Microsoft is pushing a novel legal theory that the graphical user interface and other non-code elements of Windows and Office are separate copyrighted works not subject to exhaustion—a doctrine that has underpinned the continent’s multi-billion-euro trade in pre-owned software for more than a decade. The claim, now being tested before the UK Competition Appeal Tribunal (CAT), could erase the legal foundation for reselling perpetual licences and reshape how businesses, governments, and consumers acquire essential productivity tools.

The case began not as an intellectual property dispute but as a competition claim. In 2021, the UK-based reseller ValueLicensing sued Microsoft for damages of approximately £270 million, alleging that the tech giant stifled the secondary market through commercial incentives. Those included trade-in programmes and discounts on cloud services offered in exchange for surrendering perpetual licences—conduct that ValueLicensing says deprived it of stock, drove down resale volumes, and inflicted huge financial losses.

Microsoft’s response shifted dramatically. Instead of merely denying the allegations, its defence now asserts that much of the software ValueLicensing traded should never have been on the market at all. The argument: Windows and Office contain “non-program copyright works”—the GUI, icons, animations, and other creative audiovisual elements—that fall outside the scope of the EU Software Directive and its exhaustion principle. If correct, reselling a licence that covers those elements without Microsoft’s authorisation would constitute copyright infringement, effectively invalidating the legal basis for the continent’s entire pre-owned software trade.

“If Microsoft’s argument is correct, it would mean that the entire resale market in Europe should not exist,” ValueLicensing has warned. That blunt assessment captures what makes this preliminary hearing so significant: a ruling in Microsoft’s favour would upend settled expectations for resellers, corporate buyers, public procurement bodies, and the millions of consumers who rely on discounted second-hand licences.

The exhaustion principle, enshrined in Article 4(2) of the Software Directive, says that once a copyright holder has received appropriate remuneration for a copy of a computer program, its distribution right is exhausted and the lawful acquirer can resell that copy. The landmark 2012 CJEU ruling in UsedSoft v Oracle (C‑128/11) confirmed this applies even to software distributed digitally, provided the original purchaser makes their copy unusable. That decision gave birth to Europe’s secondary software market.

Microsoft does not challenge UsedSoft directly. Instead, it draws a line between “program copyright” (the source and object code) and “non-program copyright” (the look‑and‑feel, graphical assets, screen layouts). Under this construction, the Software Directive only governs the code; the expressive elements are protected under the InfoSoc Directive, and the CJEU’s later Tom Kabinet ruling on e‑books (which rejected exhaustion for digital content outside the Software Directive) means those elements cannot be freely resold.

This is a radical re‑classification. Until now, courts and regulators have consistently treated a computer program as a single economic good. Splitting it into program and non‑program components, and applying different legal regimes to each, would introduce enormous complexity. A single Windows or Office licence would become a bundle of rights, some exhausted and some not—a situation that could make any resale legally precarious unless the seller can prove exactly which elements were licensed and for what purpose.

High stakes for the entire European market

The immediate consequences of a Microsoft win would be severe.

Resellers would see the legal ground vanish beneath them. Companies that trade in pre‑owned Microsoft licences would face potential copyright infringement claims on existing stock and could lose the ability to source new inventory. Financing lines, customer contracts, and even the business models of dedicated second‑hand software firms could collapse overnight.

Enterprise and public‑sector buyers have long used the secondary market to reduce procurement costs. A UK local authority, for example, might purchase several thousand used Windows licences at a fraction of the retail price. If that channel disappears, IT budgets would come under immediate strain. Some organisations could be forced into costly subscription agreements simply because no lawful alternative remains.

Consumers and small businesses would be hit hard. A legitimate, low‑cost legal pathway to obtaining genuine Microsoft software would close, pushing more users toward unlicensed copies or locking them into subscription models they cannot afford. This has equity and environmental implications: extending the life of older hardware through affordable software reduces e‑waste and keeps technology accessible, goals that a contraction of the resale market would undermine.

Microsoft itself might appear to win in the short term—regaining control over downstream distribution and accelerating the shift to subscription services—but a ruling this sweeping would invite intense regulatory scrutiny. The UK Competition and Markets Authority and the European Commission would likely examine whether the contraction of the secondary market distorts competition, harms consumers, or entrenches dominant positions. A judicial decision that effectively destroys a lawful market would be a red flag for antitrust authorities.

Three scenarios and their probabilities

Legal and market observers are gaming out several possible outcomes.

  1. Resale survives. The CAT rejects Microsoft’s non‑program exhaustion argument in full. It holds that the Software Directive and UsedSoft remain the governing framework for computer programs, and that the presence of graphical elements does not change the analysis. The secondary market continues on its current legal footing, and ValueLicensing’s competition claims proceed on their factual merits. This is the most market‑stabilizing outcome and arguably the one most consistent with longstanding precedent.

  2. Partial restriction. The CAT accepts that some discrete creative elements might not be exhausted while others are, creating product‑specific reservations on resale rights. Some licences would remain tradable, others would not, and resellers would need to undertake granular provenance checks before every transaction. Compliance costs would rise sharply, and legal uncertainty would persist for years. This messy middle ground would be a boon for lawyers but a headache for the industry.

  3. Broad victory for Microsoft. The tribunal fully embraces the argument, excluding key parts of Office and Windows from exhaustion. The secondary market contracts dramatically, second‑hand supply dries up, and organisations that depend on used licences face immediate budget pressure. Regulatory and legislative responses become far more likely, and the ruling triggers a wave of follow‑on litigation as rights holders in other creative industries test the same logic. This is the most disruptive scenario and, historically, the kind of outcome courts approach with great caution.

Most specialists expect the CAT to be wary of the third scenario. Judges are hesitant to make sweeping doctrinal changes that would restructure entire markets without clear legislative instruction. The tribunal is likely to scrutinise Microsoft’s construction rigorously, weighing not only legal merit but also the commercial and policy consequences of upending the UsedSoft settlement.

What stakeholders should do now

While the legal arguments play out, practical steps can protect resellers and purchasers.

For resellers:
- Audit inventory immediately, cataloguing each licence by type (perpetual, subscription, OEM), provenance, and any surrender or assignment documentation.
- Segregate stock that might be affected by the non‑program claim and consider holding off on large transactions until legal clarity emerges.
- Review customer contracts and warranties—representations about licence legitimacy must be accurate, and indemnity provisions may need updating.
- Develop contingency revenue streams such as support, migration services, or cloud advisory to reduce reliance on licence resale.

For corporate and public buyers:
- Model the financial impact if second‑hand channels become unavailable. Factor in the cost of switching to subscription‑based licensing or cloud alternatives.
- Preserve all documentation related to licence surrenders, trade‑ins, or discounts obtained from Microsoft; these records are already material to the CAT proceedings.
- Consult competition and IP counsel to evaluate exposure and to review procurement fallbacks.

For Microsoft and other independent software vendors:
- Prepare for heightened regulatory engagement regardless of the outcome. A win on copyright grounds will not end competition scrutiny.
- Ensure licensing terms and market communications clearly articulate any intended distinctions between program and non‑program elements to reduce legal uncertainty.

Judicial caution and the bigger picture

Courts are not immune to the broader policy currents swirling around this case. A ruling that curtails the resale of software would clash with Europe’s stated ambitions for a circular economy and digital affordability. It would also run counter to the principle, well established in EU law, that intellectual property rights should not be used to partition markets or restrict competition beyond what is necessary to reward creators.

The CAT will be acutely aware that its decision could either reinforce or unravel the legal certainty upon which a sizeable industry has been built. That institutional caution suggests the tribunal may prefer narrower findings that address specific copyright questions without upending the entire used‑software market—though the risk of a more disruptive outcome remains real.

For now, the preliminary hearing is exposing the fault lines. Microsoft’s argument is clever, exploiting the nuanced distinctions the CJEU has drawn between software and other digital content. But it also seeks to rewrite the rules after the game has been played for more than a decade, relying on a legal re‑characterisation that few anticipated when UsedSoft was decided.

ValueLicensing, meanwhile, is fighting to preserve a market that has become a crucial procurement tool for cost‑conscious organisations. Its claim that Microsoft’s trade‑in programmes unlawfully choked off supply is fact‑intensive and may be difficult to prove, but the exhaustion dispute threatens to eclipse that underlying competition case.

Conclusion

The ValueLicensing v. Microsoft proceedings in the CAT are about far more than £270 million in alleged losses. They are a proxy war over the future of software ownership and distribution in Europe. Microsoft’s attempt to cordon off the graphical elements of Windows and Office from exhaustion is a legal gambit with massive systemic implications. If successful, it would effectively erase the legal foundation for the continent’s second‑hand software market, driving users toward ever‑tighter vendor control and subscription models.

However, courts historically resist doctrinal shifts that would cause market convulsions. The more likely result is a measured ruling that preserves exhaustion for the core program while perhaps acknowledging—but not weaponizing—the separate copyright in the GUI. That would keep the resale market alive, though not without some additional friction.

For anyone who buys, sells, or relies on pre‑owned Microsoft licences, the safest course is to prepare for change. Audit your holdings, secure your documentation, and watch closely as this landmark case unfolds. The outcome will echo across every IT department, procurement office, and reseller in Europe for years to come.