The Court of Appeal has issued its ruling in JJH Enterprises Ltd (trading as ValueLicensing) v Microsoft Corp and others [2026] EWCA Civ 872 dismissing Microsoft’s appeal in the long-running dispute with ValueLicensing over the resale of “used” software licences.
The underlying proceedings concern alleged breaches of competition law, but the appeal turned on a series of copyright law questions relevant for the secondary market for perpetual software licences.
Background
ValueLicensing operates a business which resells second-hand Microsoft software licences. It alleged that Microsoft unlawfully restricted the supply of those licences through contractual restrictions and by encouraging customers to move from perpetual licences to subscription-based offerings, contrary to Articles 101 and 102 of the Treaty on the Functioning of the European Union and equivalent UK competition law provisions.
Microsoft’s defence relied heavily on copyright law. It argues that the software licences resold by ValueLicensing were not subject to copyright exhaustion and that the reseller’s activities therefore infringed Microsoft’s intellectual property rights. If Microsoft were correct on the copyright issues, ValueLicensing’s competition claim would effectively fail.
The jurisdiction issue
Microsoft argued that the High Court, and not the Competition Appeal Tribunal (CAT), should decide disputed issues of copyright law. The Court of Appeal rejected that argument. It held that the CAT has jurisdiction to determine any issue necessary to resolve a competition claim, even where those issues arise in other areas of law, such as copyright or contract. The fact that the copyright questions were a necessary step in determining whether competition law had been infringed did not remove them from the CAT’s jurisdiction.
Exhaustion and “complex” software products
Microsoft argued that products such as Windows and Office contain not only computer programs but also other copyright-protected works, such as graphical user interfaces, icons and other visual elements. While the CJEU’s decision in UsedSoft GmbH v Oracle International Corp established exhaustion principles for computer programs under the Software Directive, Microsoft argued that the non-program elements remained protected under the InfoSoc Directive and were not exhausted.
The Court rejected that approach. It held that software products must be assessed as a whole. The CAT had found that the non-program elements were ancillary or accessory to the core functionality of Microsoft Office and Windows. As a result, the products were properly characterised as computer programs, bringing them within the Software Directive regime applied in UsedSoft.
The consequence was that exhaustion applied to the entire product, including the associated graphical and non-program copyright works. The Court considered that any other conclusion would allow software vendors to circumvent UsedSoft simply by incorporating a small amount of additional copyright material into a software package.
Volume licences can be split
The second major issue concerned Microsoft’s volume licensing arrangements. Microsoft argued that customers who had acquired a block of licences could not subdivide and resell smaller quantities. It relied on paragraph 69 of the CJEU’s judgment in UsedSoft, which states that a purchaser may not divide a licence and resell only part of the associated user rights.
The Court interpreted that passage narrowly. It concluded that the prohibition in UsedSoft was directed at the particular client-server architecture considered in that case, where multiple users shared rights linked to a common server installation. It was not intended to prohibit the resale of separate and independent software licences acquired under a volume licensing agreement.
The Court endorsed the CAT’s reliance on a German court finding that Microsoft Office and Windows licences operate differently from the Oracle licences considered by the CJEU. Individual Microsoft licences could therefore be separated and resold in smaller quantities.
Contract terms cannot defeat exhaustion
Microsoft also contended that the particular structure of its licensing agreements made the licences indivisible. The Court disagreed, emphasising that exhaustion operates by law and cannot be negated by contractual drafting. Once a qualifying first sale has occurred, contractual provisions purporting to restrict onward transfer cannot override the exhaustion principle.
