App developers: if you sell into the EU and don't think about these four things, you'll hate yourself in the morning

For European app purchasers, July 4, 2012 may be their software independence day. (Okay, I admit that was horrible. I couldn't resist.)

Long story short: in the USA, if you download software, the developer has the right to restrict you from passing your download to someone else. Your app can be tied to your phone or your tablet and it's a violation of the license to sell the app to someone else. Until today, that was the case in Europe too. But after a lawsuit brought by Oracle against a company called UsedSoft, a sort of marketplace for buying and selling licenses for downloaded software, things are different in the EU. And for everyone from app developers to authors to musicians, this is a big change.


The issue turns on something called the "first sale doctrine" which is what allows for used bookstores: if you buy a copyrighted item, you can resell it. This makes sense: if you buy a book you're not buying the copyright in the book, you're just buying the pieces of paper and binding, and a publisher shouldn't be allowed to block you from reselling them just because they have copyrighted material on the pages. But for downloads things have been different: because software comes with an End User License Agreement, developers have used that EULA to say you can't transfer your downloaded software.

In a masterpiece of horrible Eurodrafting, the EU Court of Justice concluded that the first sale doctrine applies to downloaded software just as much as it does to a CD: you can transfer ownership of downloaded software if you delete the version on your own computer when you're done. Bought an app and don't like it? Give it to your friend. Resell it on eBay. But if you can get rid of it and you live in Europe, you're now allowed.

This judgment is going to have huge implications that will reach all over the entertainment industry.

- For apps and other software it's obvious: purchasers can resell the thing they buy.

- E-books and downloaded music are software too. The terms of purchase on them  often purport to say that they are limited to use by one user or on a certain number of devices. That may not be possible any longer.

- For online games that are free to play with purchased upgrades, it's possible that players may now want to resell their purchased upgrades. That would of course massively change the value proposition for these games and their developers. And does your EULA ban this?

Although there's only so much you can do in response to something like this, here are four immediate tips EU-based developers and people selling into the EU should think about:

1. Think about whether you can monetize your software by selling something other than a copy of it. A simple fix like switching to selling activation keys probably won't work: they're basically the same thing. But selling subscriptions or time-bombed software might limit your losses: at least then a subsequent purchaser only gets a limited time value.

2. Think about hooking up with a reseller outside the EU who shouldn't be subject to this judgment.

3. Think about whether your business model could stand up to lower pricing. The judgment that caused this was about Oracle software which can cost tens or even hundreds of thousands of dollars. Obviously super-low pricing isn't feasible for them. But for an app that costs $1.99 to buy directly from your reseller, that price might be low enough that people would rather just avoid the hassle and buy it.

4. And even if it has to be possible, that doesn't necessarily mean it has to be easy.


Links:
Press release from EU Court of Justice: http://bit.ly/M5sAbE