UK Court of Appeal Dismisses Microsoft Appeal, Upholds Resale of Perpetual Windows and Office Licenses

The litigation between Microsoft and UK software license reseller ValueLicensing continues. The UK Court of Appeal has dismissed Microsoft's appeal, upholding the ruling against the company. Microsoft now intends to appeal the case to the UK Supreme Court. Most proceedings in the related case will be suspended pending the judicial body's final decision on whether to accept the appeal.

The core issue is whether perpetual licenses for Windows and Office purchased by enterprises can be resold as second-hand. ValueLicensing argues that they can be resold and accuses Microsoft of restricting the secondary license market through licensing terms and commercial incentives. The company is claiming 270 million pounds in damages from Microsoft.

ValueLicensing is a dealer of second-hand software licenses, primarily recovering unused Microsoft perpetual licenses from enterprise customers and reselling them to other businesses. The company contends that Microsoft, through enterprise agreements, discounts, and migration to subscription-based products, limits customers' ability to sell old licenses to third parties, thereby harming competition in the second-hand software market.

The UK Competition Appeal Tribunal previously ruled in favor of ValueLicensing on preliminary issues, holding that the EU principle of software copyright exhaustion continues to apply and that perpetual Windows and Office licenses purchased under volume licensing agreements can be split and resold. It is important to note that this is not a final judgment on the merits; whether ValueLicensing's claim is valid still requires further proceedings.

Microsoft subsequently appealed, but the UK Court of Appeal dismissed the appeal on July 7, 2026, and upheld the original ruling. The court found that ValueLicensing could continue to pursue its case regarding second-hand software licenses.

Microsoft has not abandoned its efforts to restrict license resale. It has obtained a further stay of execution and is preparing to apply for permission to appeal to the UK Supreme Court. If the Supreme Court declines to hear the case, the matter will return to the UK Competition Appeal Tribunal to continue hearing the remaining disputes, including whether Microsoft's commercial practices constitute anti-competitive behavior and whether ValueLicensing's claim for 270 million pounds against Microsoft is valid.

This case is inseparable from the 2012 European Court of Justice ruling in UsedSoft v. Oracle. At that time, the ECJ ruled that once a software developer sells a perpetual license, its distribution right is exhausted, and the developer cannot continue to prevent the license from being resold. That precedent established the legal foundation for second-hand software transactions in Europe.

Microsoft's defense attempts to distinguish between the software code itself and other copyrighted content within the software, such as graphics and clip art. Microsoft argues that even if the resale of software licenses applies to program code, it should not automatically cover these additional elements. However, the UK Competition Appeal Tribunal and the UK Court of Appeal did not adopt this argument. Under the previous rulings, the inclusion of graphical elements or other non-code content in Office is not sufficient for Microsoft to circumvent the rules on software license resale.