CJEU re-affirms Usedsoft judgment but finds that lawful computer program acquirers may not resell back-up copies of those programs
On 12 October 2016, the Court of Justice of the European Union ("CJEU") rendered its judgment in the Ranks and Vasiļevičs case. This is an interesting judgment because it is the first decision after the UsedSoft case regarding the rule of exhaustion of the computer program copyright protection under the Computer Program Directive, which generated a lot of media attention and opened up a market for "second-hand" software.
The origin of the Ranks and Vasiļevičs case lies in Latvia, where criminal charges were brought against Aleksandrs Ranks and Jurijs Vasiļevičs, for the unlawful sale of goods protected by copyright and for the intentional unlawful use of another person’s trademark. More specifically, Ranks and Vasiļevičs were charged with violating Latvian criminal law by selling various copyright-protected Microsoft computer programs. It was estimated that they sold more than 3,000 copies of these Microsoft programs and the value of the material damage caused to Microsoft by the unlawful activities of Ranks and Vasiļevičs would be €265,514.
During the proceedings in Latvia, Mr Ranks and Mr Vasiļevičs asked the Criminal Law Division of the Riga Regional Court in Latvia to submit a request to the CJEU for a preliminary ruling on the interpretation of Articles 4 and 5 of the Computer Programs Directive, which led to the judgment at hand. In essence, the Latvian Court asked the CJEU two questions: whether Articles 4(a) and 4(c), and Articles 5(1) and 5(2) of Directive 91/250 must be interpreted as meaning that the acquirer of a used copy of a computer program, which is stored on a non-original material medium, may, under the rule of exhaustion of the rightholder’s distribution right, resell that copy where (i) the original material medium of that program, acquired by the initial acquirer, has been damaged and (ii) that initial acquirer has erased his copy or ceased to use it.
The CJEU reaffirms its Usedsoft judgment by considering that the term “sale” in Article 4(c) of Directive 91/250 must be given a broad interpretation. Sale thus encompasses all forms of marketing of a copy of a computer program characterised by the grant of a right to use that copy, for an unlimited period, in return for payment of a fee designed to enable the copyright holder to obtain a remuneration corresponding to the economic value of that copy. In principle, this includes such cases as the one at hand in which the copyright holder (Microsoft) markets its computer program, which is stored on a medium such as a CD/DVD-ROM, constituting a first sale where such medium is accompanied by a 'perpetual' license. If such a perpetual right is purchased, the copyright holders' rights regarding that copy are exhausted, and the acquirer may resell that copy, even if the applicable license terms contain an interdiction to do so.
However, the Latvian questions do not concern the resale by an acquirer (whether he acquired it from the initial buyer or a subsequent buyer) of the used copy of a computer program that is stored on the original material medium, but rather the resale of the used copy of a computer program that is stored on a non-original material medium. The CJEU holds that the Directive must be interpreted as meaning that the initial acquirer may not, in the situation in which the original material medium has been damaged, destroyed, or lost, provide its back-up copy of that program to that new acquirer without the rightholder’s authorization.
The case (C‑166/15) can be found here.