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Second hand software comes of age

We look at how data protection laws from Europe are implemented poorly.02 Aug 2007

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.

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