news analysis A U.K. company that specializes in second-hand software claims to have found a loophole in Microsoft software licensing that has enabled it to continue trading five months after the software giant attempted to stamp out the practice.
U.K.-based Discount-licensing.com has been trading since 2005, selling pre-owned Microsoft software that has come on to the market because of bankruptcy or other issues.
Speaking to ZDNet Asia sister site ZDNet UK this week, Discount-Licensing (which used to trade under the name Disclic) discussed how it has continued to trade despite Microsoft's decision in October 2007 to introduce a clause into its software licenses to make the re-selling of licenses expressly forbidden.
Following the Microsoft changes, Discount-licensing employed lawyers to look at Microsoft's old and new terms and conditions. "That was where we found that it benefited us," said Noel Unwin, director of Discount-Licensing. "All our advice told us you cannot backdate a contract, which meant that we were free to continue reselling software licenses with the previous terms (disused licenses purchased before October 2007) for many years to come."
Microsoft has communicated with Unwin via e-mail but has raised no specific objections to the company re-selling application licenses that pre-date the 2007 changes, he claims. "We have asked Microsoft for any comment they may have at every step on the way," said Unwin. "So far they have not said we are doing anything wrong."
Discount-Licensing acts as a link between companies who have second-hand software to sell and potential buyers. The company only deals in applications software, such as Exchange or Office, rather than operating systems such as XP, according to Unwin.
ZDNet UK contacted Microsoft for clarification on whether second-hand software license sales of this type violated its terms but the company did not reply in time for this article.
Discount-Licensing's model works when Company A--because of internal changes, bankruptcy or some other reason--has spare licenses for Microsoft software. Company A contacts Discount-Licensing, which then establishes that the software licensing is Company A's to sell and not stolen or otherwise illegal. Discount-Licensing advertises the product on its Web site; Company B sees the availability and wants the software licensing, and Discount-Licensing sets up a transaction.
Rather than Company A selling its Microsoft licenses directly to Company B, the actual transaction involves Company A setting up an intermediate company that is then sold to Company B--along with the software licenses, explained Unwin.
Discount-Licensing will not touch the transaction, which becomes a straightforward transfer from Company A to Company B. The software licenses are sold at a percentage of the full cost with Discount-Licensing taking a broker's percentage for setting up and handling the transaction. The all-important Microsoft product keys are supplied as part of the deal, and Company B can start running its new application.
"There is a busy trade in disused software license stock, which I believe will now grow exponentially with the pre-owned Select license market", Unwin told ZDNet UK, "and with older versions of software, such as Office 2000, which is really popular".
Microsoft defines its Select License as being aimed at organizations with 250 or more desktop PCs, and based on a "forecast licensing model in which usage is measured against the forecast".
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