The legal nature of license keys on the blockchain

License keys have long been used in the software industry to control and monetize the use of programs. The purchaser of the software receives an individual key that gives him access to the full version. Without this key, the software can usually only be used to a limited extent or not at all. But what is the legal nature of such license keys and how can they be combined with modern technologies such as blockchain? And what impact does this have on the drafting of contracts for the sale of license keys?

License key as proof of rights of use

From a legal point of view, license keys primarily represent proof that the owner has acquired certain rights of use to software. The license agreement between the manufacturer and user regulates the scope of these rights, such as whether the software may only be installed on one device or several devices, whether updates and support are included and whether the license is valid for a limited or unlimited period of time.The license key thus serves as a kind of evidence with which the user can document his entitlement to use the software vis-à-vis the manufacturer. At the same time, it acts as a technical access control, in that the software only unlocks the full functionality when a valid key is entered. In this sense, the license key is similar to a physical key that enables and restricts access to a specific asset.

Tokenization of license keys on the blockchain

By using tokens on a blockchain, license keys can now be managed and transferred in a new way. Instead of delivering the key by e-mail or on a data carrier, it is stored as a token on the blockchain. The buyer receives the token and thus the right to use the software.The advantages are obvious: the transfer of the token can be tracked seamlessly and the current owner can be clearly identified at any time. Unlike conventional license keys, the manufacturer can still track who is using the software even after the sale. In addition, the transfer or resale of the license can be transparently mapped on the blockchain.From the licensor’s perspective, the blockchain therefore offers a high degree of control and security. But there are also advantages for the licensee: They can prove their acquired usage rights at any time using the blockchain history and, if necessary, transfer them to third parties without having to rely on the manufacturer’s cooperation.

Legal classification of tokens

But how are such tokens to be legally assessed? Is it merely a digital license key or an asset in its own right? According to the prevailing opinion, tokens do not constitute objects within the meaning of the German Civil Code, as they exist purely digitally and have no physical embodiment.Rather, tokens are likely to be classified as other items in accordance with Section 453 of the German Civil Code (BGB), to which the provisions on the purchase contract apply accordingly. The purchaser of the token therefore receives the rights embodied therein, in particular the right to use the licensed software.Whether it is also possible to acquire tokens in good faith, as is the case with movable property, has not yet been clarified by the supreme court. There are also still unanswered questions about how the tokenization of licenses relates to aspects such as consumer protection, warranty and manufacturer liability.

Exhaustion principle for software licenses

The principle of exhaustion under copyright law plays an important role in this context. This states that the distribution right of the rights holder is exhausted with the first sale of the software. The purchaser may then resell the software without the consent of the rights holder.In the “UsedSoft” case, the European Court of Justice ruled that the principle of exhaustion also extends to digitally distributed software, provided that the rights holder has granted the first purchaser a right of use for an unlimited period in return for payment of a fee. However, the prerequisite is that the first purchaser renders his own copy unusable when he sells it on.This ruling has far-reaching consequences for the trade in used software licenses. Companies such as UsedSoft, which trade in used licenses, can now invoke the principle of exhaustion. You may resell licenses that originally came from the manufacturer after the initial purchase without having to obtain the manufacturer’s consent.

Designing license agreements on the blockchain

In view of this legal situation, the question arises as to how license agreements can be optimally structured on the blockchain. On the one hand, the contracts should clarify which rights are transferred with the token and which restrictions on use apply. It should be noted that general terms and conditions clauses that prohibit resale are invalid according to the ECJ ruling.On the other hand, the contracts should regulate how the transfer of the token takes place technically and what obligations apply to the initial purchaser. For example, it must be ensured that the first purchaser renders his own copy unusable if he resells the token. The question of whether and how the token is linked to updates and support should also be addressed.Finally, it is advisable to adapt the license agreements to the special features of the blockchain. For example, it could be stipulated that the acquisition of the token and the granting of usage rights only become effective once the transaction has been confirmed on the blockchain. Questions of liability and the applicable legal system should also be clarified in view of the global and decentralized nature of blockchain.

Conclusion and outlook

The tokenization of software licenses on the blockchain opens up new possibilities for trading and transferring usage rights. It offers advantages such as transparency, traceability and automation, but also raises new legal questions.In order to create legal certainty, license agreements need to be carefully drafted, taking into account the special features of blockchain. Further developments in case law and legislation also remain to be seen, particularly with regard to the principle of exhaustion and the acquisition of tokens in good faith.However, it is clear that blockchain has the potential to fundamentally change the trade in software licenses and other digital goods. Companies and rights holders should follow this development closely and address the opportunities and risks at an early stage. Because one thing is certain: the tokenization of licenses is no longer a distant dream of the future, but has long since become a reality.

Author: Marian Härtel

Marian Härtel ist Rechtsanwalt und Fachanwalt für IT-Recht mit einer über 25-jährigen Erfahrung als Unternehmer und Berater in den Bereichen Games, E-Sport, Blockchain, SaaS und Künstliche Intelligenz. Seine Beratungsschwerpunkte umfassen neben dem IT-Recht insbesondere das Urheberrecht, Medienrecht sowie Wettbewerbsrecht. Er betreut schwerpunktmäßig Start-ups, Agenturen und Influencer, die er in strategischen Fragen, komplexen Vertragsangelegenheiten sowie bei Investitionsprojekten begleitet. Dabei zeichnet sich seine Beratung durch einen interdisziplinären Ansatz aus, der juristische Expertise und langjährige unternehmerische Erfahrung miteinander verbindet. Ziel seiner Tätigkeit ist stets, Mandanten praxisorientierte Lösungen anzubieten und rechtlich fundierte Unterstützung bei der Umsetzung innovativer Geschäftsmodelle zu gewährleisten.