Court of Appeal backs ValueLicensing over Microsoft in second-hand software licence fight

The Court of Appeal has upheld two rulings of the Competition Appeal Tribunal in favour of JJH Enterprises Limited, trading as ValueLicensing, dismissing Microsoft's challenge to both the tribunal's jurisdiction and its findings on copyright exhaustion. The judgement, handed down on 7 July 2026, clears the way for ValueLicensing's substantial damages claim to proceed.

ValueLicensing resells second-hand licences for Microsoft products including Windows and Office. It alleges that Microsoft stifled the supply of those licences through contractual restrictions and by shifting customers onto a subscription model, in breach of Articles 101 and 102 TFEU and the Competition Act 1998. The claim spans the UK and the EEA over the period 2014 to 2022. Because the case turns on EU law in force at the time, the court applied the relevant Directives and assimilated CJEU authority throughout.

Central to Microsoft's defence was the contention that copyright in the resold software had not been exhausted, meaning ValueLicensing had infringed rather than lawfully traded. It was common ground that if Microsoft succeeded on copyright, the competition claim would fail.

A tribunal equipped to decide copyright

On the jurisdiction appeal, Microsoft argued that copyright issues fell outside the tribunal's remit under section 47A of the 1998 Act, being either logically anterior to the competition claim or amounting to allegations of infringement properly reserved to the High Court. The Chancellor of the High Court, giving the leading judgement, rejected both limbs. Section 47A contains no language limiting the tribunal's power to resolve any issue necessary to determine a competition claim. That copyright questions can be arranged as anterior in a logical sequence did not remove them from the tribunal's reach, and Microsoft was seeking no remedy for infringement in any event.

The court distinguished the Chancellor's own decision in Unwired Planet v Huawei, where a contractual FRAND claim represented a distinct and alternative cause of action rather than a question that had to be resolved to decide competition infringement.

Exhaustion and the problem of complex matter

The preliminary issue appeal raised two points. The first concerned "non-program works" such as icons, fonts and user interfaces, governed by the InfoSoc Directive, bundled with computer programs governed by the Software Directive. Microsoft argued these works were not exhausted. Applying UsedSoft, Nintendo and Tom Kabinet, the court agreed with the tribunal that the products were in substance computer programs, with the other works incidental or of mere accessory character. The Software Directive therefore governed, and all relevant rights were exhausted. The court noted that Microsoft's approach would produce the odd result that a sprinkling of clip art could defeat the doctrine altogether.

The second point was whether ValueLicensing could subdivide volume licences. The court held that UsedSoft at [69], properly read, prohibits subdivision only in the client-server context at issue there, where a single retained server copy underpins multiple interdependent user rights. Microsoft's products involved independent copies distributed internally, a materially different arrangement. The reasoning of the German Federal Court of Justice in UsedSoft 3 offered persuasive support.

Microsoft's arguments on licence construction, transfer forms and the burden of proof were also rejected. Exhaustion operates by law at the point of first sale, regardless of contractual terms purporting to prevent it, and a first acquirer's later retention of a copy is that acquirer's infringement alone.

Lord Justice Green and Lord Justice Phillips agreed. Both appeals were dismissed.