Second hand software comes of age
OUT-LAW Radio, 02/08/2007
We look at how data protection laws from Europe are implemented
poorly.
A text transcription follows.
This transcript is for anyone with a hearing impairment or who
for any other reason cannot listen to the MP3 audio file.
The following is the text spoken by OUT-LAW journalist Matthew
Magee.
My name is Matthew Magee, and this week we talk to a man who
will let you trade in your old business software for new, and we
ask: can you trade mark your home town? And is it wise?
But first, the news:
- Accused NASA hacker allowed to appeal; and
- YouTube filters due by September
Accused NASA and Pentagon hacker Gary McKinnon has won the right
to appeal to the House of Lords over his extradition to the US. The
Lords will hear his case, even though they recently refused to hear
another US extradition case, that of the so called Natwest
Three.
McKinnon has admitted accessing the computers of US military
headquarters the Pentagon and space agency NASA. The US won the
right to extradite McKinnon in the High Court.
McKinnon has always argued that he should be tried but in the UK
where he performed his actions.
Video sharing website YouTube hopes to filter out unauthorised
copyrighted material by the end of the year, according to a lawyer
for its owner, Google.
Philip Beck said that the company hoped to have its system in
place by September or later in the autumn. Beck told a New York
judge of the implementation timetable as part of a lawsuit being
taken against it by content owners.
That was this week's OUT-LAW News
When Microsoft recently released Vista, the new version of the
Windows Operating System that runs on most of the world's
computers, the computer world was shocked when customers utterly
failed to rush to upgrade their systems.
Faced with a Windows XP product that already did more than most
users could ever want, consumers and businesses stayed away in
droves and appeared to have reached a point some never believed
possible: upgrade resistance.
One business is uniquely placed to take advantage of this trend.
Staffordshire's Discount Licensing trades in used software
licences. It is an unusual and inventive concept that could take
advantage of a growing sense amongst users that their software is,
well, good enough as it is, thanks.
Discount Licensing will sell you a licence for older versions of
software for up to 80% off the original sale price, it claims. So
instead of going out and buying a three hundred and something pound
licence for Microsoft Office 2007, you could use Office 2003
instead for far less.
It gets these old versions mostly from companies that go bust.
Co-founder and director Noel Unwin says he is earning from things
that, previously, nobody had seen as an asset.
Unwin: We resell licences mainly from the
insolvency market back into the private sector. The idea was how
would be actually be able to realise a value for potentially an
asset that has been unrealised and ultimately if you are going to
look at trying to identify these licences the first place to start
for me was the insolvency market but unfortunately many times the
licences, because nobody knew the licences existed as an asset, it
was just being overlooked in the contract, and so regardless of the
fact that an insolvency may have sold all his assets we now come
along a few years later and say well you know there is an asset
here we can still realise the value for this asset because it is a
potential licence and as long as it is an open licence agreement a
company has every right to actual realise value for that so that is
all we have been doing.
Unwin says that the idea came about when he worked for a German
firm and one of his customers went bust.
Unwin: The seed of the idea of the software
licensing comes from a gentleman who does not actually work in our
business and he was actually a colleague of my business partner and
he one day was getting rid of his machine, or the company was
getting rid of his machine, and the comment was made that his
machine would have most possibly a surplus licence. What actually
happened to that licence? I was working as a creditor at the time
for an insolvency and one of my customers had gone insolvent and
simply I thought if we are going to get licences from companies
that are surplus I would not go into the solvent market I would go
into the insolvent market and hence that is how the whole idea came
about.
Discount Licensing's business is legal because Microsoft's
software licences allow for a transfer of that licence. Unwin says
that he went to Microsoft before the business started trading to
talk the issue through, and that his firm is an official partner
firm of Microsoft’s.
Unwin: Obviously we had to discuss this with
Microsoft beforehand. We were not going to arrogantly go about
doing something that was going to come into the public eye anyway
and we made a point of discussing the processes with Microsoft so
that or more importantly because Microsoft actually do the updates
themselves. We had to make sure there was a process in place that
our customers would be happy with, otherwise we just would not have
any customers because you would be seen as a cowboy outfit if you
didn’t have the software manufacturer Microsoft actually ratifying
this on a public forum which we did of course.
There is a potential flaw in the business plan though. Unwin’s
entire business rests on Microsoft not changing its terms and
conditions to bar the transfer of licences. Surely, I asked him one
line inserted into a licence agreement would scupper his whole
company.
Unwin: If Microsoft found a way to block a
secondary market then, yes, we would be in a situation where the
business would have about, lets say, four to five years left of
trading, because if Microsoft change the terms and conditions of a
volume licence agreement today you would still have a number of
licences available in four to five years time through the insolvent
market because of companies that have purchased licences up to
today will still be around until, the next five years.
So we are vulnerable, but not to the point where it would be a
showstopper from day one. If Microsoft were to do that and I would
consider it rather strange that Microsoft would not want to respect
a market which allows their customers of businesses to actually
realise value from an asset and also reduce costs.
For the moment at least, Unwin has a more pleasant problem to
ponder: he can’t get his hands on old licences, and demand is
outstripping supply, the problem every business owner wants to
have. He has come up with another ingenious idea to keep the old
licences flowing. He’s offering a trade in scheme on software. If
you want a brand new piece of software such as Office 2007 he will
give you a 20% discount if you give him the licence to your old
software to sell.
Unwin: We actually have an excess demand
scenario, which is a very fortunate situation to be in for a lot of
businesses, and hence one of the reasons why we were looking at
this potential licence trade in model because we have a lot of
companies that actually are constantly looking for non-current
versions because businesses don’t want to have to be forced into
buying the most current version and then having to use their
downgrade rights to use a non-current version that they’ve
currently got installed on their machines.
There is a checklist of things to do when you move into a new
area. Say hello to your neighbours, maybe put a couple of pot
plants at your door introduce yourself to the postman.
But if you’re lifestyle guru Martha Stewart there’s an extra
task, trade mark the name of your new home town.
It’s not the best way to ingratiate yourself to your new
neighbours but if you live in Katonah it’s frankly a terrible idea.
This is one of America’s chicest towns. Ralph Lauren lives next
door while Susan Sarandon, Tim Robbins and Glen Close live just
down the road. Stewart wants to sell a line of paints, lighting and
home accessories in the name of her new home town but the town’s
folk are up in arms at what they see as a smash and grab raid on
their heritage. Local businesses fear that they will have to change
their name and a campaign called “nobody owns Katonah” has taken a
grip of the town. So is Stewart even able to trade mark a town name
and what will it mean for her famous fellow Katonahains? Lee Curtis
a trade mark specialist at Pinsent Masons, the law firm behind
OUT-LAW told me that you can trade mark a town name but only in
some cases.
Curtis: It depends on the size of the town or
city and whether that city or town or geographical area is
well-known for the goods for which you are seeking protection. So
for example, it’s unlikely if you get a registration for the simple
word mark London because various different businesses operate in
the London area, it is so big. For example, Cheddar, you couldn’t
register that for cheddar cheese because the Cheddar area is
well-known for cheese, so it very much depends on the size of the
city and area and whether it’s well-known for the goods or
services.
The basic guidance in the UK is that you can trade mark a town
name if it has fewer than 2,000 inhabitants. The other thing worth
remembering is that the trade mark only gives protection in
relation to specific goods and services, so Stewart would not own
the town name for all purposes. This isn’t new territory
Glastonbury has been through it all before. The music festival
wanted to register the town’s name for music activities, after some
initial scepticism from locals the two parties hammered out a
perfectly amicable agreement. Curtis explained that even without
such model harmony businesses from a town enjoy special protection
in relation to that town’s name.
Curtis: You have a defence to trade mark
infringement action. If you can use geographical term in a
descriptive sense so people from Glastonbury or people from Katonah
can say I am from Katonah or I have a business in Katonah if
that’s the case well then they’re perfectly free to use that term
in a descriptive sense so no one who’s got a legitimate interest
and trades in those two particular geographical areas will be
stopped from using the terms.
Stewart is having far more trouble than Glastonbury festival's
Michael Eavis ever had. Her spokesperson said that the trade marks
were necessary to prevent knock-off goods but Curtis said that as
ever in legal disputes a little dialogue can go a long way.
Curtis: This is a question like in any legal
dispute if you can explain exactly what rights you’re getting and
how this will affect local businesses and that they can still trade
under the name that they’re based in the area then all well and
good, so it is not so much about trade mark law, it’s possibly a
bit more about diplomacy and just packing down some feathers which
have been ruffled.
That's all we have time for this week, thanks for listening.
Why not get in touch with OUT-LAW Radio? Do you know of a
technology law story? We'd love to hear from you on radio@out-law.com.
Make sure you tune in next week; for now, goodbye.
OUT-LAW Radio was produced and presented by Matthew
Magee for international law firm Pinsent Masons.
