UsedSoft Now Binds Your Perpetual Microsoft Surplus
The UK Court of Appeal dismissed Microsoft’s appeals in JJH Enterprises Ltd (t/a ValueLicensing) v Microsoft on 7 July 2026 ([2026] EWCA Civ 872). UsedSoft still covers Windows and Office even when those products carry clipart, icons, and help files. A volume block can be subdivided and resold as units. That is now Court of Appeal law, not a reseller theory waiting on the Competition Appeal Tribunal. The compensation claim has not been tried. Microsoft’s cloud-credit path was not decided.
That’s the problem.
This is not a courtroom story. It is a surplus story. If you still hold perpetual Microsoft that the next Enterprise Agreement is about to treat as a credit toward cloud, you need that file this week. Not because you are about to become a reseller. Because the person across the table already knows the secondary market just got a clearer floor.
What the CAT and the Court of Appeal actually decided
ValueLicensing’s claim, transferred from the High Court in 2022 as case 1570/5/7/22, alleges that Microsoft stifled the second-hand on-prem market (restrictive clauses, a push from perpetual onto subscription) in breach of the Competition Act and Articles 101 and 102 TFEU. Justin Turner KC chairs the tribunal.
Two preliminary issues went first. Microsoft said Office icons, clip art, help files, and typefaces made the product a creative work under the Information Society Directive, outside UsedSoft. It also said a volume buy (a block of seats under an Enterprise Agreement) could not be broken up and resold piecemeal. The CAT rejected both in [2025] CAT 75, handed down on 12 November 2025. Exhaustion under Article 4(2) of the Software Directive operates by law and is not limited by contractual terms in Microsoft’s Enterprise Agreements. The first online sale exhausts the distribution right in the works supplied with Windows and Office. Subdivision of those licences is permissible.
Microsoft appealed the preliminary-issue judgment and an earlier jurisdiction ruling ([2025] CAT 33) that the CAT could decide the copyright questions necessary to resolve the competition claim. The Court of Appeal dismissed both appeals on 7 July 2026. Software products are assessed as a whole. Non-program elements that are ancillary do not take Windows and Office outside UsedSoft. UsedSoft itself (C-128/11) said a first acquirer could not divide a licence and resell only unused user rights. The Court of Appeal read that passage as the client-server architecture in that case, not as a ban on subdividing independent Microsoft volume units.
This appeal decided resale and subdivision. It did not decide whether customers may apply the value of older-product licences to new cloud subscriptions rather than selling them to a third party. It is not a damages award. A CMC is listed for 14 September 2026. Microsoft has sought to keep the claim stayed while it considers a further appeal.
The related Wolfson collective action is a different file. So is the broader UK licensing litigation. Do not brief someone else’s claim size as your exposure.
UsedSoft and subdivision are now the file for the next EA
Look at your own Microsoft file. Most SAM reports still have a row that says “Office” or “Windows” and a renewal slide that says “we are on Microsoft 365.” Those two sentences hide the surplus.
A perpetual on-prem license you already paid for is one asset. A cloud subscription that replaced the workload is another. UsedSoft, as the Court of Appeal has now left it, is the rule that a secondhand software license can be resold. Subdivision is the rule that a volume block is not one brick. A 1,000-seat buy can be treated as units.
If your reports still collapse “Microsoft” into seats you subscribe to, you are reading a reporting layer, not a license position. This is not a criticism of the teams building those reports. The tools prove what is deployed. They do not recast leftover perpetual against a credit offer and a resale path the Court of Appeal just refused to kill. The gap is interpretation work.
Do not let Microsoft frame the next meeting as “the court did not decide our cloud-credit model, so nothing changes.” On the law they appealed, that sentence is fair. Yours is narrower: what perpetual Microsoft do we still hold, can it be treated as units, what is the credit on the table, and what does a lawful third-party resale path do to that number. “We moved to the cloud” is not an answer. A volume SKU you cannot split in your own file is not a position.
If that feels familiar, the problem is not your team’s maturity. A commercial question is being answered with a subscription inventory.
Picture your procurement director, sixty days from the Enterprise Agreement. Microsoft, or the partner who sells the term, will walk in with the option the cloud-credit model assumes: apply the value of older-product licenses to new cloud subscriptions rather than selling them to a third party. Your CIO wants to know whether unused Office and Windows perpetual is worth more as that credit or as something that can legally leave the estate.
If SAM needs three weeks to turn “we used to buy perpetual” into a unit-level surplus file, the meeting already has a framing. An analysis that arrives after the credit is in the draft schedule is a document. One that arrives during the meeting is a decision input.
You are not being asked to become ValueLicensing. You are being asked to know what you still own. Counsel will decide whether you sell, hold, or take the credit. SAM’s job is to hand them something current. The same pack is the renewal file.
What to put in the file before you sit down
Do this in the next thirty days, as a decision pack rather than a project. The event is the next EA, not the trial.
| What you produce | Why it changes the next conversation |
|---|---|
| Perpetual Microsoft still in the estate, by product and version | Separates a Microsoft 365 slide from licenses that still exist. A subscription count is not a surplus file. |
| How those licenses were bought: volume, a 1,000-seat block, or named units | The Court of Appeal left subdivision standing. A block you cannot split is not a position. |
| What is unused, underused, or already replaced by a subscription | That is the surplus. Credit versus third-party resale. Both numbers, one page. |
| A one-page note for procurement, finance, and the CIO | What we still hold. What credit is on the table. What UsedSoft leaves standing if we do not take it. |
Can a non-specialist brief the CIO in fifteen minutes from the pack you have today? If the answer is no, you do not have a perpetual Microsoft position. You have a library and a news alert.
The decision layer, not another inventory
You already have discovery data and a Microsoft agreement. The gap is not another inventory. The gap is turning that estate into a decision: which perpetual Microsoft still sits in the file, which of those units are surplus, what the cloud credit is, and what procurement should do before the next EA. LICENSEWARE sits on the inventory and ITSM tools you already run. It is not a rip-and-replace SAM suite. It is a decision layer: what matters, why it matters now, what should happen next. Microsoft Deployment Manager and Microsoft Entitlement Manager recast perpetual leftover against the MLS, not against a subscription count.
If you are heading into an EA and your current tools still need three weeks to turn a perpetual leftover into a credit-versus-resale number, book an Audit Readiness Review. You can also start on the free plan and run the analysis on your own data.
The question to walk in with
Do not let Microsoft frame the next meeting as “we offered you a path to the cloud, and the court did not decide that was wrong.” The right question is: what perpetual Microsoft do we still hold, can it be treated as units, what is the credit, and what does the resale path the Court of Appeal just left standing do to that number. That is a data question, not a sales question.
Microsoft may seek a further appeal. ValueLicensing will take the compensation claim toward a liability trial. You still have to walk into the next EA. The vendor will walk in with a number. The only question is whether you have yours first: current, defensible, and tied to the contract in front of you.
