Briefly about my wording: I call the operation of purchased software in a data center a hosted cloud. The software is operated in the data center, the authorized users "use" the software by accessing it via data networks (usually the Internet).
Microsoft states in its license terms that software manufactured and delivered by Microsoft from 1.1.2019 (new software contracts, upgrades) may only be installed and operated at certain data center operators (authorized outsourcers) and may only be operated at other data centers for an additional license fee. The path is clearly defined: Hosted cloud of Microsoft products is to take place on Azure services. The customer should pay more for operation on other systems or preferably do without them. Software from the Microsoft universe should only be allowed to be used in the Microsoft universe.
The question is therefore clear. Can Microsoft make the installation of and access to the on prem software dependent on the purchase of additional licenses or generally exclude them? The answer is also clear, although the experts argue about the justification: No. However, I would like to make it clear from the outset that I do not believe that Microsoft will allow itself to be dissuaded from its path without the intervention of antitrust authorities. Neither the retailers nor the customers will initiate legal proceedings against Microsoft. My attitude is based on the experiences I have had with customers and dealers on the subject of relicensing and auditing. Even if the lawyer is convinced that the software vendors are doing something wrong, customers are more willing to accept a certain amount of costs than to risk termination of the software maintenance contract (and thus the absence of unneeded releases) and than to fight for their rights in the courts. On the one hand, there is a lack of available alternatives that could be used instead of the purchased Microsoft software and, on the other hand, not only the costs of a legal dispute but also the costs of procuring new software systems have to be taken into account. As long as Microsoft does not overstep the mark in terms of price and the antitrust authorities do not put a stop to Microsoft's actions, nothing will change in practice, in my opinion.
From a legal point of view, there are two ways to claim that Microsoft's license terms violate the law and are therefore invalid.
- Possibility of prohibition under copyright law and German general terms and conditions law.
German GTC law states in Section 307 II of the German Civil Code that the user of a GTC may not unreasonably disadvantage the contractual partner through the GTC. GTCs are the standard provisions that we all know "as small print" and which, according to the law, are contractual provisions that are not negotiated with the contractual partner in individual cases, deviate from the content of the law and have been formulated for a large number of contracts. Microsoft's license terms are therefore general terms and conditions. However, the question is whether Microsoft's license terms constitute an unreasonable disadvantage.
1) How must software in the cloud be licensed?
I must say at the outset that I take a different dogmatic approach to many of my colleagues. According to the law, copyright law establishes a quasi-monopoly in favour of the rights holder by constituting prohibition rights, which in the area of usage rights only apply with the consent of the rights holder. For example, copies of software may only be made with the consent of the rights holder (§69c No.1 UrhG). However, this action is necessary because software has to be installed somewhere and loaded into the working memory, otherwise it cannot function. So I need the right of reproduction from Microsoft, which I also received for the server software as part of the purchase agreement or software maintenance agreement. For the reproduction, it is completely irrelevant whether it takes place on your own computer or in a data center on third-party computers. So far I am in agreement with my colleagues.
The difference in cloud hosting, however, is that the software is accessed via data networks. There must be remote access to the server software. The question is whether this remote access requires the separate consent of Microsoft (Section 69c No. 4 UrhG) or is such an act of use, as long as it belongs to the "core area of intended use" according to Section 69d UrhG, one for which no separate license is required. I think the latter view is wrong. It is based on an analogy of an "Internet video recorder" decision by the Federal Court of Justice from April 22, 2009 (CR 2009, 598). This concerned a case in which private users were able to make and retrieve copies of films on the internet for themselves. The BGH wrote that there was no publication if someone made a copy for themselves on the internet and then accessed it. This certainly applies to the area of private use, as this is cloud storage and no one would argue that content stored in the cloud is "public" because it can be accessed via the internet. Sections 69c no. 1 to no. 4 UrhG come from a different era. Software was not used via the cloud. The idea was that software would be presented to "members of the public" via the Internet. However, according to the usual description, members of the public are people who are not closely connected to each other privately. You may be familiar with this from the question of whether a private copy is not published if the copy is only passed around among close relatives and acquaintances. However, this concept of publicity cannot be maintained in the case of "authorized users". The people who work together in a company according to the will of the management are rarely all related or related by marriage. In my opinion, it is wrong to equate the concept of the public with the authorized user with regard to a decision that was clearly about the private use of works. Where does the law say that the authorized user is not a member of the public? How do you deal with the issue of group licenses if it is up to the group to decide how many authorized users there are? The European Court of Justice and the Federal Court of Justice have been wrestling for decades with the content of the term "public" in order to be able to determine the question of appropriate remuneration for the use of a work. In a recent decision (9.9.2021, Deutsche Digitale Bibliothek II GRUR 21,1511), the Federal Court of Justice again recognized [para.32] that the concept of the public is only fulfilled in the case of an indefinite number of addressees and quite a large number of persons. So you need a license if only 5 people use the software via the Internet but none if more than 5000 have simultaneous access? It is better and more straightforward to assume that the public in Section 69c No. 4 UrhG is to be equated with the authorized users. This avoids inconsistencies with the interpretation of the term "public".
This means that you must always have permission to reproduce and use the software via the Internet in order to use it, §§ 69c No.1 and No.4 UrhG, if the software is used commercially.
2) The doctrine takes a different approach. It denies the requirement of licensing pursuant to Section 69c No. 4 UrhG if only authorized users use the software. It says that, for financial reasons, it should not matter whether the authorized purchaser of the software uses it in a data center or on his own computers and that the retrieval of the software via the cloud is therefore part of the intended use. I expressly agree with the argument of financially sufficient remuneration. It makes no difference to the software manufacturer whether the software is used in a data center or on their premises. The cloud is advantageous for people like me because the costs for operation and maintenance are lower and I don't have to worry about technical problems due to incompatibilities etc.. But that should not be the manufacturer's advantage. In the case of a license that is not expressly granted, my path leads via Section 31 V UrhG.
3) The reason why Microsoft's practice is also likely to fail before German courts on the basis of copyright law is due to the decision-making practice of the Federal Court of Justice, which repeatedly emphasizes that copyright law is not a vehicle for enforcing marketing wishes. In the OEM decision of the BGH of August 8, 2000, Microsoft has already suffered a setback when it tried to prohibit the resale of software that was delivered pre-installed on PCs with reference to licensing regulations. If Microsoft does not require the purchase of a license if it is installed in the data centers of small "non-listed providers", it is clear what Microsoft's objectives are.
- Prohibition options under antitrust law.
There is no need to argue for long here: Microsoft's practice violates antitrust law. It is an abuse of a dominant market position in accordance with Art. 102 TFEU, Section 19 GWB. The exploitation of copyright claims alone does not in itself constitute an abuse. Microsoft may continue to sell licenses on the market for money. In a "Microsoft" decision from 2007, the ECJ stated that there are indications of the existence of exclusionary competition if a provider with which Microsoft is already competing in a neighboring market (in this case, the services of a data center) is impeded , thereby restricting technical development. It is certainly not wrong to assume that Microsoft has a market dominance of more than 40% in the software sector (this is the requirement under Section 18 (4) ARC). The Commission has assumed a market share of more than 90% for certain products such as Office. If the antitrust authorities (finally) take action, there may be hope.
