The initial buyer of software that comes with an unlimited user licence may resell that copy and the licence, Europe's top court has ruled—however, where the original physical medium has been damaged, destroyed, or lost, a tangible backup copy mustn't be sold in its place.

The case considered by the the Court of Justice of the European Union (CJEU) concerned two Latvian nationals, who were alleged to have sold thousands of copies of Microsoft products in an online marketplace in 2004.

The court said: "It is estimated that they sold more than 3,000 copies of programs and the material damage caused to Microsoft by the activities of Mr Ranks and Mr Vasiļevičs has been evaluated at €265,514."

The criminal law division of the Riga regional court in Latvia, which is hearing the case, asked the CJEU for its opinion on a specific issue that had arisen: whether the acquirer of a backup copy of a program, stored on a non-original medium, could re-sell that copy if the original had been damaged, and the initial acquirer no longer possessed or used the program.

The CJEU was asked to rule on the issue in light of the 1991 EU directive on the legal protection of computer programs. The directive established a "rule of exhaustion" for software, called the "first sale doctrine" in the US, which meant that after the first sale of a computer program in the EU, the copyright holder lost the power to stop the acquirer from selling it on. Before making its own ruling, the Latvian court wanted to know whether the rule of exhaustion applied to backup copies too.

In its judgment, the CJEU said that backup copies "may be made and used only to meet the sole needs of the person having the right to use that program and that, accordingly, that person cannot—even though he may have damaged, destroyed, or lost the original material medium—use that copy in order to resell that program to a third party."

The court's ruling confirms the preliminary opinion of advocate-general Saugmandsgaard Øe, who wrote in June: "Where the original copy of a computer program, sold by the rightholder or with his consent, is incorporated in a material medium, only that original tangible copy benefits from the rule of exhaustion of the right of distribution."

The new case represents an important addition to EU law on how the rule of exhaustion applies to software, and builds on the 2012 UsedSoft judgment, where the CJEU affirmed the right to re-sell downloaded software, subject to certain conditions.