Can you resell your eBooks?

Background

It is central to the European market that there is free movement of goods: consistent with the Treaty of Rome, a rightsholder’s rights are ‘exhausted’ once there has been a first sale, with the owner’s consent, within the European Union.  Rightsholders generally cannot then exercise their intellectual property rights (trademarks, copyright, patents etc) to stop further distribution of their products save in very specific circumstances eg for public health reasons (for pharmaceuticals) or to protect rental rights for films.

For products which embody copyright works, it has been settled (at least in England) for over 300 years that the copyright owner’s right to control distribution is exhausted after first sale. This necessarily overrides any attempt by the rights owner to impose contractual restrictions to the contrary.

But of course, distribution methods change and, in the case of software, there has been an obvious shift in delivery from boxed product to download from the software vendor’s website.

The trigger for change in what should be allowed was the German company, UsedSoft GmbH, which was marketing Oracle software that was surplus to the requirements of corporate customers. Oracle brought legal proceedings against the company relying on the non-assignment provisions in its license agreements.

When the proceedings reached the European Court in 2012, it surprisingly declared that such provisions were overridden by the exhaustion principle for computer programs embedded in the 2006 Information Society Directive. The conditions were that the software had been licensed on a perpetual basis for a commercial fee and that the licensee had made unusable their own copy of the software when transferring the license to the buyer.

The case was described as a ‘meteor’ by one commentator.

Although the court’s ruling was limited to software, other industries have looked with concern as new vendors of pre-owned digital content have entered the marketplace and have agitated for the same rules to be applied to their product.

The challenge for these vendors is that when ’selling’ a digital product, a number of acts restricted by copyright take place – distribution reproduction and communication to the public. All these need to be either licensed or permitted and the particular exemption for software that is within the InfoSoc directive is not in place for other types of copyright work.

Position in Europe

In 2014, the European Court looked at the legitimacy of technical protection measures for Nintendo videogames. It was noted that these were not pure software products since they additionally included imagery, sound and graphical user interfaces: the UsedSoft principle could not then apply, with the implication that those seeking the resale of pre-owned videogames could not sidestep the technical protection measures.

Later in the same year, the German Court of Appeal in Hamm also rejected the idea that the exhaustion principle could apply, by analogy to the UsedSoft case, to audio-books.

There have been other skirmishes around, for instance, both digital content and physical products including one related to posters remounted as canvas prints. But a new reference will finally, we hope, determine the lawfulness of resale of digital content across all media.

In a Dutch case, the Court of the Hague has given a judgment in support of Tom Kabinet that sells eBooks online for 2e. However it is now referring the key questions as to whether such sales are lawful to the European Court. This judgment is expected later in 2018 and is expected to be a clear determination as to the resale of many types of digital media.

Position in USA

The leading case here was brought by Capitol Records against ReDigi, an online marketplace of music downloads.

Here, the United State District Court, Southern District of New York firmly denied the possibility of lawful resale, repeating that any such substantial change must be a matter for legislation: ‘Congress has the constitutional authority and the institutional ability to accommodate fully the varied permutations of competing interests that are inevitably implicated by such new technology’ .

So, resale of digital content is generally prohibited in the US, absent a license from the rightsowner.

Memery Crystal comment

It is clear that both EU law and US law remains hopelessly unable to accommodate fast-moving technologies and means of consumption. If we are carrying out a Google Images search or uploading digital files into DropBox there are then multiple reproductions and mirror copies made  for which no explicit copyright license has been granted.

Our classic concepts of copyright date back to at least 1709 with much of the wording used in today’s legislation remarkably similar to that used when reproduction of a copyright work simply meant using wooden blocks and ink.

Until there is a genuine digital copyright act, we shall continue to rely on court cases which grapple uncomfortably and painfully with our connected world.

This article was written by Robin Fry in our Commercial, Media and Technology team.