CJEU rules that the market of “used” e-books is not in accordance with EU law

Just before Christmas, the CJEU issued its long-awaited decision in the Tom Kabinet case. The Court followed the opinion of advocate general Szpunar and decided that copyrights are not exhausted in case of sale of e-books. A distinction was drawn between e-book and computer programs, the latter not being subject to the exhaustion doctrine. This means that to establish an online market of “second-hand” software no authorisation of copyright holders is required.

EU law establishes the doctrine of exhaustion, according to which the distribution right is exhausted with the first sale of goods, on which rights are materialised (such as a CD or a book). In the UsedSoft case, the CJEU decided that the doctrine is applicable in case of online sale of “used” computer programs, under the condition that the seller deletes its copy of the program after the transfer to the buyer.

A similar case, with the difference that it concerns the sale of “used” e-books, came before the Dutch court which was not sure about the applicability of the doctrine of exhaustion in this case and thus posed a question for preliminary ruling to the CJEU. The Court reformulated the question asking itself whether enabling permanent downloading of an e-book constitutes distribution (in relation to which the doctrine is applicable) or perhaps communication to the public (regarding which the doctrine is inapplicable) according to the InfoSoc Directive.

In assessing the criteria of the communication to the public, the Court said that making the works available on a website constitutes an act of communication, even if the works are nor eventually downloaded. As potentially everyone, as long as he or she is a member of the online “reading club”, can access the work, the condition of the public is also met. Additionally, the fact that the majority of the licensing agreements contain a clause stating that only the licensee can read the book on his or her own equipment supports the finding that the work is communicated to a public that was not envisaged by the copyright holder when he or she first made the work available. The CJEU thus concluded that there has been a communication to the public for which the doctrine of exhaustion does not apply.

The Court did not address the question whether the practice constitutes an act of distribution (which was actually the question posed by the referring court), however, it implied that even in this case, there would be no exhaustion. While the Software Directive does not distinguish between tangible and intangible copies (for instance, between software on CDs and DVDs on the one hand and software downloaded from the internet on the other), the InfoSoc Directive applies the exhaustion doctrine to rights on a tangible object only (thus only to books but not to e-books). The judgement will have detrimental impacts not only to the providers of “second-hand” e-books but most likely also the providers of other content covered by the InfoSoc Directive (for example, audio books, films and music).