On November 10 2016 the European Court of Justice (ECJ) rendered its judgment in the dispute between Vereniging Openbare Bibliotheken (VOB) and Stichting Leenrecht, which had been referred to it by The Hague District Court. VOB represents the interests of all public libraries in the Netherlands, which lend physical books to borrowers and, in return, pay a lump sum to Stichting Leenrecht. Stichting Leenrecht is the body designated by the minister of justice to collect lending rights payments, which are distributed to rights holders through collective management organisations.

Facts

The dispute concerned whether the lending of electronic books (e-books) by public libraries:

  • falls within the scope of the EU Rental and Lending Rights Directive (2006/115/EC); and
  • is covered by the existing public lending rights regime under the Dutch Copyright Act.

These questions are relevant because electronic lending (e-lending) by public libraries has become a reality in a growing number of countries, including the Netherlands.

In 2013 the minister of education, culture and science concluded – on the basis of a research report – that existing legislation leaves no room for the introduction of a copyright exception at the national level which permits the online lending of e-books by public libraries. The report paid special attention to the economic aspect of the debate and confirmed that e-lending by libraries entails certain economic risks, notably with regards to the income of e-book retailers and book publishers.

As a result of the government's stance, public libraries in the Netherlands concluded that, in the short term, there was no solution other than to enter into licence agreements with e-book publishers in order to obtain the right to lend their e-books. In 2014 the libraries launched a platform that can be used to lend e-books. Nonetheless, VOB initiated proceedings against Stichting Leenrecht before The Hague District Court to clarify the legal situation. In an April 1 2015 decision, The Hague District Court referred the case to the ECJ for a preliminary ruling.

Preliminary questions

The district court sought guidance on whether 'lending' under the EU Rental and Lending Rights Directive involves making e-copies available for temporary use by public libraries under the 'one-copy-one-user' model, which implies that only one copy may be downloaded during the lending period and that, after such period has expired, the downloaded copy can no longer be read by that user. This question particularly concerns Articles 1(1) and 6 of the directive.

The district court also sought guidance regarding whether:

  • the copy must be introduced into circulation by or with the consent of the author or can merely derive from a lawful source; and
  • the exhaustion doctrine of Article 4(2) of the EU Copyright Directive (2001/29/EC) is relevant in this regard.

Advocate general's opinion

In his opinion of June 16 2016, Advocate General Maciej Szpunar emphasised the importance of the public lending of e-books and its contribution to cultural promotion. He further concluded that legal acts must be interpreted in the context of the evolution of technology, the market and consumer behaviour – especially in areas strongly influenced by technological progress, such as copyright. Szpunar further emphasised that the EU Rental and Lending Rights Directive aims to safeguard the interests of authors, rather than publishers.

ECJ decision

The ECJ's judgment that e-lending is included in the EU Rental and Lending Rights Directive's scope shows that it has adopted the same view as Szpunar. Both Szpunar and the ECJ came to this conclusion primarily on the basis of a teleological interpretation of the directive.

Such an interpretation is possible as the directive's text does not answer the district court's questions. Therefore, the ECJ had to examine whether there were grounds to justify the exclusion of the lending of digital copies and intangible objects from the directive's scope.

The ECJ first established that the interpretation of the EU Rental and Lending Rights Directive may not contravene international law, such as the World Intellectual Property Organisation (WIPO) Treaty. The ECJ held that the agreed statement attached to the WIPO Treaty clarifies that intangible objects, such as digital copies, are explicitly excluded from the rental right, but that the concept of 'lending' can also include digital lending (since this is not explicitly excluded).

Second, in Paragraphs 40 to 44 of its judgment, the ECJ held that the preparatory work preceding the adoption of the EU Rental and Lending Rights Directive and its predecessor, the EU Lending Rights Directive (92/100/EC), do not support the conclusion that lending carried out in a digital format should be excluded from the scope of the former in all cases. This observation is noteworthy because the explanatory memorandum on the Proposal for a Council Directive on Rental Rights and Lending Rights (Final COM(90) 586) hints at a different viewpoint. The memorandum includes the European Commission's desire to exclude the making available of works via an electronic data transmission from the scope of the EU Lending Rights Directive. However, according to the ECJ, this statement does not cover the underlying situation because:

  • the examples mentioned in that explanatory memorandum exclusively concern the electronic transmission of films (and not books); and
  • when the explanatory memorandum was drafted, digital copies of books were uncommon and, as such, it cannot implicitly be presumed that the commission considered them.

Finally, the decision that e-lending falls under the EU Rental and Lending Rights Directive's scope is supported by its objectives that:

  • copyright must adapt to new economic developments, such as new forms of exploitation; and
  • the exclusion of the lending of e-books would contravene the general principle of ensuring a high level of author protection.

Following its decision that e-lending is included in the EU Rental and Lending Rights Directive's scope, the ECJ had to address whether Article 6(1) of the directive can be applied to such lending. Article 6(1) enables EU member states to derogate from the exclusive right of the author to allow or disallow public lending of his or her work (provided for in Article 1), provided that the author, at minimum, is remunerated for such lending.

The ECJ agreed with Stichting Leenrecht that exceptions to an author's exclusive rights must be interpreted strictly, but added that such interpretation must enable the effectiveness of the exception to be safeguarded and its purpose to be observed (with reference to – among other things – the judgment in Painer (C-145/10)). Considering the importance of the lending exception for the public interest and the similarities between e-lending and the regular lending of physical books, the ECJ saw sufficient reason to apply Article 6(1) of the EU Rental and Lending Rights Directive to e-lending, on the conditions that:

  • the author is remunerated; and
  • the e-lending occurs on the basis of the one-copy-one-user model.

Additional questions

The district court's second question was whether the Copyright Act and, in particular, the provision requiring that the copy of a work lent by a public library must be that which was brought into circulation with the author's consent, comply with Article 6(1) of the EU Rental and Lending Rights Directive. In this regard, the district court also questioned whether the exhaustion doctrine of Article 4(2) of the EU Infosoc Directive (2001/29/EC) is relevant.

The ECJ answered the above question in the negative. Article 1(2)(b) of the EU Infosoc Directive stipulates that the directive does not affect the provisions of EU laws concerning lending rights. The ECJ did not deem exhaustion to be relevant to the concept of lending. The fact that Article 15(c) of the Dutch Copyright Act requires that a copy of a work be brought into circulation with the rights holder's consent complies with the EU Rental and Lending Rights Directive and its objectives, as this condition further safeguards the high level of protection required for author rights and interests.

Finally, the district court sought guidance with regard to the question of whether the public lending exception under Article 6(1) of the EU Rental and Lending Rights Directive is precluded from applying to the lending by a public library of an e-book where that copy was obtained from an unlawful source (the district court's third question). To accept that a copy lent by a public library may be obtained from an unlawful source would amount to tolerating, or even encouraging, the circulation of counterfeit works, which is clearly contrary to the objective. The ECJ referred to the private copy case ACI Adam v Stichting Thuiskopie (C-435/12), in which a similar observation was made.

Comment

Although the outcome of this case is unsurprising at face value, it is clear that the ECJ was guided by a strong functional approach with the aim of confirming that the existing legislation can cope with the development and marketing of new products and services and the creation and exploitation of their creative content. A distinction between physical and e-books does not match this objective. The lack of guidance in the EU Rental and Lending Rights Directive's text and its preparatory works leaves the ECJ with sufficient room to interpret it in line with its objectives. It should be kept in mind that, as a result of the wording of the questions referred to by the ECJ, the scope of this ruling is limited to e-lending under the one-copy-one-user method only.

This outcome could be considered to be a success for public libraries. However, the practical consequences remain to be seen. As stated, VOB established a platform in 2014 to enable e-lending, and the number of items available through this platform is large and continues to grow. The legitimacy of this platform is in the licence agreements concluded by public libraries and (usually) publishers. The terms of these agreements are often more practicable than the freedom of the one-copy-one-user model, which renders such agreements unnecessary. It is questionable whether this ECJ ruling will change the way in which parties cooperate.

For further information on this topic please contact Roderick Chalmers Hoynck van Papendrecht? at AKD by telephone (+31 88 253 50 00) or email (rchalmers@akd.nl). The AKD website can be accessed at www.akd.nl.

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