The principle of exhaustion of copyright in digital copies of works in the case law of the Court of Justice of the European Union – Part 2

This study is a follow-up to the theme, discussed in no. 11 (28) 2020 monthly "Legal and Tax Advice - RB Newsletter" 1 .

The purpose of the article, as in part first, is the examination of the precedent judgments of the Court of Justice of the European Union (hereinafter referred to as the ‘Court’ or ‘TEU’), which are specific milestones in the process of shaping the EU principle of the exhaustion of copyright to digital copies of works[2].

The author presents, among other things, the conclusions of the landmark judgment of the CJEU 19 December 2019 in the case of Nederlands Uitgeversverband and Groep Algemene Uitgevers v Tom Kabinet Internet BV and others 3 , in which the Court decided, almost a decade after the question referred for a preliminary ruling in the case of UsedSoft GmbH v.

Oracle International Corp. 4 whether this rule applies to digital copies of works other than software.

1. Derogations from the right to reproduce digital copies of works – judgment of the TEU in the case of Alexanders Ranks and Yurijs Vasiļevičs v. Finanšu un economics of the noziegumu izmeklēšanas prokoratūra and Microsoft Corp. 5

In the present case, the reference for a preliminary ruling was for interpretation Articles 4(2) and 5(1) and 2 Directive 2009/24 (so-called Software Directive or Software Directive)[6]. This application was lodged in criminal proceedings against A. Ranks and J.

Vasiļevičs, who were prosecuted, among others, on charges of illegal sale within an organized criminal group of copyright-protected items, as well as carrying out unregistered business activities due to the placing on the market – via an online electronic market – copies of used computer programs registered on media that are not original.

The facts in this case were as follows. Aleksandrs Ranks and Yuris Vasiļevičs were prosecuted because they sold on the online electronic market various copyright protected and developed by Microsoft Corp. computer programs, including versions of Microsoft Windows software and its further Microsoft Office office version.

The re-examiner (as a result of an effective cassation) of the Riga District Court (Rīgas apgabaltiesas Krimināllietu thysu kolija) at the request of A. Ranks and J. Vasiēevičs decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

1. Is a person who has acquired a computer program with a “used” license on a disc that is not original but works and is not used by any other user, can according to Articles 5(1) and 4(2) Directive 2009/24 rely on the exhaustion of the right to distribute a copy (copy) of that computer program first the buyer purchased from the copyright holder to the original record, the condition of which deteriorated, so first The buyer removed or no longer uses his copy (copy) of the computer program?
2. In case of question first The answer is yes: whether a person who can rely on the exhaustion of the right to distribute a copy (copy) of a computer program has the right to sell that program to a person third on a disc that is not original, within the meaning of Articles 4(2) and 5(2) Directive 2009/24?

Answering the questions asked, TEU First, noted that A. Ranks and J.

Vasiļevičs are being prosecuted for acts committed at the time when it was in force Directive 91/2507 , not Directive 2009/24, Therefore, the questions raised relating, inter alia, to the interpretation of the principle of exhaustion of the distribution right of the copyright holder must be interpreted as referring to equivalent provisions Directive 91/250.

The Court then found that, by means of the questions raised, the national court sought to determine whether Article 4 point (a) and (c) and Article 5(1)(2) Directive 91/250 it must be interpreted as meaning that the purchaser of a used copy of a computer program registered on a material medium which is not original may, in accordance with the rule of exhaustion of the right of distribution, resold such a copy when, after first, delivered to the original buyer the original material carrier of this program was damaged and when, after second, that original purchaser removed or ceased to use his copy.

In this respect, the CSF recalled that according to Article 4 point (c) that Directive first sale within the Union of copies of a computer program by or with the consent of the rightholder exhaustive the right to distribute that copy within the Union.

This provision shows that the exhaustion of the right to distribute copies of a computer program is dependent on the combined occurrence of two the conditions, namely that it be placed on the market — or more specifically: sold by the rightholder or with his consent — and that that placing on the market take place within the Union.

The Court has already ruled that the term ‘sale’ referred to in that provision, which must be interpreted as extending, covers all forms of marketing a copy of a computer programme, which confers the right to use that copy for an indefinite period in return for payment of the price to enable the copyright holder to obtain a remuneration corresponding to the economic value of that copy[8].

The Court found that, as a rule, the exhaustion of distribution rights results in that an entity entitled under copyright to a computer program (in this case Microsoft) which sold in the Union a copy of that program on a material medium (such as CD -ROM or DVD-ROM) together with a license for unlimited use, could no longer object to further resale of that copy by the original purchaser or subsequent purchasers, despite the existence of contractual provisions prohibiting any further disposal. However, the questions asked do not relate to the situation where the original purchaser resold a copy of the computer program in use registered on the original material medium, but to the situation of resale of the used copy of the computer program registered on a material medium which is not the original (reserve) by the person who purchased the copy from the original buyer or further buyer.

TSUE noted that Directive 91/250 grant the copyright holder to a computer programme the exclusive right to exercise or permit permanent or temporary duplication of the programme by any means and in any form, in part or in full, subject to the exceptions set out in Directive 91/250.

The authorised purchaser of a copy of a computer program placed on the market by the rightholder or with his consent may consequently resell the copy used, provided that the divestment does not prejudice the exclusive right of reproduction guaranteed to that right and that any reproduction of the program is authorised or subject to the exceptions laid down in the Directive.

In conclusion, the CJEU ruled that the derogations from the right to reproduce specified under Article 5(1) and 2 Directive 91/250 may not be interpreted in such a way as to enable the resale of a backup created when the original material carrier of the copy has been damaged, destroyed or lost. The exhaustion of the right to distribute allows only the resale of the original material medium on which the program was acquired for the time being first, and not any further copies made.

Comparing the ruling in the present case with the judgment in UsedSoft cannot fail to observe that the interpretation Article 5(2) Directive 91/250 Whereas it is much more restrictive as applied by the EUSF in the present case.

The technology developed faster than the law in this area, and the TSUE in UsedSoft relied on a targeted approach to ensure that the right to distribution was exhausted in situations not foreseen by the EU legislator.

In the Usedsoft case, it was crucial to ensure the protection of the intangible form of the computer program rather than the medium on which it is based. In this context, close interpretation Article 5(2) Directive 91/250 in the present case, it is inconsistent with the existing case law.

However, the Court may have sought to prevent criminals from violating the rights of persons third. However, the importance of this solution is limited to a relatively narrow situation of actual production of copies of computer programs on an unoriginal medium. The offences in question have occurred above ten Years ago.

Many new computers no longer have CD-ROM drives, as programs and other digital content are downloaded directly from the internet. With this in mind, UsedSoft has a much wider application as it refers to more current practices.

Additionally, the development of Software as a Service and cloud processing also marginalize the importance of this solution. Provisions Directive 2009/24, Named lex specialis and released from the chains Directive 2001/29, they have maintained the progressive, deliberate interpretation of the Court in the UsedSoft case.

Return to orthodoxy by strict interpretation Article 5(2) Directive 91/250 in this case, however, it is problematic because it misconstrued or deliberately ignored the intangible nature of the software.

1. The lack of the principle of the exhaustion of copyright to digital copies of the work under the InfoSoc Directive – the judgment of the TEU in the case of Nederlands Uitgeversverband and Groep Algemene Uitgevers v. Tom Kabinet Internet BV and Others. 9

At least 2012, i.e. Since the judgment in UsedSoft, the doctrine of copyright raised the question whether EU copyright permits the creation of a secondary market for digital copies of works other than software.

The Court of Justice of the European Union replied to that question 19 December 2019, By issuing such a very expected judgment in the case of Nederlands Uitgeversverband and Groep Algemene Uitgevers v.

Tom Kabinet Internet BV and Others, the application for a preliminary ruling referred to interpretation Article 2, Article 4(1)(2) and Article 5 Directive 2001/29 (so-called Copyright Directive or InfoSoc Directive) 10 and was presented in the dispute between Nederlands Uitgeversverbond (hereinafter ‘NUV’) and Groep Algemene Uitgevers (hereinafter ‘GAU’) and Tom Kabinet Internet BV (hereinafter ‘Tom Kabinet’), Tom Kabinet Holding BV and Tom Kabinet Uitgeverij BV on the provision of online services in the form of a virtual market for ‘used’ electronic books.

The facts in this case were as follows. Tom Kabinet Uitgeverij was the publisher of books, electronic books and databases, and Tom Kabinet managed a website where 24 June 2014 launched a web service in the form of a virtual market for ‘used’ electronic books.

The associations of NUV and GAU, whose aim is to defend the interests of Dutch publishers, brought proceedings against Tom Kabinet, Tom Kabinet Holding and Tom Kabinet Uitgeverij concerning this online service.

Although this action was dismissed, the Amsterdam Court of Appeal prohibited Tom Kabinet from offering online services allowing the sale of illegal electronic books.

From 8 June 2015 Tom Kabinet modified the services offered so far and replaced them by Toms Leesclub (Tom's reading club, hereinafter referred to as the ‘reading club’), under which Tom Kabinet conducts electronic book trading.

The reading club offers its members, for a certain fee, ‘used’ electronic books, which were either purchased by Tom Kabinet or given to it by members of that club. In the latter situation, these members should provide a link to download a given book and declare that they have not retained a copy of it.

Tom Kabinet then downloads an electronic book from the seller's website and places on it his own digital watermark, which should enable confirmation that it is a legally acquired copy.

NUV and GAU have asked the Hague court to ban Tom Kabinet, Tom Kabinet Holding and Tom Kabinet Uitgeverij from violating the copyright of members of these associations by announcing or multiplying electronic books.

In particular, they consider that Tom Kabinet, as part of the reading club, makes unauthorised public access to electronic books.

The court in The Hague (rechtbank Den Haag) doubted whether the communication of a distance electronic book by collecting, at a charge, for use without time limit may constitute a dissemination operation within the meaning of Article 4(1) Directive 2001/29 and whether the right to distribution can therefore be exhausted within the meaning of Article 4(2) this directive.

In those circumstances, the national court decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

1. Is Article 4(1) Directive [Directive 2001/29] must be interpreted as meaning that, under the wording “any form of public distribution of the original of their works or copies thereof by sale or otherwise” it is also understood that electronic books (such as digital copies of copyright-protected books) may be made available on a network to be downloaded for an unlimited period of time at a price equivalent to the economic value of the copy of the work?
2. If yes to the question first: whether the right to distribute within the Union the original or copy of the work in question under Article 4(2) Directive [Directive 2001/29] exhaustive be as soon as possible first sale or other first transfer of the material in question – what is meant by making available online electronic books (which are digital copies of copyright-protected books) to be downloaded for an unlimited period of time at a price that represents for the rightholder a remuneration corresponding to the economic value of the copy of the work belonging to it – within the Union by the rightholder or with his permission?
3. Is Article 2 Directive [Directive 2001/29] Whereas it must be interpreted that the transfer between subsequent purchasers of a legally acquired copy for which the right to distribute it has been exhausted includes the authorisation of the reproduction operations referred to in that Article, where necessary for the legitimate use of such copy, and if so, what conditions should then be fulfilled?
4. Is Article 5 Directive [Directive 2001/29] it must be interpreted as meaning that the rightholder must not oppose the reproduction operations necessary for the transfer between subsequent purchasers of a legally acquired copy for which the right to distribution has been exhausted, and if so, what conditions should then be fulfilled?

In response to the question first The CJEU ruled that the provision of an electronic book to the public by downloading, for permanent use, falls within the concept of ‘public making available’ within the meaning of Directive 2001/29 about copyright.

The Court found that the provision of electronic books, by downloading, for permanent use does not fall within the right to ‘public distribution’ from Article 4(1) Directive 2001/29, but the right to “public access” from Article 3(1) that Directive for which exhaustion is excluded on the basis of section 3 This article.

In support of this statement, the Court, in particular, has derived from the Treaty of the World Intellectual Property Organisation (WIPO) on the authorship of the directive and its preparatory work that the intention of the Union legislature was to reserve this principle of exhaustion for the dissemination of material objects such as books on a material medium.

In contrast, the application of this principle of exhaustion to electronic books threatens to undermine the interests of rightholders in receiving adequate remuneration for works to a much greater extent than for books on a material medium, since dematerialised digital copies of electronic books do not deteriorate with use and therefore constitute excellent substitutes for new copies.

The Court pointed out, more specifically, that the concept of ‘public making available’ should be understood broadly, in so far as it covers any making available of the work to recipients who are not at the place from which the provision is made, and therefore any transmission or retransmission of that type, by wire or wireless means.

This concept is connected two cumulative elements, namely that the work must be made available to the public.

About first element, this is from the justification of the application Directive 2001/29 It follows that ‘the decisive activity is to make the work public and thus offer it on a publicly available website, which precedes the actual on-demand transmission’ and that ‘it does not matter if someone actually downloaded it’.

Thus, according to the Court, the fact that the works in question were notified to any person who would register on the website of the reading club should be considered to be ‘making available’ the work, and it is not necessary for that person to make use of this possibility by actually downloading an electronic book from that site.

About second the element, this should be taken into account not only the number of people who may have access to the same work simultaneously, but also how many of them may have access to the work successively.

In this case, the Court considers that the number of people who, simultaneously or successively, may have access to the same work through a reading club platform is significant.

Therefore, without prejudice to the fact that the referring court has made arrangements taking into account all relevant elements, the work in question should be considered to have been made publicly available.

Furthermore, the Court has already ruled that the recognition that a "public release" has taken place requires that a protected work be made available on the basis of a particular technology other than that used before, or, in the event of failure to meet the above condition, among a new audience, i.e.

an audience whose rightholder has not yet taken into account, allowing the original public release of the work.

In the present case, since the submission of an electronic book is generally accompanied by a license to use only the user who downloaded the electronic book, the same book using his own equipment, it should be considered that making available such as that made by Tom Kabinet is making available to the public, the copyright holder of which has not yet taken into account, and therefore to the new public.

According to the Court’s reply, there is no such thing as ‘digital exhaustion’ of the right to distribution according to Article 4 InfoSoc directive. More specifically, the provision of electronic books falls within the right to make publicly available for which there is no possibility of exhaustion (yes: Article 3(3) InfoSoc Directive).

3. Summary

While the concept of exhaustion is not difficult to grasp in analogue copies, digital copies are extremely difficult. Basically, the problem is twofold, i.e.

First, it is necessary to determine whether in a given situation there is indeed a ‘sale’ of a digital copy in the legal sense of that word, or whether, for example, a license agreement is concluded for e-books on Amazon or iTunes works, rather than a sales agreement.

In addition, it should be determined whether the person who ‘buys’ a digital copy of the work ever becomes the ‘owner’ of that copy. In both cases, the answer – at least formally – may be negative.

Under EU law, the Court already In 2012 In the judgment in UsedSoft, it confirmed the possibility of digital exhaustion under the Software Directive for computer programs downloaded from the internet.

Thus, the TEU ruled that it was possible to resell legitimate copies of computer programs downloaded from the internet if the operation in question was equivalent to a sale (this was formally a ‘licence’, although it had the characteristics of ‘sale’).

Although the TEU confirmed the general principle of UsedSoft in its Microsoft ruling 11 , In 2016 Whereas it was still unclear whether and to what extent this proposal could be extended to works other than computer programs and falling within the scope of the EU General Copyright Directive, i.e. InfoSoc directive.

As a result of the judgment in UsedSoft, the question arose as to whether the same application could be made for other objects of copyright in digital format, including electronic books, audiobooks, music and audiovisual files, etc. In short, those works which are protected by the InfoSoc Directive rather than the Software Directive (the interpretation of which was the subject of dispute in the UsedSoft case).

In its opinion on Vereniging Openbare Bibliotheken v Stichting Leenrecht 12 , Advocate General Maciej Szpunar considered that this issue remained pending at EU level and the Court’s judgment of 2015 on Art & Allposters International BV v.

Stichting Pictoright 13 (the case concerning the analogue issue and having nothing to do with the digital world) did not answer the question whether Article 4 InfoSoc provides for digital exhaustion.

Meanwhile In 2014 Amsterdam District Court In the first In the Tom Kabinet case, the right to distribution will be exhausted after first legal sale of copies of electronic books. An appeal was lodged against the decision of the Amsterdam court before the Hague court.

That court ruled that the supplier of second-hand electronic books, Tom Kabinet, was not liable for unauthorised public access under the Dutch equivalent Article 3(1) InfoSoc directive. However, it was unclear whether it could rely on digital exhaustion of the right to distribute in connection with its e-book trade.

The court in The Hague therefore decided to seek guidance from the TEU.

In its reply, the Court delivered a judgment in the case C-263/18 14 , which should be considered legally correct for the following reasons. After first, reference point 28 15 and 29 16 preamble to the InfoSoc Directive.

After second, Need to remember Article 3(3) the InfoSoc Directive, according to which ‘the activities of making works publicly available and making public as referred to in this Article result in the exhaustion of certain rights Under section 1 and 2”.

After third, By adopting the InfoSoc Directive, the EU legislator has transposed WIPO Internet treaties into EU law.

Agreed declarations to Article 6(7) WIPO Copyright Treaty 17 provide that ‘the expressions “multiple copies” and “original and multiple copies” used in those Articles, in the context of the right to place on the market and the right to rent as provided for in those Articles, relate only to fixed copies which may be marketed as material objects’.

Moreover, the case law of the TEU itself should be pointed out, which makes a distinction between the right to distribute which would be exhausted and other rights for which exhaustion would not take place. For example, in the case of SA Compagnie générale pour la diffusion de la télévision, Coditel, and Others v. Ciné Vog Films and in.

18 The Court did not find that a claim to pay a fee for each public execution of a film would be contrary to EU law. Similar distinction between impacts first The sale of the copyrighted work or copies thereof for the exhaustion of distribution rights and other property rights was also made in Warner Brothers Inc.

and Metronome Video ApS v. Erik Viuff Christiansen 19 and on criminal proceedings against Jean-Louis Tournier[20]. Some indirect guidance on the lack of digital exhaustion in the InfoSoc Directive can also be drawn from newer case law, including the Allposters judgment 21 and the abovementioned Vob judgment 22 , and some tax cases.

Indeed, on the European Commission v French Republic 23 The CJEU considered that under the VAT Directive 24 Electronic books may be classified as services rather than goods. For purposes Article 98(2) This e-book directive is not a commodity but a ‘electronic service’.

This may suggest that the delivery of an e-book is indeed eligible as an act of making it public rather than as a dissemination operation[25].

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\12 Judgment of the Court of Justice of 10 November 2016, Vereniging Openbare Bibliotheken v Stichting Leenrecht, C-174/15.

13 Judgment of the Court of Justice of 22 January 2015, Art & Allposters International BV v. Stichting Pictoright, C-419/13.

14 Judgment of the Court of Justice of 19 December 2019, Nederlands Uitgeversverbond and Groep Algemene Uitgevers v. Tom Kabinet Internet BV and others, op. cit.

15 „The protection of copyright under this Directive includes the exclusive right to control the distribution of works in the form of a material medium. first sale in the Community of the original work or copies thereof by or with the authorisation of the rightholder exhaustive absolutely right to control the resale of this item within the Community (...)’.

16 „The problem of full use does not arise for services, in particular online services (...)’.

17 Treaty of the World Intellectual Property Organisation on Copyright, drawn up in Geneva 20 December 1996

18 Judgment of the ECJ of 18 March 1980, SA Compagnie générale pour la diffusion de la télévision, Coditel, and Others v. Ciné Vog Films and others, C-62/79.

19 Judgment of the ECJ of 17 May 1988 Warner Brothers Inc. and Metronome Video ApS v. Erik Viuff Christiansen, C-158/86;

20 Judgment of the ECJ of 13 July 1989 on criminal proceedings against Jean-Louis Tournier, C-395/87.

21 Judgment of the Court of Justice of 22 January 2015, op. cit.

22 Judgment of the Court of Justice of 10 November 2016, Vereniging Openbare Bibliotheken v Stichting Leenrecht, op. cit.

23 Judgment of the Court of Justice of 5 March 2015 the European Commission v. the French Republic, C-479/13.

24 Directive 2006/112 to 28 November 2006 on the common system of value added tax, OJ L 347, p. 1-118.

25 E. Rosati, Copyright and the Court of Justice of the European Union, Oxford University Press, 2019.