Microsoft turns to the UK Supreme Court after losing twice over second-hand software licenses, and billions could ride on the outcome | Daily Reports Online
- Microsoft has won an extended stay at the Competition Appeal Tribunal while it seeks permission to appeal to the UK Supreme Court, having lost at both the Tribunal and the Court of Appeal
- Its argument that Office’s icons and clip art placed it outside software exhaustion rules was rejected as producing “odd results”, including CD software being resellable while identical downloads were not
- The jurisdiction ruling matters more than the £270 million claim, as it clears the way for a parallel collective action that could expose Microsoft to billions
Microsoft has bought itself time in its long-running fight with a British software reseller, securing an extended stay of proceedings at the Competition Appeal Tribunal while it prepares to seek permission from the UK Supreme Court to appeal.
While Microsoft has yet to appeal formally, its indication that it intends to do so buys it some breathing room against a judgment that could mean that parallel proceedings, including a £3.5 billion class action lawsuit that could compromise as many as 2.7 million members, could become a centerpiece of the software giant’s future legal troubles in the UK.
The UK CAT (Competition Appeal Tribunal) has paused parts of the case as a result, and Chair Justin Turner KC noted that it was not yet known whether permission would be granted, and framed his decision as balancing the potential waste of costs if permission were granted and an appeal succeeded against the undesirability of delay in the proceedings.
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A legal quagmire exacerbated by shifting legal defense from Microsoft?
Microsoft has been fighting this claim for years, dating back to 2021, when JJH Enterprises, a Derby-based reseller trading as ValueLicensing, sued Microsoft for £270 million.
The allegation is that Microsoft wrote terms into its agreements that offered customers better subscription pricing in exchange for surrendering the right to resell their perpetual licenses, thereby choking off the secondary market and pushing buyers toward Microsoft 365 even as the software giant denies wrongdoing.
ValueLicensing’s case rests on the Court of Justice’s 2012 decision in UsedSoft v Oracle, which held that a software vendor’s distribution right is exhausted once it sells a perpetual license, including one delivered by download, so it cannot use copyright to block the onward sale of that copy.
Having contested the case as a competition matter for years, Microsoft changed its argument in 2025, recasting it as a copyright dispute. Office, it said, is not merely a computer program. It ships with icons, user interface elements, help files, and clip art, and those creative components should be governed by a different copyright regime in which exhaustion does not bite.
That argument has now failed twice. The Competition Appeal Tribunal (CAT) unanimously decided the preliminary copyright issues in ValueLicensing’s favor in November 2025, and on July 7, 2026, the Court of Appeal dismissed both of Microsoft’s appeals, one challenging the CAT’s jurisdiction to rule on copyright questions at all, the other contesting the copyright findings themselves.
Microsoft’s reading, the court observed, would produce “odd results”: software supplied on a CD-ROM could be freely resold while the identical software delivered as a download could not, and a vendor could defeat established exhaustion principles simply by bundling some icons with its code.
At the same time, the CAT did not grant resellers unlimited freedom. Under UsedSoft, a buyer holding a single copy installed on a server and licensed for several users cannot carve off part of that user capacity for resale, because exhaustion attaches to the copy rather than the seat.
The Tribunal distinguished that from a genuine volume arrangement comprising multiple independent copies or licenses, in which reselling a corresponding number may be permissible once the seller has stopped using the copies it has passed on. That distinction sets real limits on how the secondary market can operate.
Microsoft has spent most of the period covered by the claim moving its customer base from perpetual licenses to Microsoft 365. If ValueLicensing wins outright, it wins the right to trade in a category that its opponent has been deliberately retiring for a decade. Should the Supreme Court decline to take the case, proceedings return to the Tribunal, with a trial mooted for 2027.
The jurisdiction ruling matters well beyond this claim. By confirming that the CAT can decide copyright questions where they are necessary to resolve a competition case, the Court of Appeal cleared a path for others, and The Register reported in April 2026 that Microsoft had viewed that appeal as a complete answer to Alexander Wolfson’s collective action, on the basis that copyright issues could not be transferred to the High Court in a class action.
Wolfson was granted permission to intervene in support of ValueLicensing, and his claim, which could expose Microsoft to liability in the billions, now stands to benefit from the ruling.
What could this mean?
Britain’s regulators have taken an interest in the same broad shift, too. On July 29 2026, the Competition and Markets Authority opened a consumer protection investigation into how Microsoft marketed its Microsoft 365 Personal and Family plans.
From January 2025, existing subscribers were given Copilot and other new features at no extra cost for the remainder of their term, then automatically moved onto a higher-priced plan at renewal unless they chose an alternative or canceled.
A time-limited “Classic” plan preserved the old feature set at the old price, and for annual subscribers the Copilot version cost £25 more per year.
“When a business changes its subscription plans, customers need clear and timely information about their options,” said Hayley Fletcher, senior director for consumer protection at the CMA. “Our investigation will consider whether Microsoft customers were misled and ended up paying more as a result.”
Microsoft said consumer trust is a priority and that it is reviewing the claims while cooperating with the inquiry. The CMA has reached no conclusions and has not accused the company of breaking the law.
That probe concerns consumer subscriptions rather than the commercial agreements at issue in the ValueLicensing case, so the two are separate matters under different regimes. What links them is the same underlying transition from one-off purchases to recurring ones.
Microsoft already faces a CMA strategic market status investigation into its business software, and Australia’s competition regulator is suing the company in the Federal Court over the same Copilot and Classic plan issue, affecting an estimated 2.7 million customers. Whichever way the Supreme Court application goes, the legal scrutiny of how Microsoft moved the world onto subscriptions is not ending soon.
The scrutiny also lands in a fraught transatlantic moment. On July 24, days after the European Commission fined Google $1 billion under the Digital Markets Act, Trump announced a Section 301 investigation into EU trade practices, declaring that the United States is not a “PIGGYBANK” for Europe and promising a substantial tariff.
Brussels has consistently maintained that regulating economic activity within the bloc is its sovereign right, and that its digital rules apply to all firms operating there. Britain sits awkwardly beside that fight. Its courts are no longer bound by EU case law, and its regulators answer to nobody in Brussels, but the president’s stated targets have been digital taxes and digital markets rules in general rather than the EU alone, and the UK has both.
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