CAT Case: Microsoft-ValueLicensing and the Resale of Pre-Owned Software

Microsoft’s long-running legal battle with UK reseller ValueLicensing has reopened at the Competition Appeal Tribunal, and this time the dispute centres not just on alleged anti-competitive conduct but on a provocative legal contention from Microsoft: that reselling pre‑owned copies of Office and Windows may be unlawful because copyright in non‑program elements of the software (for example, graphical user interfaces) places those elements outside the Software Directive’s exhaustion rule and therefore outside the usual EU regime that has historically permitted resale of used software licences. (theregister.com)

Background​

The ValueLicensing claim began as a classic competition‑law complaint: ValueLicensing alleges Microsoft deliberately suppressed the supply of perpetual (non‑subscription) licences by designing commercial incentives — discounts on subscriptions and contractual clauses — that encouraged customers to surrender or forfeit perpetual licences, thereby shrinking the pool of licences available to the secondary market. ValueLicensing says those practices cost it roughly £270 million in lost profits and seeks compensation and injunctive relief. (valuelicensing.com, theregister.com)
Procedurally the case has been managed closely by the CAT for several years; the Tribunal has issued multiple procedural rulings, and a preliminary issues trial (PI Trial) was listed for early September 2025 to determine discrete copyright questions Microsoft has raised as part of its defence. The CAT has already considered — and rejected — an argument from Microsoft that the Tribunal lacks jurisdiction to decide matters that turn on copyright law; the CAT held its competition jurisdiction is broad enough to encompass incidental copyright issues that are central to a properly pleaded competition claim. (catribunal.org.uk, hoganlovells.com)

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Why this is legally and commercially significant​

At stake in the PI Trial is more than one reseller’s balance sheet. If Microsoft’s legal construction prevails, it could undermine the legal foundation of the European secondary market for certain software licences. ValueLicensing and a host of resellers and buyers treat the sale and purchase of perpetual licences as legitimate and governed by the European Software Directive and ECJ precedent allowing resale of software where the right of distribution has been exhausted. If key Microsoft products were reclassified — because parts of Office and Windows are treated as protected works outside the Software Directive’s exhaustion rule — the effect could be to substantially restrict or prohibit resale of many pre‑owned licences across Europe. ValueLicensing warns that the entire resale market could be threatened if Microsoft is right. (theregister.com, valuelicensing.com)

Legal context: exhaustion, UsedSoft and Tom Kabinet​

To understand the legal fault‑lines, two leading Court of Justice of the EU (CJEU) decisions must be unpacked.

• UsedSoft (C‑128/11, 2012) established that the principle of exhaustion applies to computer programs: once a right‑holder has received appropriate remuneration for a copy of a computer program, the distribution right is exhausted and resale of that copy is permissible — including downloads, so long as the original user makes their copy unusable at the time of resale. That judgment is the foundational EU authority that underpins the legal second‑hand software market. (op.europa.eu)
• Tom Kabinet (C‑263/18, decision delivered in 2019) took a different line for digital works such as e‑books: the CJEU concluded that resupplying e‑books via download constitutes a communication to the public rather than a simple distribution, so exhaustion does not apply and resale without authorization is not permitted. The Tom Kabinet ruling deliberately distinguished software from other digital content: the Software Directive is lex specialis for computer programs, and the economic and functional realities of software led the Court to treat it differently from e‑books and other content. (acr.amsterdam, scl.org)

Microsoft’s present move asks the court to draw a new line within the software itself: some parts of its products (the “non‑program” elements — e.g., the look and feel, interface graphics, and certain embedded creative elements) are protected by general copyright under the InfoSoc regime rather than being pure computer programs under the Software Directive. If parts of Office or Windows are characterized in that way, Microsoft argues the exhaustion principle would not apply to those elements and resale of licences covering them would necessarily infringe copyright unless authorised. That is a novel — and potentially expansive — legal theory. (theregister.com)

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What the CAT has already determined procedurally​

The CAT has been asked to determine whether these copyright issues can be decided as part of ValueLicensing’s competition claim or whether they are matters for a different court. In May 2025 the Tribunal rejected Microsoft’s jurisdictional challenge, finding that the CAT's statutory jurisdiction over competition claims reasonably permits inquiry into adjacent legal questions that are necessary to resolve the antitrust claim instead of fragmenting litigation across different forums. That ruling is significant: it preserves a single forum to consider the competition and intertwined copyright questions together, avoiding a procedural bifurcation that would prolong resolution and raise costs. (catribunal.org.uk, hoganlovells.com)
At the same time, the CAT has dealt with other disclosure disputes and privilege issues in the case — material given those procedural fights often illuminate the factual matrix (for example, whether Microsoft had a policy designed to curtail the second‑hand market) — and ordered further disclosure in contested areas. Those factual disclosures are central to ValueLicensing’s core competition allegations about market‑shaping conduct. (catribunal.org.uk)

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The strengths of Microsoft’s position​

1. Legal precedent for digital‑content differentiation: Tom Kabinet gives Microsoft an arguable pathway. The CJEU has shown it is willing to treat non‑program digital content differently from software when it comes to exhaustion and communications‑to‑the‑public issues. If Microsoft can show that substantial parts of Office/Windows are creative works protected outside the Software Directive, Tom Kabinet’s reasoning could be adapted to yield a restriction on resale. (acr.amsterdam)
2. Copyright complexity around modern suites: Modern productivity suites are hybrids. They package software, user‑visible creative assets, templates, fonts, UI elements, and embedded content. Microsoft will argue that those elements fall within an author’s copyright distinct from the functional program code, and that exhaustion law should not be mechanically extended to them. This is a complicated but plausible legal construction. (theregister.com)
3. Procedural advantage if jurisdictional fragmentation had been ordered away: by keeping all issues in the CAT, Microsoft can press a copyright defence at the preliminary stage, with the prospect of resolving many issues in a consolidated way rather than by parallel litigation in the High Court. That is efficient from a defendant’s litigation planning perspective — even if the substantive law is contested. (hoganlovells.com)

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The weaknesses and risks in Microsoft’s case​

1. UsedSoft remains binding: the 2012 UsedSoft decision is potent precedent that broadly endorsed resale of software licences and endorsed the exhaustion doctrine for programs, including downloaded copies. Any Microsoft argument that seeks to broadly exclude Office and Windows from the Software Directive’s exhaustion rule must grapple directly with UsedSoft’s logic and holdings. The CJEU has already shown a willingness to protect a secondary market for software when the Software Directive applies. Microsoft’s argument must therefore be tightly tailored and is at risk of judicial pushback. (op.europa.eu)
2. Economic and policy backlash: courts are cautious about producing commercial outcomes that upend entire market sectors. A ruling that effectively kills the secondary market for major productivity and OS licences would have wide ripple effects — from public procurement to SME budgets — and judges may be reluctant to take such a sweeping step without clear statutory or normative basis. The CAT has already signalled its willingness to determine issues that are central to competition harms, which suggests a fact‑driven inquiry rather than a quick legal cut‑off. (catribunal.org.uk)
3. Factual bindings from disclosure: ValueLicensing alleges Microsoft ran a deliberate policy — offering discounts or other commercial incentives that required the surrender of perpetual licences — to suppress the secondary market. Documents and testimony revealed or ordered disclosed in the CAT could show policy intent and practice. If the factual record supports ValueLicensing’s narrative, proving a competition law abuse could be straightforward and would blunt pure legal defences. (valuelicensing.com)

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Parallel litigation and the wider litigation landscape​

Microsoft is defending multiple related claims in the UK. An opt‑out class action led by Alexander Wolfson accuses Microsoft of abusing market dominance through licensing conduct and seeks damages potentially running into the billions. Separately, Dr Maria Luisa Stasi has filed a claim alleging that Microsoft’s licensing for Windows Server penalises customers using competing cloud platforms (AWS, GCP) and steers them toward Azure; that claim is tied into broader regulatory scrutiny by the UK’s Competition and Markets Authority. Those cases are separate but materially connected: a favourable jurisdictional or legal ruling in ValueLicensing could be invoked in other proceedings, and vice versa. (stewartslaw.com, reuters.com)
The inter‑relationship of these actions increases the stakes: a binding legal finding that limits resale across Europe would strengthen the legal armoury of businesses and litigants alleging that Microsoft’s licensing choices foreclose competition. Conversely, if Microsoft successfully narrows exhaustion or copyright interpretation, claimants face a higher bar. (theregister.com, iclg.com)

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Practical implications for stakeholders​

For resellers and secondary‑market participants​

• Preserve documentation. Maintain clear records of acquisition, assignment, and surrender communications for each licence. The CAT’s proceedings have shown that documentary proof can be decisive when establishing whether a resale transaction satisfied UsedSoft’s conditions and whether licences were legitimately transferred. (valuelicensing.com)
• Inventory and audit stock. Segregate licences whose provenance is contested and conduct legal checks on licence‑type (perpetual vs. subscription vs. OEM) before sale.
• Insurance and funding considerations. Consider litigation‑risk insurance and contingency plans; large claims and extended judicial timelines can pressure small resellers’ cash flows.

For corporate purchasers and public bodies​

• Review contracts and historic surrender terms. Contracts that required licence surrender to obtain subscription discounts are now at the centre of litigation. Public sector bodies in particular should catalog any such clauses and any consideration received. Those documents have been prominent in the CAT’s disclosure process. (catribunal.org.uk, valuelicensing.com)
• Reassess procurement and upgrade strategies. Organisations that rely on secondary licences should model alternative scenarios (supply disruption; potential injunctive relief; future licensing cost changes) and maintain legal and procurement flexibility.

For Microsoft and other ISVs​

• Watch litigation outcomes carefully — precedents will migrate. If courts allow refined copyright categorisations to limit resale, other platform providers may try to replicate the approach. Conversely, a ruling that preserves the secondary market will constrain the scope for contractual restrictions.
• Policy and PR management. Microsoft’s public posture and settlement calculus will influence regulator and customer sentiment; high‑profile legal wins can come at reputational cost. The CAT docket already shows public and regulator interest in related cloud licensing complaints. (hoganlovells.com, reuters.com)

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Business and market‑level consequences: three plausible scenarios​

1. Narrow defeat for Microsoft — resale survives: The tribunal finds that the Software Directive and UsedSoft continue to govern resale of software programmes and that Microsoft’s copyright construction is too broad as a matter of EU law. The secondary market continues, and ValueLicensing‑style claims proceed on competition facts. This outcome preserves the resale market but keeps pressure on Microsoft’s commercial practices via competition law claims. (op.europa.eu, valuelicensing.com)
2. Partial win for Microsoft — limited restriction on specific elements: The CAT accepts that certain creative or non‑program elements are protected under separate copyright rules and are not exhausted; resale of licences that implicate those elements is restricted. The market fractures: some licence types remain tradable while others become contested, driving complexity and compliance costs for resellers and buyers. This middle path would create legal uncertainty and require case‑specific assessments. (acr.amsterdam, theregister.com)
3. Broad victory for Microsoft — secondary market materially restricted: A sweeping ruling excluding a wide swath of Microsoft’s products from exhaustion would dramatically reduce second‑hand availability, increase pressure on pricing and procurement, and likely trigger regulatory responses across the EU and the UK. The commercial effect would be immediate for resellers and would empower claimants in the Wolfson/Stasi class actions. This is the most disruptive outcome and therefore the one courts may treat with the most caution. (stewartslaw.com, theregister.com)

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Risks beyond the courtroom​

• Regulatory intervention. If courts shrink the resale market, competition authorities may step in to craft remedies for the primary market or to police unfair contract terms. The CMA and the EU’s competition authorities are already focused on cloud and platform dynamics; judicial findings can catalyse regulatory action. (reuters.com, hoganlovells.com)
• Fragmentation of precedent. Divergent decisions across member‑state courts or between courts and regulators could produce a patchwork of rules, effectively forcing resellers to operate under country‑specific compliance regimes.
• Commercial displacement. Rapid shifts to subscription models and cloud platforms are already changing how software is consumed. Legal uncertainty may accelerate vendor capture of customers into subscription ecosystems, with knock‑on effects for software pricing, public budgets, and smaller ISVs. (valuelicensing.com, reuters.com)

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How the industry should prepare — a short, operational checklist​

1. Audit and catalogue all licence holdings and resale contracts immediately.
2. Preserve all communications with vendors, especially where discounts were exchanged for surrender of perpetual licences.
3. Place sensitive documents in secure legal holds and consult competition counsel about disclosure obligations.
4. Reassess pricing models and cash reserves for resellers that may face prolonged litigation risk.
5. Monitor CAT hearings and rulings closely — outcomes will influence procurement strategy and contract drafting. (catribunal.org.uk, valuelicensing.com)

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Why this matters to WindowsForum readers​

This litigation is not an abstruse copyright puzzle; it strikes at everyday realities: how organisations license Office and Windows, the viability of cost‑saving second‑hand licences, and the balance between copyright owners’ control and the functioning of downstream markets. A decision for Microsoft could reduce options for cost‑conscious buyers and accelerate subscription lock‑in. A decision for ValueLicensing could vindicate the long‑standing market practice that permitted resale and put licensing behaviour under tighter competition law scrutiny.
Community debate and practical action — from procurement teams re‑examining contract boilerplate to small resellers reconsidering inventory strategies — will be the immediate consequence of whatever the CAT decides at the PI Trial and in subsequent hearings. Forum discussions have already picked up steam as the legal calendar has evolved and new rulings and disclosures emerged.

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Conclusion​

The ValueLicensing dispute presents a high‑stakes collision between EU copyright doctrine, competition law, and commercial licensing practice. The CAT’s decision to hear preliminary copyright issues keeps the entire matter inside one tribunal and accelerates an answer to a question that is both doctrinally thorny and commercially consequential: can Microsoft lawfully assert copyright over parts of its software in a way that defeats the Software Directive’s exhaustion regime and effectively prohibits resale?
That question will be resolved not in a vacuum but against the twin precedents of UsedSoft and Tom Kabinet, the detailed factual record emerging from discovery, and the wider constellation of parallel claims and regulator interest. For resellers, purchasers, and the vendor community, the prudent course is immediate preparedness: audit, preserve, and plan for multiple legal and commercial futures. The Tribunal’s rulings over the coming months will shape how Europe — and by influence, other jurisdictions — balances copyright protection against the economic freedoms of secondary markets for software. (op.europa.eu, acr.amsterdam, catribunal.org.uk)

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Source: theregister.com Microsoft software reselling dispute heads back to UK court