The European Court of Justice (ECJ) has held that it is an infringement of copyright to sell a physical back-up copy of a software program, even if the original physical copy has been damaged, lost or destroyed.

Background

The right to do or to authorise the permanent or temporary reproduction of a computer program by any means and in any form, in part or in whole, where loading, displaying, running, transmission or storage of the computer program necessitates this reproduction, requires authorisation by the right holder (Article 4(a), Directive 91/250/EEC, now Article 4(1)(a), Directive 2009/24/EC) (1991 Directive) (2009 Directive) (Article 4(a)).

The first sale in the EU of a copy of a program by the right holder or with his consent exhausts the distribution right within the EU of that copy, with the exception of the right to control further rental of the program or a copy of it (Article 4(c), 1991 Directive, now Article 4(2), 2009 Directive) (Article 4(c)) (Article 4(2)).

The making of a back-up copy by a person having a right to use the computer program may not be prevented by contract in so far as it is necessary for that use (Article 5(2), 2009 Directive) (Article 5(2)).

Under the 2009 Directive, the right to distribute a copy of a computer program which had been downloaded from the internet with the permission of the right holder was exhausted if the right holder had also granted the acquirer the right to use the copy for remuneration representing full economic value for an unlimited period of time (UsedSoft GmbH v Oracle International Corp; see News brief "Second-hand software: the market opens up"). Also, as the right holder could not object to the resale of a copy of a computer program for which its distribution right was exhausted, a second acquirer of that copy and any subsequent acquirer were lawful acquirers and could resell it.

Facts

In the Latvian court, R and V were convicted of copyright infringement offences from their sale online of thousands of copies of Microsoft software programs.

R and V appealed. The Latvian court referred the interpretation of Articles 4(c) and 5(2) to the ECJ. The question was whether a first acquirer of an original disk, who lawfully makes a back-up copy, and where the copy originally acquired is damaged, destroyed or lost, has the right to sell or transfer that back-up copy, relying on exhaustion of the distribution right.

Decision

The ECJ held that the 2001 Directive must be interpreted as meaning that the initial acquirer of a copy of a computer program accompanied by an unlimited user licence is entitled to resell that copy and his licence to a new acquirer. However, where the original material medium of the copy that was initially delivered to him has been damaged, destroyed or lost, he may not provide his back-up copy of that program to that new acquirer without the authorisation of the right holder.

The ECJ noted that exhaustion of the distribution right under Article 4(c) concerned the copy of the computer program itself and the accompanying user licence, and not the material medium on which that copy had, or might be, first offered for sale in the EU. It was clear from UsedSoft that Article 4(c) referred to the sale of a copy of a program, making no distinction as to whether that copy was in tangible or intangible form.

However, Article 4(a) also granted the holder of the copyright in a computer program the exclusive right to do or to authorise the permanent or temporary reproduction of that program by any means and in any form, in part or in whole. It followed that if a person lawfully acquired a copy of a program, they could resell it, as long as the sale did not adversely affect the right holder's exclusive reproduction right. In order not to infringe the reproduction right, the resale had to either be authorised by the right holder, or fall within one of the copyright exceptions, such as the right to make a back-up copy.

As the back-up copy could lawfully be made and used only to meet the sole needs of the person having the right to use that program, that person could not use that copy in order to resell the program to a third party, even if they had damaged, destroyed or lost the original material medium. The making of multiple back-up copies clearly exceeded what would be necessary for the use of the computer program by the lawful acquirer.

The exhaustion rule did not cease to apply just because a copy was a back-up copy rather than an original copy. However, the initial acquirer of a copy of a program who then resold that copy must, in order to avoid infringing that right holder's exclusive right of reproduction of his computer program, make any copy in their possession unusable at the time of the resale.

The ECJ noted that the circumstances of the national proceedings differed from those of UsedSoft in that there was nothing to suggest that R and V bought and downloaded the initial copies from the right holder's website. It was not clear whether they themselves had made those copies. The national court must decide whether they had infringed by possessing for commercial purposes, and putting into circulation, infringing copies, and this question was not affected by whether they themselves made the back-up copies or acquired them from a third party.

The ECJ has applied the principle set out in UsedSoft to a scenario where the software is bought as a physical copy rather than downloaded. Although UsedSoft did not relate to physical copies, the ECJ said that it was clear from Article 4(2) that the original buyer of a physical copy and anyone in a subsequent chain of acquisition of that copy would be free to sell the copy on, together with its accompanying user licence, regardless of any purported contractual restriction. Although the decision refers to the user reselling the copy 'and his licence', such language is difficult to understand. Under UsedSoft a lawful acquirer is shielded from infringement by the doctrine of exhaustion and a statutory exception from infringement. As such no transfer of a contractual licence from the copyright owner takes place.

The status and treatment of back-up copies are not addressed in the 2001 and 2009 Directives. The ECJ has taken a restrictive view, concluding that these copies do not enjoy the same status as originals as far as exhaustion of rights is concerned. This makes practical sense, as it would be a difficult task for a right holder to establish whether the corresponding original copy had indeed been lost or rendered unusable.

Case: Ranks and Vasiļevičs, C-166/5.

First published in the December 2016 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.