New CJEU reference ... asking whether InfoSoc Directive envisages digital exhaustion

Yes, at last the question that has been daunting copyright enthusiasts for a long time - at least since the 2012 decision of the Court of Justice of the European Union (CJEU) in UsedSoft, C-128/11 [Katposts here] - is going to be asked:

Is there such thing as digital exhaustion under the InfoSoc Directive?

This is a topic that this blog has followed for a while [latest installment here]; the practical implications relate to the possibility of having second-hand markets for digital copies of copyright content, e.g. e-books, videogames, audiobooks, etc.

The law

As far as the law is concerned, the relevant provision is Article 4(2) of the InfoSocDirective, which concerns exhaustion of the right of distribution:

"The distribution right shall not be exhausted within the Community in respect of the original or copies of the work, except where the first sale or other transfer of ownership in the Community of that object is made by the rightholder or with his consent."

Things are complicated further by the wording of Recital 28 and 29 in the preamble to the directive, as well as the fact that - unlike the right of distribution - the right of communication to the public (i.e. the key right when it comes to online exploitation and availability of content) is not subject to exhaustion as per Article 3(3).

[For some further background information on where the law stands, you can take a look at these slides I prepared for a lecture at Bocconi University a few weeks ago]

The Dutch Tom Kabinet e-book case

Readers may remember that the question of digital exhaustion has arisen in a number of Member States, especially in the aftermath of the controversial UsedSoft decision by which the CJEU held that the Software Directive - which is lex specialis in relation to the InfoSoc Directive [this concept was reiterated in Nintendo, on which see Katposts here] - envisages digital exhaustion in relation to software.

While in 2014 the Court of Appeal of Hamm (Germany) dismissed the idea that exhaustion could apply to audiobooks [here], in the same year the Amsterdam District Court (Netherlands) suggested otherwise in a case concerning second-hand e-book trader Tom Kabinet [here].

As this blog anticipated back in 2014, the Dutch Tom Kabinet case might be one to head to Luxembourg.

Now, after little less than three years, all this is becoming real.

Through anonymous Katfriend, expert in all things Dutch IP, @TreatyNotifier comes the news that the Tom Kabinet case is indeed just about to be referred.

In a decision published two days ago the Rechtbank Den Haag (Court of The Hague) held that Tom Kabinet is not liable for unauthorised acts of communication to the public under the Dutch equivalent of Article 3(1) of the InfoSoc Directive. However, it is unclear whether it could invoke the digital exhaustion of the right of distribution in relation to its e-book trade.

Hence, the Dutch court decided that a CJEU reference is necessary, and drafted the following questions [WARNING: the English translation has been prepared by @TreatyNotifier]

1. Is Article 4(1) of the InfoSoc Directive to be interpreted as meaning that "any form of distribution to the public of the original of their works or of copies thereof by sale or otherwise" as intended there to be understood as remotely through downloading for use for an unlimited time making available for use of e-books (i.e. digital copies of copyright protected books) at a price through which the copyright holder receives a remuneration corresponding to the economic value of the copy of the work of which he is the proprietor?

2. If Question 1 is to be answered in the affirmative, is the distribution right with respect to the original or copies of a work as referred to in Article 4 (2) of the InfoSoc Directive exhausted in the Union when the first sale or other transfer of ownership of that material, here including making available e-books (i.e. digital copies of copyright protected books) remotely through downloading for use for unlimited time at a price through which the copyright holder receives a remuneration corresponding to the economic value of the copy of the work of which he is the proprietor, in the Union is made by the rightholder or with his consent?

3. Should Article 2 of the InfoSoc Directive be interpreted as meaning that a lawful transfer between successive acquirers of the copy of which the distribution right has been exhausted means consent for the acts of reproduction referred to in that article, in so far as those acts of reproduction are necessary for the lawful use of that copy?

4. Should Article 5 of the InfoSoc Directive be interpreted as meaning that the copyright holder can no longer object to acts of reproduction which are required for a legitimate transfer between successive acquirers of the copy in respect of which the distribution right has been exhausted?

The parties to the proceedings have until 30 August to react to the drafting of the questions. After that date (and without further deliberation) the questions will be finalised (in a new intermediate decision which will be published on rechtspraak.nl) and sent to Luxembourg sometime in autumn 2017. 

Predicting the future requires
some serious dressing-up
and scenographic work first

What will the CJEU say?

At paragraph 54 of his Opinion in VOB, C-174/15, Advocate General Szpunar suggested that existing CJEU case law - notably the decision in Allposters, C-419/13 [Katposts here - that is where the CJEU held that exhaustion only applies to the tangible support of a work] "neither calls into question nor limits in any way the conclusions which follow from the Usedsoft judgment." 

In the subsequent VOB decision, albeit ruling out that the issue of exhaustion would be relevant to the case at issue (i.e. the possibility for libraries to e-lend works in their collections), the CJEU nonetheless seemed to suggest (at paragraph 59) that the concept of exhaustion under the InfoSoc Directive is linked to the sale "of the physical medium containing the work". (emphasis added)

This, together with: (1) the fact that the (completely offline) Allposters case suggested that exhaustion only applies to the corpus mechanicum (tangible support) of a work, and (2) the language of Recitals 28 and 29 - might be a hint towards a response of the CJEU in the sense of denying the existence of digital exhaustion under the InfoSoc Directive.

In any case, as I suggested here, the question of whether there is or there is not digital exhaustion might be a self-resolving one, in the sense that it might become eventually irrelevant in the context of creative industries and content providers increasingly experimenting with and relying on models – notably streaming – where the actual possession of a ‘physical copy’ by the end-consumer is an anomaly, rather than the rule.

But let's wait and see!