BREAKING NEWS: CJEU says exhaustion only applies to the tangible medium of a work (so no such thing as a digital exhaustion?)

Today's an important day for EU copyright at the Court of Justice of the European Union (CJEU). The Court has in fact just issued its much-awaited 50-paragraph decision in Case C-419/13 Art&Allposters.

Readers will remember that this was a complex reference for a preliminary ruling from the Dutch Supreme Court encompassing a number of topical issues, notably: (1) the right of adaptation; and (2) exhaustion of the distribution right under Article 4 of the InfoSoc Directive.

Today the Court ruled that:

• With regard to the adaptation right, it is true that the InfoSoc Directive does not mention it. However, a situation like the one at hand, ie paper poster and canvas transfer of copyright-protected works, falls within the scope of Article 4(1) of the InfoSoc Directive;
• Exhaustion of the right of distribution under under Article 4(2) of the InfoSoc Directive only applies to the tangible support of a work.

Background

The background proceedings concern the unauthorised making and selling by Art&Allposters of altered versions of copyright-protected artworks, whose rights are managed by collecting society Pictoright. Art&Allposters used authorised posters of the artworks in question to transfer the images on canvas first, and sell them afterwards over the internet. It is worth adding that this process involved, first, the placing of a special cover on the poster and, secondly the transfer of the image from the poster to the canvas by means of a chemical process. 

Following an unsuccessful outcome at first instance, Pictoright won before the ’s-Hertogenbosch Court of Appeal. This court relied on the 1979 Poortvliet judgment to exclude that the right of distribution had been exhausted as per Article 12b of the Dutch Copyright Act and Article 4(2) of the InfoSoc Directive.

The litigation eventually reached the Supreme Court, that decided to stay the proceedings and seek guidance from the Court of Justice of the European Union (CJEU) as to the following:

1. Does Article 4 of the [InfoSoc] Directive govern the answer to the question whether the distribution right of the copyright holder may be exercised with regard to the reproduction of a copyright-protected work which has been sold and delivered within the European Economic Area by or with the consent of the rightholder in the case where that reproduction had subsequently undergone an alteration in respect of its form and is again brought into circulation in that form?

2(a). If the answer to Question 1 is in the affirmative, does the fact that there has been an alteration as referred to in Question 1 have any bearing on the answer to the question whether exhaustion within the terms of Article 4(2) of the Copyright Directive is hindered or interrupted?

2(b). If the answer to Question 2(a) is in the affirmative, what criteria should then be applied in order to determine whether an alteration exists in respect of the form of the reproduction which hinders or interrupts exhaustion within the terms of Article 4(2) of the Copyright Directive?

2(c). Do those criteria leave room for the criterion developed in Netherlands national law to the effect that there is no longer any question of exhaustion on the sole ground that the reseller has given the reproductions a different form and has disseminated them among the public in that form (judgment of the Hoge Raad of 19 January 1979 in Poortvliet, NJ 1979/412)?

The AG Opinion

Last September Advocate General (AG) Cruz Villalon issued his Opinion [not yet available in English, but commented here], in which he took position as regards two fairly controversial issues under EU copyright.

First, he held the view that - contrary to the position of the EU Commission - the right of adaptation has not been generally harmonised at the EU level.

Only analogically exhausted ...

Secondly, he stated that the right of distribution can only be exhausted in relation to the tangible support of a work, not also its (as the AG called it) corpus mysticum. In other words, the AG appeared to suggest that, not only can there be just analogue exhaustion under the InfoSoc Directive, but exhaustion is to be interpreted strictly. For instance, the one pending before the Dutch Supreme Court would not be a case where exhaustion even comes into consideration, on grounds that the alteration by Art&Allposters was particularly relevant and concerned the same support which was used for the original artworks.

The CJEU decision

In its judgment the CJEU followed the AG Opinion, though not in relation to the issue of the right of adaptation. 

Notably, the Court relied on Recital 28 to the InfoSoc Directive and the WIPO Copyright Treaty to hold the view that exhaustion of the distribution right only applies to tangible objects:

"[T]he EU legislature, by using the terms ‘tangible article’ and ‘that object’, wished to give authors control over the initial marketing in the European Union of each tangible object incorporating their intellectual creation. That finding, as the European Commission correctly states, is supported by international law, and in particular by the WIPO Copyright Treaty, in the light of which Directive 2001/29 must be interpreted as far as possible ... Article 6(1) of that Treaty provides that authors of literary and artistic works are to enjoy the exclusive right of authorising the making available to the public of the original and copies of their works through sale or other transfer of ownership. In that regard, the significance of the term ‘copy’ was explained by the Contracting Parties by an agreed statement concerning Articles 6 and 7 of the Treaty adopted by the Diplomatic Conference of 20 December 1996, at which the Treaty itself was also adopted. According to that statement, ‘the expressions “copies” and “original and copies” being subject to the right of distribution and the right of rental under the said Articles, refer exclusively to fixed copies that can be put into circulation as tangible objects’. Accordingly, it should be found that exhaustion of the distribution right applies to the tangible object into which a protected work or its copy is incorporated if it has been placed onto the market with the copyright holder’s consent." [paras 37 to 40]

... But InfoSoc adaptable

This said, the Court considered whether the fact that the object, which was marketed with the copyright holder’s consent, has undergone subsequent alterations to its physical medium has an impact on exhaustion of the distribution right. The CJEU concluded that "the consent of the copyright holder does not cover the distribution of an object incorporating his work if that object has been altered after its initial marketing in such a way that it constitutes a new reproduction of that work. In such an event, the distribution right of such an object is exhausted only upon the first sale or transfer of ownership of that new object with the consent of the rightholder." [para 46]

All in all:

"Article 4(2) of Directive 2001/29 must be interpreted as meaning that the rule of exhaustion of the distribution right set out in Article 4(2) of Directive 2001/29 does not apply in a situation where a reproduction of a protected work, after having been marketed in the European Union with the copyright holder’s consent, has undergone an alteration of its medium, such as the transfer of that reproduction from a paper poster onto a canvas, and is placed on the market again in its new form." [para 49]

In a nutshell

Of course this case was not about digital exhaustion. However, by suggesting that exhaustion under Article 4 of the InfoSoc Directive only applies to the tangible support of a work, the Court appeared to imply that there is no such thing as a general digital exhaustion under EU copyright. In other words: the decision in UsedSoft [on which see Katposts here and 1709 Blog posts here] was possible only because of the lex specialis nature of the Software Directive [which the CJEU itself re-affimerd in Nintendo, here here and here]. 

Readers will be aware that earlier this week, the Amsterdam Court of Appeal issued a ruling against second-hand ebook seller Tom Kabinet [here], although it refrained from addressing the issue of whether the InfoSoc Directive allows such thing as a digital exhaustion.

At this stage this Kat notes that the Art&Allposters ruling may have provided a (partial) response to this thorny issue, yet the last word in this respect is probably yet to be said, whether at the judicial or policy levels. 

A more detailed analysis of today's ruling will follow shortly, so: stay tuned!