Holders of copyright in e-books and potentially other digital works should be able to prevent their resale in the EU, according to a significant opinion in favour of rights-holders.

This is the opinion of Advocate General Szpunar in the case of Tom Kabinet (C-263/18) – the first case to consider how the Copyright Directive (2001/29/EC) might apply to a marketplace in second-hand digital works. If Szpunar’s non-binding opinion is followed by the Court of Justice of the European Union, this will be a significant win for rights-holders.

Findings: In his opinion, AG Szpunar found that the supply of e-books by downloading for permanent use is not covered by the distribution right (Article 4 of the Copyright Directive) but rather the right of communication to the public (Article 3 of the Copyright Directive). Importantly, Article 3 does not expressly include a concept of ‘exhaustion’ of copyright. It would therefore be an infringement of copyright to resell a protected work if the resale amounts to a public communication.

Facts of dispute: Tom Kabinet Internet BV is a Dutch company that runs an online marketplace for used e-books. The company buys e-books from individuals or official distributors (who agree to delete the copies from their computer), and resells them to other individuals. Two associations that defend the interests of Dutch publishers brought proceedings in the Dutch courts against Tom Kabinet Internet BV, alleging that the resale of e-books was an infringement of copyright.

Legal background: The resale of physical works protected by copyright, such as a book, CD or DVD, is generally permitted where the first sale is by a person who lawfully acquired a copy of the work. This is because the right to distribute a copyright work under Article 4 of the Copyright Directive, which would normally be reserved for the holder of the copyright, is ‘exhausted’ once a copy of the work is lawfully placed into circulation.

Since these laws were first enacted, copyright content and the means of supplying it have become increasingly digitised. There have long been discussions on how the rights contained in the Copyright Directive apply to the download of other digital content. So far, the CJEU has decided that the download of computer programs falls under the right to distribution in the case of UsedSoft (C-128/11), which was in the context of the Software Directive (2009/24/EC). However, the French courts have recently taken the opposite approach in the case of UFC-Que Choisir v Valve, ruling that the resale of videogames online is permitted under copyright law (although it would not be surprising to see this case appealed and perhaps see a further reference to the CJEU).

Reasoning by AG Szpunar: In reaching his opinion, AG Szpunar noted that ‘arguments, of both a legal and a teleological nature, are in favour of recognition of the rule of exhaustion of the distribution right with respect to works supplied by downloading for permanent use’. In particular, the fact that a user permanently possesses a copy of a downloaded work ‘shows the similarity of that mode of supply with the distribution of tangible copies’. However, AG Szpunar concluded that the law as it currently stands should lead to the opposite finding. The EU legislature’s intention in the recitals to the Copyright Directive is clear: downloading digital works should be covered by the right of communication to the public.

Commentary: Although the decision has come as a surprise to some, AG Szpunar’s opinion will be welcomed by rights-holders, who would argue that facilitating marketplaces in the resale of digital works may pose risks for rights-holders. For example, the market value of a work is likely to be lower if it must compete with second-hand digital copies sold at a fraction of the price, with no loss in quality (unlike a second-hand physical work), and there is further a risk of piracy if sellers do not delete copies sold from their computers. However, critics of the decision believe that it does not benefit consumers because restricting the second-hand market would lessen competition and innovation. More broadly, given that digital resale models are being replaced with subscription-only models (where ownership of the digital work is not transferred), future cases may be more concerned with the underlying policy issues than the specific exhaustion question under consideration in this case.

It also remains to be seen whether the CJEU will follow AG Szpunar’s opinion, particularly given his recognition of public policy reasons for deciding in favour of the resale of digital works despite the legal and teleological arguments to the contrary.

The full opinion can be found on EUR-Lex.