How does licensing software not imply ownership? Don't I own a Windows operating system once I pay for it?

Question

Background

I've been through the Windows 8.1 EULA and the EULA for computer manufacturers. I've also seen this question where an answer says that Windows is sold as a software service.

The EULA states this about ownership: "How can I use the software? The software is licensed, not sold. Under this agreement, we grant you the right to install and run one copy on the computer on which you acquired the software (the licensed computer), for use by one person at a time"

The EULA states this about transfer: "Can I transfer the software to another user? You may transfer the software directly to another user, only with the licensed computer. The transfer must include the software, proof of purchase, and, if provided with the computer, an authentic Windows label including the product key."

My question spans three scenarios:

• Scenario 1: I have a desktop computer on which I've installed only Linux. I purchased a new laptop for price P. It cost me P because it had Windows 8.1 pre-installed and I could register Windows online. There are other laptops that cost less than P, because they are sold without any operating system. Windows EULA allows me to take a backup of the operating system onto a pen drive. I registered Windows and took a backup on a pen drive. Now within a few days, if the laptop gets crushed under a truck, I've lost function of the hardware, but I still have a backup of the software. Since I paid for the software, can't I install it on my desktop PC, register it online and use it?

• Scenario 2: The laptop does not get crushed under a truck. After a few years of using the laptop, I choose to sell the laptop to a company that purchases old devices to recycle them. The company only cares about the hardware. They are going to pull apart the entire laptop and send the parts for recycling. Can I delete everything on the hard disk, hand over the laptop to the company and use the Windows backup to install it on my desktop PC?

• Scenario 3: I sell the laptop to someone who dislikes Windows. They'd rather use Linux. So I install only Linux on the laptop and explicitly tell the person that although this laptop came bundled with Windows, I'm going to use Windows for myself on my desktop PC, and he'd have to only use Linux on the laptop.

This is for a situation where Windows installed on the desktop would be used solely for personal use. No commercial use at all. If I wanted, I could take some of the RAM or some other hardware from the laptop and use it with any other laptop, because I purchased the hardware and I own it. So given that I have also purchased a license to the software, if the laptop gets destroyed, shouldn't I have the right to utilize the fact that I paid for the software, and be able to use the software as a single installation on my desktop? This is by nature of the software being safe from physical destruction, and the fact that I'm not misusing the software.

Answer 1

General

The legal discussion hinges on the question whether the concept of copyright exhaustion applies to software. (The linked article also discusses the Court of Justice of the European Union ruling mentioned below in the EU part of this answer.)

Copyright exhaustion, in simple terms, allows certain uses (like the ones in your scenarios) of copyrighted (books) or patented (e.g. devices) items for which the copyright or patent holder has the right to first sale. If and when that principle applies, the original seller cannot control further sales or other uses of that particular specimen. Their copyright is "exhausted" with the first sale.

Situation in India

I want to emphasize that I have exactly zero experience regarding India in any way. All I did was that I went to the google.

It appears that the Indian Supreme Court recently ruled in Engineering Analysis Centre for Excellence Pvt. Ltd. v. CIT that the typical EULAs are valid. In particular, copyright exhaustion does not apply and the EULA can restrict re-selling and similar actions.

The case is discussed in this article, including relevant quotes.

This would make everything illegal which is forbidden by an EULA. As I read the EULA, creating a backup copy is allowed, as is restoring Windows from it, obviously; whether that has to happen on the same computer is unclear to me and may depend on the license type (OEM vs. standalone), although I have two remarks:

1. Microsoft is the copyright owner; if they provide you with a license (for example because you called them after you re-installed Windows from a backup copy, and the internet license process didn't work) without you making false claims it is their prerogative. You are good.
2. What constitutes a different computer? The SSD? The case? The mouse? We do have a case of the Ship of Theseus, or here for a funnier take: How much can you change before it becomes a different machine? The answer: Call Microsoft and find out.

Situation in the EU

The situation in the EU is fundamentally different from the one depicted with a misguided metaphor in the accepted answer.

In Europe, all of your scenarios are legal.

In July 2012, the European Court of Justice ruled in favor of the company usedSoft who is a license reseller.

(I'm writing this text on a machine with a Windows license that cost me, together with a Microsoft Office Professional license, 30 Euros, from this store.)

The title of the Court's press release couldn't be clearer:

An author of software cannot oppose the resale of his ‘used’ licences allowing the use of his programs downloaded from the internet

Not only can you re-install the software, provided it is the only installation, on the same or a different computer; you can even sell it. You can even sell OEM and bulk licenses.

The full text of the decision can be found here. The court stressed that it doesn't make a difference whether the software was originally provided on a physical carrier like a DVD or as a download. Crucially, the seller is obligated to continue providing downloads and updates for the re-sold licensed software as if it were still owned by the first buyer. There is no legal difference between software provided on a physical medium or as a download. To quote the decision:

80 Since the copyright holder cannot object to the resale of a copy of a computer program for which that rightholder’s distribution right is exhausted under Article 4(2) of Directive 2009/24, it must be concluded that a second acquirer of that copy and any subsequent acquirer are ‘lawful acquirers’ of it within the meaning of Article 5(1) of Directive 2009/24.

81 Consequently, in the event of a resale of the copy of the computer program by the first acquirer, the new acquirer will be able, in accordance with Article 5(1) of Directive 2009/24, to download onto his computer the copy sold to him by the first acquirer. Such a download must be regarded as a reproduction of a computer program that is necessary to enable the new acquirer to use the program in accordance with its intended purpose.

The court also examines the problem of how to prevent abuse of this permission for online copies (as opposed to physical media) and finds no substantial obstacles here.

"79 As Oracle rightly observes, ascertaining whether such a copy has been made unusable may prove difficult. However, a copyright holder who distributes copies of a computer program on a material medium such as a CD‑ROM or DVD is faced with the same problem, since it is only with great difficulty that he can make sure that the original acquirer has not made copies of the program which he will continue to use after selling his material medium. To solve that problem, it is permissible for the distributor — whether ‘classic’ or ‘digital’ — to make use of technical protective measures such as product keys.

It seems noteworthy to me that the general question of how to prevent illegal copies is only loosely related to the question of reselling anyway. Even if it were illegal to resell, the seller's problem with illegal copies would not disappear. (It might be somewhat easier to enforce by "dongling" it to a specific hardware and not allow any re-installation whatsoever, but mainstream software producers don't appear to do that, generally.)

Lastly it is noteworthy that the original seller may strong-arm the original buyer into signing an EULA that expressly forbids reselling; those restrictions are simply null and void in the EU.¹

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_{¹ The German EULA of Microsoft Windows does not forbid reselling. The EULA for MS Office has restrictions concerning transfer to third parties in point 3 but notes that those are not applicable if the software was bought in the EU or EFTA and the transfer is inside that region.}

Answer 2

How does licensing a software not imply ownership?

Because it doesn’t.

Don't I own a Windows operating system once I pay for it?

No

Scenarios 1 - 3: each and every one of these is a breach of the license and unlawful.

A license is different from ownership

Perhaps the most understandable analogy is a theme park.

The theme park is owned by someone, let’s call them D.

They sell you a day-ticket which is a license to access their property subject to certain conditions: access at certain times, to certain areas/rides and with restrictions on certain kinds of behavior.

You can do only what D allows and nothing else. You certainly don’t own the theme park.

Now, replace D with Microsoft and theme park with Windows and you have the same situation.

Answer 3

Under standard contract law, all the negative replies listed here would be correct. HOWEVER- having in the past contacted Microsoft service about OS transfer under MS licensing, so long as the license is a full license, and not an OEM license (equipment manufacturers license is MUCH more restricted than full license, that's why it doesn't add as much cost to new hardware as a full version does), you can extract the license code from the registration, make your backup install copy, wipe the original HDD, restore the hardware chipset to factory wipe (there are instructions online, Microsoft will help find them) to remove any POST key, and at that point there is no active version of the OS. You can then install and activate the OS on another system, but you will likely have to contact MS service directly to clear the license for full Windows activation. Once done, that copy is exclusive to the now active system, and should be fine.

Answer 4

Software is not a physical thing. It is not possible to "own" it, you can only own rights to it. You can own a copyright to the software, or you can own a license to the software. Obviously, when you "buy" software, you're not buying the copyright outright, you're buying a license. "License" is a synonym for "permission". You are buying a permission to use the software. And that permission is subject to the conditions that come with it.

Answer 5

The license is very clear. If you buy for example a Dell PC with a Windows license, what will happen is that Dell bought say a million OEM licenses from Microsoft at a very good price, and Dell has therefore a license to install Windows on one million computers that are sold to end users or companies. The licenses that Dell installs are specific to both Dell, and to that particular Dell computer.

So if you sell the computer or give it away as a present, you sell it or give it away together with the license, so the next person can use Windows on the same computer. The license does not allow you to install the Windows software on a different computer. And that's about it.

Now if we go through your three different scenarios... In scenario 1, your computer was crushed, very bad luck... You are actually allowed to make a backup copy of the license in US law - but you are not allowed to install that backup on any other computer, only on the one that the Windows license belonged to. The license does not allow you to install the Windows software on a different computer. On the positive side, if you are insured, the insurance company has to pay for your loss, which is one PC and one license.

In the second case, where you sell your PC to a recycler, if the recycler takes it just for the parts and not to make a working computer, the license has lost its value. The license does not allow you to install the Windows software on a different computer.

In scenario 3, if the buyer isn't interested in Windows, the license doesn't force him to install it or keep it installed anywhere. However, you can't install the software on another computer. The license does not allow you to install the Windows software on a different computer.

That's the point in the end: The license allows you to use Windows on ONE particular computer. Not on any other computer. No argument of yours can get around that.

You can buy Windows with a different license, that gives you more freedom what you can and can't do it. Windows with such a license is a lot more expensive. You got a license at the lowest possible price, which gives you fewer rights.