EU High Court Rules Against Digital Resale; We’ll Talk About This at the Conference

This week the Court of Justice of the European Union (CJEU) issued a landmark ruling that digitally downloaded files are not subject to exhaustion (the EU equivalent of first sale in U.S. law). This means that consumers don’t have the right to resell (or give away, lend, or rent) ebooks and other digital files. This ruling brings EU law into line with the U.S. precedent established by the Second Circuit Appeals Court in the ReDigi case a year ago.

With this ruling, the CJEU took the expected step of following the opinion that one of its Advocates General, Maciej Szpunar, issued back in September. The CJEU was asked by a Dutch court to answer questions of law that would help it reach a decision in a case involving the online sale of “used” ebooks by Tom Kabinet, a Dutch startup.

The questions referred to the CJEU boiled down to one issue: does making a file available by digital download implicate the right of distribution or not? The principle of exhaustion only applies to the right of distribution, so if downloading doesn’t implicate distribution, then exhaustion doesn’t apply, and the copyright owner can control whether the user has the right to alienate downloaded files. The court ruled that distribution doesn’t apply, that the only right implicated in digital downloads is the right of communication to the public. In fact, the CJEU held that distribution only applies to physical objects.

The court also held that making a file available for download through a specific technical mechanism counts as communication to the public even if no one downloads the file. In other words, if Tom Kabinet makes ebooks available on its website, then it still could be infringing copyrights even if no one buys them (or more accurately, spends “points” on them).

The CJEU reached the same conclusion as the U.S. Second Circuit did almost exactly a year ago regarding ReDigi, the digital music resale startup. Judge Pierre Leval found that reselling a digital file involves making a copy of the file rather than sending that file to the buyer. Advocate General Szpunar reached the same result in his opinion.

This brings EU law regarding digital exhaustion/first sale into line with the prevailing precedent in the States… except for one thing. Along the way to reaching its decision, the CJEU also ruled (relying on its own precedent) that making a digital file available for downloading counts as communication to the public even if no one downloads it, as long as the file is made available by “specific technical means, different from those previously used” or is made available to a different set of people from the ones to whom the copyright owner originally sent the files. In U.S. law, the question of whether “making available” implicates any of the rights in the copyright bundle is not settled, although the U.S. Copyright Office took the position in 2016 that it implicates the right of distribution.

The Dutch court handling the Tom Kabinet case will take this CJEU ruling into account as it decides the case. Another case pending in the Netherlands will also need to take this ruling into account: Vereniging Openbare Bibliotheken v. Stichting Leenrecht, which is about whether public libraries are allowed to “lend” ebooks to their patrons without paying royalties (Dutch law provides for royalties on library book loans). Given the new result from the CJEU, the answer there is likely to be no.

To reflect this new development, we’re making a change in the agenda for the Copyright and Technology conference on January 15 in NYC: instead of the panel on blockchain applications for visual arts, Lance Koonce of Davis Wright & Tremaine and I will do a session on Digital First Sale, based in part on a talk I gave at the BYU Copyright and Trademark Symposium back in October. Register to join us–earlybird registration expires tomorrow!

 

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