News
Court of Appeal dismisses both of Microsoft's appeals in ValueLicensing claim
Charles Fussell LLP acts for JJH Enterprises Limited (trading as ValueLicensing) in its competition damages claim against Microsoft. On 7 July 2026 the Court of Appeal rejected Microsoft's appeals in full, clearing the way for the claim to proceed in the Competition Appeal Tribunal.
Microsoft's defence to ValueLicensing's competition claim rested on an ambitious proposition: that the trade ValueLicensing complains was foreclosed had no right to exist in the first place. That proposition has now been rejected twice. In JJH Enterprises Limited (trading as ValueLicensing) v Microsoft Corporation & Others [2026] EWCA Civ 872, handed down on 7 July 2026, the Court of Appeal dismissed both of Microsoft's appeals. The judgment was given by the Chancellor of the High Court, with whom Green and Phillips LJJ agreed.
It is the most significant English decision on exhaustion of copyright in software since the Court of Justice's judgment in UsedSoft (Case C-128/11), and the first appellate confirmation that the Competition Appeal Tribunal may determine copyright questions arising within a competition claim.
The claim
ValueLicensing buys and resells pre-owned perpetual licences for Microsoft products, including Windows and Office. Its claim, brought under Articles 101 and 102 TFEU, the corresponding provisions of the EEA Agreement and the Competition Act 1998, is that Microsoft foreclosed the secondary market in those licences: by restricting resale in its Enterprise Agreements, and by moving customers from perpetual licences onto Microsoft 365 subscriptions on terms that discouraged them from reselling the licences they already owned.
Microsoft's answer was a copyright defence. It contended that the resale trade was, first, illegal, because its products embed literary and artistic works such as fonts, icons and clip art which fall outside the exhaustion regime for computer programs; and second, impossible, because a customer acquiring volume user rights under an Enterprise Agreement could not lawfully subdivide them for resale in smaller quantities. Had either argument succeeded, the competition claim would have fallen away with it.
The Tribunal rejected Microsoft's challenge to its own jurisdiction in May 2025 ([2025] CAT 33), and decided the preliminary copyright issues in ValueLicensing's favour following a trial in September 2025 (judgment 12 November 2025, [2025] CAT 75). Microsoft appealed both rulings.
Jurisdiction
Microsoft argued that copyright questions fall outside the Tribunal's remit under sections 47A and 47B of the Competition Act 1998, and should have been remitted to the High Court. The Court of Appeal disagreed. Copyright and competition issues intersect, and where a copyright question is antecedent or necessary to the resolution of a competition claim, the Tribunal may decide it. Alexander Wolfson, the proposed class representative in the parallel collective proceedings against Microsoft, was permitted to intervene in support of ValueLicensing on this appeal.
Exhaustion
Microsoft argued that Windows and Office fall outside Article 4(2) of the Software Directive because they incorporate non-program works. The Court of Appeal held that the inclusion of incidental literary and artistic works does not take a computer program outside the exhaustion regime, which operates on the first sale and by operation of law, whatever the contractual terms may purport to provide. Microsoft's construction, the Court observed, would produce odd results: software supplied on CD-ROM could be freely resold while the identical software delivered by download could not, and a vendor could defeat UsedSoft simply by bundling some clip art with its code.
Subdivision
Microsoft contended that volume user rights acquired under its Enterprise programme could not be subdivided and resold. The Court held that the restriction identified in UsedSoft at [69] is confined to the client-server situation there under consideration, where a single retained copy underpins multiple interdependent user rights. Microsoft's products involved independent copies distributed internally — a materially different arrangement. The reasoning of the German Federal Court of Justice in UsedSoft III provided persuasive support. Microsoft's further arguments on construction, the form of transfer and the burden of proof were also rejected.
Why the decision matters
For the secondary market, the judgment removes uncertainty around copyright in connection with the resale of pre-owned perpetual licences, and confirms that exhaustion cannot be contracted around. For competition litigants, it establishes that a defendant cannot displace a claim from the Tribunal by dressing its defence in intellectual property — a point of real practical importance as foreclosure claims increasingly run into IP-based defences. And it preserves a substantial abuse of dominance claim against Microsoft, alongside the collective proceedings brought on behalf of a wider class of licence holders.
What happens next
Microsoft has indicated that it intends to seek permission to appeal to the Supreme Court. On 21 July 2026 the Tribunal stayed the proceedings pending the determination of any such application, save for ValueLicensing's outstanding disclosure and confidentiality applications, which are to be determined at a case management conference listed for 14 September 2026. If permission to appeal is refused, the claim will proceed to a liability trial in the CAT.
The team
Charles Fussell LLP acts for ValueLicensing. The firm instructed Matthew Lavy KC (4 Pump Court) on the jurisdiction appeal and Michael Hicks (Hogarth Chambers) on the copyright appeal, together with Mark Wilden (3PB) and Henry Edwards (8 New Square).
Microsoft was represented by Willkie Farr & Gallagher (UK) LLP with Tony Singla KC, Hugo Leith and Kristina Lukacova on the jurisdiction appeal, and by Sidley Austin LLP with Geoffrey Hobbs KC, Nikolaus Grubeck an Janni Riordan on the copyright appeal. CMS Cameron McKenna Nabarro Olswang LLP also represent Microsoft in the proceedings.
Charles Fussell LLP was known as Ghaffari Fussell LLP until 31 July 2026, and is recorded under that name in the Court of Appeal judgment. The firm has acted for ValueLicensing since 2020.