A Plea for Digital Exhaustion in EU Copyright Law

Author:Caterina Sganga
Position:Associate Professor of Comparative Private Law, DIRPOLIS Institute, Scuola Superiore Sant'Anna (Pisa, Italy). The author would like to thank the participants to the EPIP Conference 2018 at ESMT Berlin, Professor Thomas Dreier and JIPITEC's anonymous reviewers for the very useful insights and comments on earlier drafts of this article. All...
A Plea for Digital Exhaustion in EU Copyright Law
A Plea for Digital Exhaustion
in EU Copyright Law
by Caterina Sganga*
© 2018 Caterina Sganga
Everybody may disseminate this ar ticle by electronic m eans and make it available for downloa d under the terms and
conditions of the Digital P eer Publishing Licence (DPPL). A copy of the license text may be obtain ed at http://nbn-resolving.
Recommended citation: Cat erina Sganga, A Plea for Digital Exhaus tion in EU Copyright Law, 9 (2018) JIPITEC 211 para 1.
other conflicting fundamental rights, while the di-
rect and indirect rulings on the matter have departed
from the principles developed in the earlier CJEU’s
case law on Community exhaustion and caused sys-
tematic and teleological inconsistencies in the judi-
cial development of EU copyright. Building on these
premises, and on the basis of a set of legal and eco-
nomic arguments, this paper advocates for the intro-
duction of a general principle of digital exhaustion in
EU copyright law and, awaiting an unlikely legislative
intervention, it proposes two routes to achieve its ju-
dicial recognition: one uses a contextual/teleological
interpretation to maintain the effectiveness of Arti-
cle 4(2) InfoSoc; the other theorizes the possibility of a
claim of invalidity of the provision under Article 52(1)
CFREU, for disproportionate violation of Articles 7, 16
and 17 CFREU.
Abstract: With the Dutch referral of the Tom
Kabinet case (C-263/18) in July 2017, the CJEU will
soon have its final say on the admissibility of digital
exhaustion under Art. 4(2) InfoSoc. Until now, years
of national decisions and the CJEU’s obiter dicta have
provided a patchwork of inconsistent answers, and
seemingly rejected the extension of the principle to
digital works upon a strict literal interpretation of EU
and international sources. Yet, the changed charac-
teristics of digital markets have outdated the InfoSoc
Directive and the classificatory dichotomies (sale vs
license, distribution vs communication to the public,
good vs service) on which the boundaries of exhaus-
tion have been drawn. At the same time, the exclu-
sion of digital exhaustion has tilted the balance be-
tween copyright and the protection of competition,
secondary innovation, fundamental freedoms and
A. Introduction
1 With the recent Rechtbank Den Haag (District Court
of the Hague)’s referral in the Tom Kabinet case1 on
the alleged copyright infringement committed by
* Associate Professor of Comparative Private Law, DIRPOLIS
Institute, Scuola Superiore Sant’Anna (Pisa, Italy). The
author would like to thank the participants to the EPIP
Conference 2018 at ESMT Berlin, Professor Thomas Dreier
and JIPITEC’s anonymous reviewers for the very useful
insights and comments on earlier drafts of this article. All
mistakes and omissions remain, of course, my own.
1 Rechtbank Den Haag, Nederlands Uitgeversverbond
and Groep Algemente Uitgevers v Tom Kabinet Internet
BV et al, C/09/492558/ HA ZA 15-827 (12 July 2017),
NL:RBDHA:2017:7543, nalized with the formalization of
the questions referred in March 2018.
an internet platform that commercializes second-
hand e-books, the Court of Justice of the European
Union (CJEU) will soon be called to have its nal say
on the controversial issue of digital exhaustion in
EU copyright law.
The questions referred to the Court are strikingly
similar to those addressed in UsedSoft,
where the
CJEU used a markedly teleological interpretation
of the Software Directive II3 to admit the
exhaustion of the distribution right over a software
commercialized through a license agreement and
downloaded from the net. In the aftermath of the
2 Case C-128/11 UsedSoft GmbH v Oracle International Corp.
3 Directive 2009/24/EC of 23 April 2009 on the legal protection
of computer programs [2009] OJ L111/16 (Software
Directive II).
Keywords: Digital exhaustion; exhaustion; CJEU; EU copyright; UsedSoft; Tom Kabinet; WCT; Article 4 InfoSoc;
copyright balance; CFREU; fundamental rights; Erschöpfungsgrundsatz; Verbreitungsrecht; e-books
Caterina Sganga
decision, commentators started debating whether
the same policy-oriented, functional approach could
lead to the extension of exhaustion to every digital
work under Article 4(2) InfoSoc4 which, thanks to
the relative clarity of Recitals 28 and 29 InfoSoc and
Article 6 of the WIPO Copyright Treaty (WCT)5
binding for the EU and implemented through the
InfoSoc Directive – has consistently been interpreted
as limiting the principle to works xed on a tangible
medium.6 The advisability of complementing the
purely positivistic interpretation of the provision
with a deeper consideration of the social, economic
and cultural implications of exhaustion, and of its
role in facilitating the achievement of copyright
goals is at stake.7
3 Introduced to balance between the user’s property
right over the material support and the author’s
exclusive rights over her intellectual creation, the
principle shortly became a tool to reconcile copyright
protection with the need to ensure access to and
availability of protected works, defend competition
and the development of secondary markets, foster
innovation, and guarantee the enjoyment of a set of
conicting rights and freedoms – chiey property,
privacy and the freedom of movement of goods.8
Similar aims, with a focus on internal market
arguments, were also behind the CJEU’s development
of the principle of Community exhaustion from 1974,9
marking one of the rst harmonizing interventions
on national copyright laws.
4 Directive 2001/29/EC of 22 May 2001 on the harmonisation
of certain aspects of copyright and related rights in the
information society [2001] OJ L167/10 (InfoSoc Directive).
5 WIPO Copyright Treaty, S. Treaty Doc. No. 105-17 (1997); 36
ILM 65 (1997).
6 Similar considerations can be found in Peter Bräutigam,
‘Second-Hand Software in Europe – Thoughts on the Three
Questions of the German Federal Court of Justice Referred
to the Court of Justice of the European Union’, [2012] 1
Computer Law Review International 1, 1-2.
7 A particular emphasis on this point is made by Peter Mezei,
‘Digital First Sale Doctrine Ante Portas – Exhaustion in the
Online Environment’, [2015] 6 JIPITEC 23, 55-56, and in more
detail in Id., Copyright Exhaustion. Law and Policy in the United
States and the European Union (CUP 2018), 139-148. See also
Giorgio Spedicato, ‘Online Exhaustion and the Boundaries
of Interpretation’ in Roberto Caso and Federica Giovanella
(eds), Balancing Copyright Law in the Digital Age - Comparative
Perspectives (Springer 2015), 43-45.
8 For a concise summary on the history of the rst sale
doctrine in US copyright law, see Aaron Perzanowski and
Jason Schultz, ‘Digital Exhaustion’ [2011] 58 UCLA Law
Review 889, 908 ff.
9 The landmark decision is Case C-78/70 Deutsche Grammophon
Gesellschaft Gmbh v Metro-SB-Großmärkte GmbH & Co. KG. [1971]
ECR I-499. For a broader overview see Nial Fennelly, ‘Rules
and Exceptions: Freedom of Movement and Intellectual
Property Rights in the European Union’ in Hugh C. Hansen,
International Intellectual Property Law & Policy, Vol 5 (Juris
Publishing 2003), pp. 33-4 – 33-11.
4 In the material world, the principle has never faced
real challenges. Its impact on the rightholder’s
exploitation of the work is limited, since the “wear-
and-tear” characteristics of the support render the
competition between original and secondary markets
insignicant.10 The copy is subject to physical
deterioration, which decreases its marketability and
value time after time, and its alienation requires the
seller’s surrender of her possession, which implies
renouncing to the enjoyment of the protected
work.11 From a legal perspective, the boundaries of
exhaustion are made clear by the tangible nature of
the medium and its commercialization via implied
sale contracts, which facilitate the distinction
between distribution and communication to the
public, between support and intellectual creation,
and between the property right over the former, and
the copyright over the latter.12
The same cannot be said for the digital environment.
Here, the quality of the copy does not deteriorate
over time, and its enjoyment is not rival. These
features increase the risk of piracy, and cause the
secondary market to potentially impact on the
sales of the originals - both elements which have
led legislators to cautiously avoid extending the
principle to dematerialized copies.13 Courts have
also consistently rejected the construction of digital
exhaustion, maintaining that the characteristics
of digital works and of their commercialization
do not comply with the literal interpretation of
the requirements set by copyright statutes for the
operation of the principle.14 In fact, the intangibility
of the copy, commercialized via written licenses that
do not formally transfer its ownership, triggers its
qualication as a service (while exhaustion is limited
to goods), and causes the denition of its transfer
as an act of communication to the public (whereas
exhaustion is limited to distribution).
10 On this comparison, arguing that the differences between
material and digital markets justify the ban of digital
exhaustion, see Andreas Wiebe, ‘The economic perspective:
exhaustion in the digital age’ in Lionel Bently, Uma
Suthersanen and Paul Torremans (eds), Global Copyright
Three Hundred Years Since the Statute of Anne, From 1709 to
Cyberspace, (Edward Elgar 2010), 321 ff.
11 Ibid 323. See also R. Anthony Reese, ‘The First Sale Doctrine
in the Era of Digital Networks, [2002-2003] 44 Boston College
Law Review 57.
12 For a comprehensive analysis of the theoretical obstacles
posed by the characteristics of the digital environment
vis-à-vis the construction of exhaustion, see Stravroula
Karapapa, ‘Reconstructing copyright exhaustion in the
online world’, [2014] 4 IPQ 307.
13 Along these lines, and with ample references, see Wolfgang
Kerber, ‘Exhaustion of Digital Goods: an Economic
Pespective’, [2016] 8(2) Zeitschrift fuer Geistiges Eigentum/
Intellectual Property Journal 149, 153 ff.
14 See the selection of cases commented on by Mezei (n 7),
paras 65-94, and related ample bibliography, with a focus
on the EU and the US.

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