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Global Media and Communications Watch The International Legal Blog for the Tech, Media and Telecoms Industry
Posted in Copyright, Intellectual Property

Tom Kabinet: CJEU rules resale of e-books requires permission of copyright holder

The CJEU in its Tom Kabinet judgment has ruled that the supply of e-books qualifies as “an act of communication to the public” under the InfoSoc Directive instead of “a distribution to the public” as is the case with physical books. It follows that copyright  in e-books cannot be exhausted. This means that the resale of e-books requires the authorization of the copyright holders or else violates the author’s or publisher’s copyrights. The same reasoning is expected to apply to all digital formats of copyright protected works covered under the InfoSoc Directive, including audiobooks, music and also video games. This notably differs from the approach to the resale of software, which was deemed permitted under the Software Directive, in the CJEU’s UsedSoft judgment.

In its judgment of 19 December 2019 in Tom Kabinet (C-263/18), the Court of Justice of the European Union (CJEU) has ruled that the supply by downloading, for permanent use, of an e-book is not covered by the right of “distribution to the public”, but is covered by the right of “communication to the public”. This means there is no exhaustion of rights and thus the second-hand trade of e-books is not permitted without the authorization of copyright holders. This judgment provides guidance on copyright in a digital environment.

Tom Kabinet
The case concerns Tom Kabinet, an e-book trading platform that allows users to sell or gift e-books to it and it will in turn resell these e-books on the platform, to other users. Publishers complained that this infringed the rights of the e-books’ copyright holders. Tom Kabinet argued that it was free to resell e-books, according to the same principle that applies to physical books, i.e. the exhaustion of the distribution right. Exhaustion of rights means that after a physical book is sold once, the copyright is regarded as “exhausted” and the purchaser is free to resell the book.

The case was referred to the CJEU by the District Court of The Hague, requesting clarification as to whether or not Tom Kabinet’s actions should qualify as a “distribution to the public” under copyright law – to which the principle of exhaustion of rights applies – and if so under what circumstances Tom Kabinet could resell e-books.

No digital exhaustion
The CJEU ruled that Tom Kabinet did not “distribute” the e-books, as distribution applies to the sale of physical goods only. Instead, the CJEU ruled that the sale of e-books qualified – in copyright law terms – as “a communication to the public”.

Consequently, exhaustion is not possible for e-books, as follows from article 3 of the InfoSoc Directive (2001/29/EC). This means that the resale of e-books requires the authorization of the copyright holder. It makes sense to also apply this reasoning to any other digital work that is protected by copyrights, such as audiobooks, music and video games.

This judgment follows Advocate General Szpunar’s earlier opinion and also seems in line with the intention of the World Intellectual Property Organisation (WIPO) Copyright Treaty, which the CJEU points outcovers tangible objects only, in relation to the right of distribution.

What about UsedSoft?
In the UsedSoft case (C-128/11) the CJEU had ruled that computer programs are subject to exhaustion. The CJEU acknowledges this in Tom Kabinet and explains that this is not at odds with its ruling on e-books. The reason is that computer programs are subject to a very specific legal regime, namely the Software Directive, which assimilates tangible and intangible copies of computer programes for the purposes of protection. E-books, however, are not computer programs. The CJEU’s ruling is in line with the Advocate General’s advice who colourfully pointed out the differences between books and software by stating that the copyright on (e-)books are meant to protect the creative work and that a computer program is more a tool than a creative work. He illustrated this by noting that “[f]or the user, reading lines of a program code would be as useful as drinking a glass of diesel oil instead of pouring it into the tank of his vehicle. Thus a computer program is more a tool than a work in the proper sense.”

Also, computer programs are deemed much less likely to be put quickly in circulation on the second hand market, due to their nature. The CJEU specifically notes that unlike physical books, e-books do not deteriorate and are perfect substitutes for new copies. A second hand market for e-books would, in its opinion, affect the interests of the rights holders  much more than a second hand market for physical books.

It is noted that in its Nintendo judgement (C-355/12) the CJEU previously ruled that video games are not merely computer programs but also creative works and “in so far as the parts of a videogame […] are part of its originality, they are protected, together with the entire work, by copyright in the context of the system established by copyright in the context of the system established by Directive 2001/29” (the Infosoc Directive). Based on this, it could well be argued that the newly established “e-books regime” should also apply to video games.

Final remarks
This judgment is a victory for copyright holders and publishers and provides much awaited clarification on copyright in the digital environment. It follows that the copyright holder’s consent is required to resell most digital products.

This is not only relevant for the book industry, but also by analogy, for the music industry, the film industry and the gaming industry, as the CJEU has clarified that copyright in digital works protected by the InfoSoc Directive, other than computer programs, cannot be exhausted and thus downloaded copies thereof may not be resold without the author’s permission.

It is up to the District Court of The Hague to apply the CJEU’s judgment to the facts of the Tom Kabinet case. It certainly seems that the continued existence of the market for second-hand e-books – by Tom Kabinet and others – has become uncertain.