EU top court rules out possibility to create second-hand marketplaces for digital content

By Eleonora Rosati

01-2020

In a much-anticipated judgment delivered last month (Tom Kabinet, C-263/18), the Court of Justice of the European Union (‘CJEU’), that is the highest EU court, ruled that the provision – over the internet – of e-books always falls within the control of the relevant copyright owner. This means that unauthorised third parties cannot ‘resell’ previously made available copies of such e-books.

The decision originated in the context of litigation in the Netherlands concerning the lawfulness of the activities of Tom Kabinet, a business that provides second-hand e-books without the authorisation of relevant copyright owners. According to Tom Kabinet, its activity would be lawful because, following the first authorized sale of the copy of an e-book, the copyright owners would lose the right to control subsequent distributions of such copy. Technically, the argument of Tom Kabinet was that the copyright owners’ right of distribution (that is the right to sell copies of a protected work) would be ‘exhausted’ following the first lawful sale, that is the initial making available of the digital copy of a book over the internet. 

At first instance this argument succeeded, but on appeal it was found to be unclear whether this interpretation of the law would be correct. Hence, the Court of The Hague asked the CJEU to provide guidance.

From a legal standpoint, to reach its decision, the CJEU distinguished between different types of rights granted by copyright, and considered that the online provision of an e-book falls within the right of communication to the public, not the right of distribution. As such, the relevant copyright owner retains the right to control subsequent acts of communication of their work, even after the initial, authorised communication. Unlike the right of distribution, in fact, the right of communication to the public can never be exhausted.

The Tom Kabinet case originated in a context of interpretative uncertainty, which was also due to an earlier ruling of the CJEU itself. In 2012, in fact, this court ruled (UsedSoft, C-128/11) that it is possible to resell lawful copies of software downloaded from the internet, if the contractual operation at issue can be considered tantamount to a sale. In the aftermath of UsedSoft a question arose whether the same conclusion could be reached for other protected content in digital format, including e-books, audiobooks, videogames, music and audiovisual media files, etc.

With the Tom Kabinet ruling it appears clear that the answer is in the negative. Copyright owners do not lose the right to control subsequent exploitations of their content over the internet further to the initial making available of said content. It follows that copyright owners will be able to take action against anyone who sells pre-owned digital copies of books, videogames, music, films, etc to which they own the rights and does so without their consent.

The only exception to this rule will continue being pure software. However, it should be noted that software which contains music, graphics, etc. likely falls within the scope of application of the general rule, due to the fact that case law has progressively narrowed down the scope of what qualifies as ‘software’. In this sense, as mentioned, videogames would for instance follow the general rule and not the exception.

The position in Europe after the Tom Kabinet ruling appears in line with the interpretation of the corresponding legal concepts in the USA. In 2018, the US Court of Appeals for the Second Circuit issued a judgment (Capitol Records, LLC v. ReDigi Inc., No. 16-2321 (2d Cir. 2018)), in which it upheld the ruling at first instance and found that the unauthorised operation of a digital marketplace for pre-owned music infringed the plaintiffs’ copyrights. In this sense, it excluded the application of the ‘first sale doctrine’, which is the US equivalent of the EU concept of exhaustion.

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