Attempts to Transfer Microsoft Licenses May be Ineffective

Like most software publishers, Microsoft includes terms in its standard license agreements to restrict a licensee’s ability to resell or otherwise assign to another party the right to install or use software. Increasing the level of difficulty for IT groups trying to manage their software assets, different types of Microsoft licenses come with different transfer restrictions. For retail off-the-shelf products, known as “full packaged product” or “FPP,” and pre-installed software, called “original equipment manufacturer” or “OEM,” licenses usually may be transferred without Microsoft’s consent, but these transfers are subject to limitations on the number of transfers (usually just one) and requirements that the transfer must be made along with the hardware on which it was originally installed. However, attempting to assign or transfer Microsoft software purchased under a volume license agreement often is considerably more difficult.

The golden rule for Microsoft volume license transfers is that the licensee cannot transfer volume licenses until those licenses are perpetual—that is, no transfer until the license fee is fully paid. However, even once the licenses have been fully paid, Microsoft pre-approves transfers only in connection with divestitures, mergers, or consolidation events, or an assignment to a licensee’s identified affiliates. (Under most standard Microsoft volume license agreements, affiliates are defined as entities under common control which is defined as shared ownership holding 50% ownership interest.) To effectuate a transfer under these narrow circumstances, the licensee must notify Microsoft of the transfer using the Perpetual License Transfer Form, or else the purported transfer is void. For circumstances that are not “pre-approved,” the licensee will submit the same form, but the form will not be effective unless Microsoft returns the form with a signature approving of the transfer. In practical terms this usually means that a “discretionary” transfer is nearly impossible, unless the licensee can bring some leverage to bear on the situation. In fact, when reading any software license that says, “Any transfer or assignment must be approved in writing by us,” it is helpful to consider that phrase to be a nicer way of saying, “We will not permit you to transfer this license. Ever.”

It is also important to keep in mind that the golden rule—ownership of a perpetual license prior to transfer—also rules out transfer of Enterprise Subscription licenses because the licensee receives no perpetual license under the Subscription. So, unless a licensee executes a buy-out at the end of the Enterprise Subscription, it has no right to transfer, even if the assignment or transfer otherwise fits into one of Microsoft’s pre-approved situations.