BREAKING - Copyright exhaustion does not apply to digital goods other than software, Hamm Court of Appeal says

A peculiar building in Hamm 
Good news for digital content providers come from a German Court of Appeal ruling that excluded exhaustion of the distribution right for digital subject-matter other than software.

As readers will remember, the Court of Justice of the European Union (CJEU)’s ruling in Case C-128/11 Oracle v UsedSoft [on which see Eleonora’s first historical post as a guest Kat here] established that, under certain circumstances, exhaustion of the distribution right within Article 4(2) of the Software Directive may take place for both software copies incorporated in physical media (like a CD or DVD) and digital files downloaded from the internet with the rightholder’s consent, being the on-line transmission functionally equivalent to the supply of a material medium. So stating, the CJEU smoothed the way to the sale of second-hand software, which is not the thing that some original software providers appreciate the most.

Following that ruling, the IP community has been racking its brain(s) over that CJEU decision, in particular whether the principles stated there might be extended beyond the boundaries of the Software Directive and applied to other copyright-protected subject-matter, such as digital movies, music, or other audio-video files. This very weblog hosted an exciting poll, in response to which the majority of readers said that yes, the CJEU could rule that exhaustion of the right of distribution concerns all kinds of digital contents via Article 4(2) of the InfoSoc Directive 2001/29.

With some relief for digital content providers, the first national decision on the topic after UsedSoft was rendered by the District Court of Bielefeld (Germany) [on which see here], that concluded differently from the majority of the Katpoll participants. Ruling on a case concerning audiobooks, the District Court took the view that the UsedSoft decision only concerned computer programs and the Software Directive, while the InfoSoc Directive - which is the one applicable to ebooks and audio books - clearly and consciously excludes exhaustion for all the other digital contents.

From the seasoned observer and Katfriend Ben Ja Min (digital Katpat!) comes the breaking news that the Court of Appeal of Hamm just upheld the Bielefeld District Court decision (Urt. v. 15.05.2014, Az. 22 U 60/13).

"Exhaustion hat fertig!", 
Giovanni says
This Kat has not yet read the full text of the decision [and likely nothing would change if he did, being the German he learned at secondary school even worst than Giovanni Trapattoni’s]. According to the Legal Tribune's note on the decision, however, the Court of Appeal seems to have confirmed that the Software Directive is lex specialis, and therefore not applicable to subject-matter other than software. As a consequence, the Court continued, exhaustion of the distribution right under S 17 of German Copyright Law does not apply to digital files like audiobooks downloaded from the internet, even if their download is made with the consent of the rightholder and it amounts to a transfer of property.

In light of that, providers of digital audio files can validly include in terms and conditions clauses that prohibit customers from reselling audiobooks. Further, the Court of Appeal concluded that such kind of prohibition could validly apply to the transfer of ‘newly saved’ versions of a file, ie new copies of files necessary for the resale to take place – whose reproduction the CJEU in UsedSoft considered justified under Article 5(1) of the Software Directive.

Stay tuned on the IPKat for more complete comments to come.

UPDATE: the decision is now available here. The press release can be downloaded here. Who could provide the IPKat with English translations? Katpat(s) are up for grabs.
BREAKING - Copyright exhaustion does not apply to digital goods other than software, Hamm Court of Appeal says BREAKING - Copyright exhaustion does not apply to digital goods other than software, Hamm Court of Appeal says Reviewed by Alberto Bellan on Friday, June 13, 2014 Rating: 5


  1. Alberto, I am not so sure that the CJEU will not accept exhaustion of distribution right in connection with digital goods other than software. Whilst it is absolutely true that under Recital 29 of Copyright Directive, no exhaustion should be effected for Internet downloads, the CJEU also said in Usedsoft (see paragraph 52) that Art. 6.1 of WIPO Treaty 1996 must be interpreted as converting into "distribution" any act of "public communication" that involves a transfer of ownership. CJEU also referred to its Peek & Cloppenburg judgment in such regard. Therefore, it should be not excluded that a similar ruling may be provided by the CJEU in connection with digital goods other than software. However, an impediment that user might face is that he cannot rely on a limitation to the right of reproduction similar to the one provided in Article 5.1 of the Software Directive (e.g. it's doubtful whether such copy would be legitimized under the private copying exception). Therefore, an outcome similar to the one in the Redigi case in the US may finally result for those other digital goods.

  2. Hi Javier,

    I think that much will also depend on the actual "special" nature of the Software Directive as compared to the InfoSoc Directive. This appears now to have been somehow strengthened by the CJEU in its decision in Case C-355/12 Nintendo. But who knows what the Court will say when given the opportunity to rule on exhaustion for digital subject-matter other than software! Perhaps some hints will be provided when the Art&Allposters decision is released.

  3. Dear Javier,

    Thank you for your comment.

    In principle, one might argue that there is no particular reason for mp3 to be treated differently from software. They're both digital goods (considering them "services" is simply ridiculous). Moreover, assuming that exhaustion should prevail on merely private interests, there should be no ground in denying its application any time a substancial (although not declared) transfer of property occurs.

    The letter of law, however, sounds quite different in SW and InfoSoc Directives, and the CJEU took care to specify that the SWD and ONLY the SWD reflects EU legislator's intention to apply exhaustion to digital copies of software (re WCT, see para 60).

    Further, I reckon that consumers' use of software is rather different than other digital goods, as different might be the issues connected to their re-sale (copying an mp3 on 1,000 devices is not the same of copying software; software has a shorter life than songs or books, etc.). This might justify a different treatment.

    There are good reasons on both sides, and with these CJEU guys one never knows.


  4. Dear all,

    Actually I think the missing of an equivalent of Art. 5.1 SWD in InfoSoc was one of the major points on which the OLG Hamm relied upon. It therefore held that the ‘technical operation’ as described in the Oracle decision cannot lawfully be performed. Yet in my personal opinion – given the convincing argumentation of the ECJ in Oracle, that downloaded IP-material should not be treated differently than hardcopies – I feel (& hope) that the ECJ would confirm their approach of Oracle if this or a similar case will be referred, especially given the latest development that the ECJ interprets earlier directives in the light of the later sui generis directives.


  5. UPDATE: the decision is now available here. The press release can be downloaded here. Who could provide the IPKat with English translations? Katpat(s) are up for grabs.


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