This month's addition to the list of 'Aspects of the ICT industry where the law is too slow to adapt' is sub-licences. Sub-licensing isn't a new concept. Plenty of technology is distributed not direct by its original developer but indirectly via an initial (or 'head') licence to a reseller or bundler, who then grants sub-licences to customers. Sometimes, the customer signs an end user agreement direct with the original owner, but often there's no direct link between the two.
Despite the prevalence of sub-licences in the ICT sector, there has been little legal guidance on the fairly basic issue of what happens to a sub-licence when the head licence terminates.
There are two ways to look at this situation. Either you can take the view that the end user has paid for his sub-licence and, as long as he complies with the terms of it, he shouldn't be deprived of the software that he paid for. Or you could take the view that the ultimate owner has the right to control who uses the software and, if the head licence terminates for any reason, then all the sub-licences which derive from that head licence should also terminate. There's even a handy bit of Latin for this second concept: nemo dat quod non habet (meaning that you can't give what you don't own).
Lawyers still love a Latin maxim, so maybe it is no surprise that the courts in this country, where they have been asked to rule on this issue, have taken the position that a sub-licence does indeed end if or when the head licence terminates.
But recently a court has come up with a different approach which could give hope to some sub-licensees that their investment in sub-licensed software may not always be wasted. In the case in question, there was a close linkage between the original owner of the software and the company granting the sub-licence (they were part of the same group of companies and had the same directors). This caused the court to rule that the original owner had effectively granted agency rights to the sub-licensor and so should be bound by the terms of the sub-licence.
Cases that apply the same principle have also appeared in other countries, including the US. While this particular case may be limited to its facts, it is a clear indication that courts may be sympathetic to the rights of sub-licence owners.
In practice, the terms of a head licence should always state what happens to sub-licences when the head licence terminates, and a company taking a sub-licence should insist on some sort of proof as to what would happen if the head licence terminates.