Does EU law allow for the second hand sale of an e-book? The CJEU has confirmed no1.
The Claimants in this case were an association responsible for defending the interests of a group of Dutch publishers. The Defendant operated a website that provided a marketplace for used e-books. The website allowed users to sell e-books they have legitimately downloaded in return for credits that can be used on the site to purchase other second hand e-books. As part of the terms of the website, the sellers were required to delete their own copy and the site even placed a digital watermark on the transferred copies to demonstrate which version the legal copy was.
The publishers argued that the Defendant was infringing the copyright in the books because the supply was an unauthorised communication to the public (contrary to Art 3(1) InfoSoc Directive2). The Defendant argued that the supply of second hand e-books fell within the ‘distribution right’ under Art 4 InfoSoc Directive (and was therefore exhausted at the point of first sale by the publishers, or with their permission).
The Principle of Exhaustion
Once a tangible copy of a protectable work (such as a physical book) has legitimately been sold to the public, the rights owner cannot prevent further resale of that work, it has been ‘exhausted’. Copyright cannot override the concept of physical ownership and the legitimate owner of an article should not be prevented from re-selling it.
To interfere with the concept of exhaustion limits the property right that the physical owner of the item enjoys. However, the digitalisation of copyright works has muddied the waters somewhat, as it has created a new means of supplying and distributing such content. One can easily and quickly obtain perfect copies of a work (which do not deteriorate physically) and distribute them at negligible cost. The result being that the ability of rights holders to obtain fair compensation for their work is reduced.
The ‘Existing’ Position
It has been unclear for some time how far the concept of ‘digital exhaustion’ stretched in the EU. In the UsedSoft3 case, the CJEU ruled that it does apply in relation to software (under the Software Directive), but many national courts have struggled with its application. There are many differences between software and InfoSoc-type works (such as literary works), not least that computer programs are tools, where as literary works can be enjoyed exactly as they exist. AG Szpunar toiled with the two sides of the argument, and set them out quite comprehensively in his opinion4. He eventually concluded, having reviewed both the legal and technological arguments, that the concept of exhaustion should not apply to e-books. Much of the reasoning was regarding the difference between the ‘communication right’ and the ‘distribution right’ and what the EU legislators intended to be covered by each.
The CJEU largely endorsed the view of the Attorney General that the supply of an e-book is covered by the right of communication to the public (under Art 3(1) InfoSoc Directive), it is not a distribution. Therefore, the concept of exhaustion does not apply to the digital sale of e-books.
Obviously this decision will be welcomed by publishers and other rights-holders in the EU. It also seems a sensible decision, for both publishers and consumers, as the alternative would inevitably be higher prices at the point of first download and lower sales of e-books.
It will also be welcome (whether you like the decision or not) that there is now some clarity, given that national courts in Member States have been struggling with the interpretation of the law for some time. However, whilst it will probably apply more broadly to other types of digital content (at least literary, musical and audio-visual works), there may be limited applicability beyond e-books as technological progress means that most copyright works are now provided via streaming or subscription services.