Summary of Court of Appeal Judgment

Factual and Procedural Background

Company A (trading as Company A Trading) sold second-hand software licences for Company B software products, including operating system and office productivity products. Company A claimed Company B restricted supply by contract and by migrating customers to subscription models, amounting to breaches of Articles 101 and 102 TFEU (and analogous EEA and domestic law). Company A sought damages for the period 1 January 2014 to 31 December 2022, across the UK and the EEA.

Company B denied liability and contended that copyright in the software had not been exhausted, so Company A's resale infringed copyright and its competition claim could not succeed. The Competition Appeal Tribunal ("the Tribunal") dealt with two interlocutory applications in May 2025 (Tribunal ruling dated 23 May 2025) and directed preliminary trials. A trial of preliminary copyright issues occurred in September 2025 and the Tribunal issued a ruling on 12 November 2025 deciding those issues in Company A's favour. Company B obtained permission to bring two appeals to the Court of Appeal: (1) a jurisdiction appeal challenging the Tribunal's competence to determine copyright issues (CA-2025-001656); and (2) an appeal on the preliminary copyright issues (CA-2025-003082). A permitted intervener (a proposed class representative) was allowed to intervene in the first appeal. The Court of Appeal heard the appeals and handed down judgment on 07 July 2026.

Legal Issues Presented

1. Whether the Competition Appeal Tribunal had jurisdiction under sections 47A/47B of the Competition Act 1998 to decide copyright issues that were antecedent or necessary to resolve a claim for alleged breaches of competition law.
2. Whether the doctrine of exhaustion, as articulated in Case C-128/11 UsedSoft GmbH v Oracle International Corp ("UsedSoft"), applies so as to exhaust copyright in (a) non-program works embedded in software products (e.g. graphics, user interfaces) and (b) subdivided or bulk licences (i.e. whether volume/multi-user licences may be disaggregated and resold).

Arguments of the Parties

Appellant's Arguments (Company B)

• The Tribunal lacked jurisdiction under s47A to decide copyright questions that are logically anterior to the competition claim and that may establish a separate cause of action for copyright infringement (which should be decided in the High Court).
• UsedSoft does not exhaust copyright in non-program works embedded in software products; such works are governed by the InfoSoc Directive and exhaustion does not cover intangible copies in that regime.
• UsedSoft, read properly (paragraph [69]), prohibits subdivision of block or multi-user rights in relevant circumstances (client-server/user-rights context), so Company A cannot subdivide bulk licences and resell parts.
• The particular contractual terms of Company B's licence agreements create indivisible block licences and/or require transfer mechanisms (e.g. transfer forms), so subdivision is impermissible.
• Certain factual points in sample transactions (including technical measures and use of product keys) meant the Tribunal should have found non-compliance with UsedSoft requirements.

Respondent's Arguments (Company A)

• The Tribunal had jurisdiction under s47A to decide any issues necessary to resolve a claim for damages under Chapter I/II, including ancillary issues of copyright and contract interpretation.
• UsedSoft applies to downloaded/intangible copies of computer programs and, where the product as a whole is in substance a computer program and non-program works are incidental/accessory, exhaustion covers the non-program works too.
• Subdivision of multiple licences is permissible in the factual circumstances of this case because the licence copies at issue are independent copies (not a single server-based user-right hub) and exhaustion occurs at first sale; contractual transfer formalities are irrelevant to exhaustion.
• If a first acquirer fails to render their copy unusable after resale that may give rise to infringement by that acquirer but does not undermine the second acquirer's exhaustion-based right to use the acquired licence.

Intervener's Position

• The intervener supported Company A's positions on the jurisdiction point and on the application of exhaustion.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Case C-128/11 UsedSoft GmbH v Oracle International Corp, EU:C:2012:407, [2012] 3 CMLR 44	Establishes that the principle of exhaustion of the distribution right in computer program copyright applies to online, download-based sales of copies of computer programs.	The Court treated UsedSoft as the central authority: exhaustion applies to intangible downloads of computer programs; UsedSoft's [69] paragraph was examined and interpreted as addressing client-server/user-right arrangements rather than a per se prohibition on subdivision in all circumstances.
Sportradar v Football DataCo [2020] CAT 25	Authority for the proposition that standalone competition proceedings under s47A often raise legal issues outside pure competition law and that such issues do not justify transfer out of the Tribunal on case management grounds.	The Court relied on Sportradar to support the Tribunal's competence to determine legal issues adjacent to competition claims and to reject a narrow reading of s47A.
Letang v Cooper [1965] 1 QB 232	Definition of "cause of action" (Diplock LJ): a factual situation entitling one person to a remedy against another.	Used to analyse Microsoft’s argument that some copyright points would establish a cause of action for infringement; the Court accepted the concept but held that existence of a cause of action did not preclude the Tribunal hearing the competition claim.
Lloyds Bank v Rogers [1999] 3 EGLR 83	Authority distinguishing a cause of action from a remedy and discussing consequences for jurisdiction.	Cited to support the point that Microsoft could have a cause of action even if no remedy is sought in the Tribunal proceedings; this did not prevent Tribunal jurisdiction.
Unwired Planet v Huawei [2016] EWHC 958 (Pat)	Discussion of transferring cases to the Tribunal and the limits of transfer in relation to distinct causes of action (e.g. contract causes of action distinct from competition law).	The Court distinguished Unwired Planet: there the FRAND contractual claim was distinct and need not be decided to resolve the competition issue; by contrast, in the present case copyright questions were necessary to resolve the competition claim.
Unwired Planet v Huawei [2020] UKSC 37	Explains FRAND; cited for context on Unwired Planet.	Referenced in relation to the prior High Court decision; used to explain background but not to change the Tribunal jurisdiction conclusion.
Betts v Willmott (1870-71) L.R. 6 Ch. App. 239	Historical authority on exhaustion of rights: purchaser's control of a purchased article includes the right to resell it.	Employed as a historical and conceptual starting point for exhaustion principles; the Court used it to situate EU doctrine of exhaustion.
Wright v BTC Core [2023] EWCA Civ 868	Review of EU provisions concerning copyright in computer programs (summary of relevant EU law).	The Court relied on the review in Wright as background for the statutory and directive analysis relating to computer programs and exhaustion.
Club Hotel Loutraki v Ethniko Simvouli Radiotileorasis (C-145/08 and C-149/08) [2010] ECR I-4165	Principle of legal classification by examining the transaction as a whole (used to decide which regime/Directive applies).	Applied to support the approach of characterising the product as a whole when deciding whether the Software Directive or the InfoSoc Directive governs exhaustion.
Art & Allposters International BV v Stichting Pictoright Case C-419/13 EU:C:2015:27	Held that "object" in Art 4(2) InfoSoc Directive means a tangible object; exhaustion under InfoSoc applies to tangible objects.	Used to note that InfoSoc's exhaustion relates to tangible objects, distinguishing it from Software Directive treatment; the Court did not need to reopen Art & Allposters but used its reasoning when analysing InfoSoc provisions.
Nederlands Uitgeversverbond v Tom Kabinet Internet BV Case C-263/18 EU:C:2019:1111	Held that ebooks are not computer programs and that where a work is to be characterised as a book the InfoSoc Directive applies; introduced the "complex matter" analysis.	The Court relied on Tom Kabinet to explain how to characterise complex matter and concluded that where the product as a whole is a computer program with incidental non-program works, the Software Directive can govern exhaustion.
Case C-390/15 Rzecznik Praw Obywatelskich (RPO), EU:C:2017:174	Permits objective justification for different legislative regimes for physical and digital copies.	Cited to acknowledge that different regimes for digital and physical markets can be justified, but the Court concluded UsedSoft requires equal treatment in the Software Directive context.
Case C-355/12 Nintendo Co Ltd v PC Box Srl, EU:C:2014:25	Introduces "complex matter": when a product comprises both computer programs and other works (graphics/sound), the work may be characterised as a whole and a particular directive applied.	Used to explain how to treat software products that include non-program works and to support the approach of characterising the product as a whole.
Case C-683/17 Cofemel v G-Star Raw, EU:C:2019:721	Recognises that distinct rights (e.g. design and copyright) can coexist over the same subject matter.	Cited by Microsoft to argue for distinct protection of non-program works; the Court distinguished that principle from the specific exhaustion choice required in complex-matter exhaustion cases like Tom Kabinet.
Case C-16/03 Peak Holding AB v Axolin-Elinor AB, EU:C:2004:324	Discusses limits on contractual terms affecting exhaustion and related principles.	Cited to support the proposition that exhaustion operates notwithstanding contractual terms purporting to prevent it; Court noted contractual formalities cannot override exhaustion.
BGH decision of 11 December 2014 (UsedSoft 3) (I ZR 8/13)	German Federal Court of Justice analysis of UsedSoft; considered client-server/user-right aspects and subdivision issues.	The Court regarded the BGH reasoning as persuasive support for its interpretation of UsedSoft: paragraph [69] relates to client-server/user-right arrangements and does not prohibit subdivision in the general independent-copy context of this case.
Case C-166/15 Ranks v Latvia, EU:C:2016:762	Addresses evidential and lawful acquisition requirements for exhaustion reliance.	Cited to explain that the claimant relying on exhaustion must show lawful acquisition; the Court concluded Company A had shown lawful acquisition.

Court's Reasoning and Analysis

The Court addressed the appeals in two main parts.

Jurisdiction (s47A/47B): The Court analysed the statutory language of s47A and found no implicit limitation preventing the Tribunal from deciding issues (including copyright questions) necessary to resolve a claim for damages for alleged competition law infringement. The Court accepted that some copyright issues were logically anterior (and might, if decided for Company B, establish a cause of action for infringement) but held that the existence of a cause of action did not deprive the Tribunal of jurisdiction to determine the competition claim. The Court distinguished Unwired Planet (which concerned transfer of distinct causes of action) and relied on the ordinary meaning of s47A and authorities on case management (including Sportradar) to conclude the Tribunal had the jurisdiction to decide the copyright preliminary issues. The jurisdiction appeal was dismissed.

Preliminary copyright issues:

1) Characterisation and applicable Directive: The Court set out the relevant international and EU instruments (WIPO treaties, InfoSoc Directive 2001/29, Software Directive 2009/24) and the principle that the Software Directive is lex specialis for computer programs. It adopted the CJEU approach in Club Hotel Loutraki, Nintendo and Tom Kabinet: the product must be characterised as a whole to decide which regime applies. Tom Kabinet shows that where the non-program element is the predominant element the InfoSoc regime applies; conversely, where the product is in substance a computer program and the non-program works are incidental or accessory, the Software Directive applies.

The Tribunal had found the non-program works (e.g. user interfaces, icons) were ancillary/accessory to the program functionality and that the product was in substance a computer program. The Court found that finding open to the Tribunal and a rational application of CJEU authority, and held that once so characterised the Software Directive exhaustion regime applies, meaning the copyrights in the non-program works are exhausted in these circumstances.

2) Subdivision of bulk licences: The Court analysed UsedSoft, particularly paragraph [69], and concluded that the CJEU's prohibition in that paragraph relates to client-server/user-right arrangements where a single server copy and associated user-rights architecture mean the user-rights are not independent and thus not susceptible to subdivision. In contrast, where multiple independent copies/licences exist (as in the present case), subdivision is not precluded by UsedSoft. The BGH UsedSoft 3 decision was persuasive support for this interpretation. The Court agreed with the Tribunal that exhaustion occurs at the first sale and that contractual labels or transfer formalities do not prevent exhaustion; if the first acquirer retains and uses a copy after resale that may give rise to infringement by that acquirer but does not defeat the second acquirer's exhausted right. The Court rejected arguments that detailed licence terms rendered the licences indivisible in law in these circumstances. The Tribunal's factual and legal conclusions on subdivision were upheld.

Holding and Implications

DISPOSITION: Both appeals are DISMISSED.

Implications: The Tribunal's rulings that (a) it had jurisdiction to determine the copyright preliminary issues and (b) exhaustion under the Software Directive applied to the products at issue (including that non-program works were incidental and that subdivision of independent licences is permissible) stand. The immediate practical effect is that the Tribunal's preliminary findings in favour of Company A are affirmed for the purposes of continuing the competition claim; the Court did not purport to create new general principles beyond applying existing CJEU authority, and no new wider precedent beyond this application was asserted by the Court.