We’ve been looking for a while at the question of whether First Sale rights apply to digital files.  If you get an e-book or music download, can you resell, lend, or give it away to someone else — as you can with physical products like print books or music CDs?  The library community has gotten excited about a European Court of Justice in Luxembourg (ECJ) ruling issued on Thursday that inches the EU closer to establishing First Sale rights for digital content… but doesn’t quite get there.

The case, which originated in the Netherlands, concerned whether libraries should be able to lend e-books to members without explicitly having a license to do so.  It involved the Vereniging Openbare Bibliotheken (Public Library Association) and Stichting Leenrecht (Lending Rights Foundation), a collecting society that collects royalties from libraries and pays rightsholders. Dutch law provides for royalties whenever someone borrows a copyrighted work from a library. The case was appealed to the ECJ two years ago.

The ECJ’s ruling said that lending e-books under a “one copy, one user” rule should be treated as equivalent to lending print books.  Under the Exhaustion rule (the EU’s equivalent of First Sale), that’s inherently legal and doesn’t require a license from the publisher.

But there’s a catch. The ECJ said that libraries can lend e-books without a license as long as “… the digital copy of a book made available by the public library [was] put into circulation by a first sale or other transfer of ownership of that copy in the European Union by the holder of the right of distribution to the public or with his consent.”

The key phrase here is “first sale or other transfer of ownership of [the digital] copy.”  It begs the question of whether publishers sell or “transfer ownership” of e-books or other digital materials to libraries in the first place.  As far as most publishers are concerned, the answer is no.

The most common way that libraries are able to “lend” e-books is through white-label platforms like OverDrive or Skoobe.  These platforms maintain repositories of e-books as digital files.  Libraries can select titles and pay for licenses to distribute them through a scheme like Adobe Content Server, which applies DRM so that users can only read them for a period of time that the library sets.  Various copies of a given e-book file are made throughout the process of the platform getting the material from the publisher and the library’s user downloading a file from the platform.  (A few libraries, such as the Enki Library group in California, operate their own servers and have direct license agreements with publishers instead of using third-party platforms, but it amounts to the same thing.)

The question is whether, at any point in this process, the library has “bought” or “taken ownership” of an e-book.  Consider that e-book files are stored on the platform provider’s infrastructure and are accessible through any library that uses the platform: if a member of Library A wants a certain e-book, she gets a copy of the file from the same server that a member of Library B got it from. And in many cases, copies of e-book files that are ultimately sent to different users may be different from one another, in that they are DRM-encrypted and can contain different metadata.

The closely related question of digital resale has come up various times in the United States, in cases such as Vernor v Autodesk (2010, involving high-priced desktop software) and Capitol Records v ReDigi (2013, involving digital music files). The U.S. Copyright Office opened an inquiry into this question as it applies to libraries earlier this year.

The ECJ ruled in 2012 on a case in Germany involving resale of enterprise software, Oracle v UsedSoft.  That ruling found a first sale right for software — including software distributed by digital download instead of physical media such as CDs — despite Oracle’s claim that its license forbade resale.  But the applicability of the UsedSoft ruling to copyrighted works other than software was unclear, because software is covered under a separate provision of EU law.

Yet in another Dutch case, Nederlands Uitgeversverbond (Dutch Publisher’s Association) v Tom Kabinet, an appeals court found just last year that the UsedSoft precedent did apply to e-books when it considered whether the Tom Kabinet website could resell them online.  That means that e-book resale is legal in the Netherlands… as long as the seller obtained its copy of the e-book legitimately.  (That’s more or less the issue currently on appeal to the Dutch Supreme Court in the Tom Kabinet case.)

In Vereniging Openbare Bibliotheken v Stichting Leenrecht, the ECJ didn’t rule at all on whether the Dutch libraries bought or took ownership of e-books . That’s presumably a matter for the lower Dutch court, to which the case now returns.  Any such decision that court makes will almost certainly be appealed up the chain to the ECJ again.  So, those who are hoping for a definitive word on library e-book lending rights could still wait for years before they get it.