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UK reseller sues Microsoft for £270m in damages claiming prohibitive contracts choke off surplus Office licence supplies

ValueLicensing also calls for action to 'restore and maintain competition and choice in the market'

Updated Microsoft is being sued by UK reseller ValueLicensing for £270m in damages over claims of restrictive contractual practices and abuse of dominance.

The claim, filed in the UK's High Court in London, asserts that Microsoft stifled the supply of preowned Microsoft licences in the UK and EEA and added clauses into contracts that restrict customers reselling their licences (in return for a discount).

"The net result," alleges the Derby-based software reseller, "has been higher prices and less choice for customers, who have been steered into cloud-based Office365 and Azure subscriptions."

Microsoft has not been subtle in its desire to shift users to a subscription model. An ad campaign was launched in 2019 aimed at highlighting the benefits of the 365 approach versus the old perpetual-licensed Office 2019. Earlier this year it slashed the length of support perpetual licence holders could expect.

That said, companies like ValueLicensing have been able to make a pound or two over the years by reselling surplus volume licences. On its website it trumpets £1m saved by an NHS trust with 4,800 Office 2019 Pro Plus licences and up to 70 per cent savings possible via surplus Microsoft licences.

ValueLicensing alleges in its lawsuit that the contractual prohibitions imposed by Microsoft as well as non-disclosure agreements (NDAs) have impacted preowned licences on the market.

The company claims that the disputed Microsoft practice has been ongoing "since at least 2016" and has calculated that the sales that it believes subsequently did not happen because of this would have resulted in £270m of profit. "Losses are continuing," it said, "and ValueLicensing reserves the right to amend the scope of the claim."

Certainly, Microsoft is showing no signs of turning away from the drive to a subscription model.

"Microsoft is the dominant provider of office software applications and operating systems. By suppressing the availability of preowned perpetual licences that compete with its latest Office365 product lines, it has tried to minimise the activities of its reseller rivals," ValueLicensing claimed.

Microsoft has a strong position in the enterprise space. Competition against its Office productivity suite is limited (despite the best efforts of the likes of LibreOffice) and companies pay handsomely in order to use its products.

Hence the industry that has sprung up around surplus licences, particularly for cash-strapped organisations such as the UK public sector.

As well as costs and relief, ValueLicensing has also asked for "various measures... to fully restore and maintain competition and choice in the market."

These include a removal of NDAs that impact the trade in perpetual licences and "a finding that the restrictive clauses on relinquishment and retention in existing agreements are illegal and unenforceable."

Jonathan Horley, founder and managing director of ValueLicensing, said that the disputed actions of Microsoft "impacted almost every organisation that provides desktop software for its workforce in the UK and the EEA."

"ValueLicensing is not the only victim," he added.

Indeed, while today's action has been filed at the UK's High Court, it will doubtlessly be followed closely by other resellers. Blighty is not the only country where surplus licences are resold. ®

Updated at 14:30 UTC 8 April 2021 to add:

A Microsoft spokesperson told The Register: "Microsoft is unable to comment on ongoing legal matters."

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