Advocate General (AG) Szpunar has delivered his much-anticipated opinion in the Tom Kabinet case (Nederlands Uitgeversverbond and Groep Algemene Uitgevers v. Tom Kabinet) which asked whether copyright owners’ distribution rights “exhaust” with the first lawful sale of an e-book.
Well established in relation to the distribution of books in the “real world”, the principle of exhaustion is an international legal doctrine which means a copyright owner’s rights over their work “exhausts” with its first authorised sale. They are unable then to prohibit, or profit from, its onward distribution. So, the resale of a purchased copy of a book through the second-hand market does not infringe on the rights of the original copyright owner. In the Tom Kabinet case, the question for the court was whether this principle should apply in the virtual world, to copies sold in the form of digital files.
Despite strong arguments to the contrary, the AG concluded that the principle of exhaustion should not apply in these circumstances.
The court considered the two ways in which the public have access to creative works. The first is as a representation or “communication”, requiring the viewing public to be present at a time specified by the author to access the work. The second is access through purchasing the work, where it is physically “distributed” to the viewing public. It is to distributions only that the principle of exhaustion applies. E-books, according to the AG, are more appropriately placed in the first classification and therefore rights cannot be exhausted. Furthermore, the AG submits that even e-books downloaded for permanent use should not be considered a “distribution”. They remain digital files, meaning there is no clear transfer of ownership.
In our digital age it is with increasing ease and decreasing expense that perfectly accurate copies of digital files may be created and disseminated. Improvements in accessibility are to be celebrated, however, a key concern has been that owners are not being appropriately compensated. Often, as was true in the present case, digital copies are resold at lower prices with the copyright owner powerless to intervene. The good news, if the opinion is followed, will be that the decision will allay those fears. Copyright owners of digital content, like e-books, will be able to control or, if necessary, prevent the further distribution of their works online. Crucially, they will be more likely to be properly remunerated for that distribution.
Although generally followed by the Court, the AG’s opinion is not binding. For now, we will have to wait and see if this is to be the last word on the exhaustion of distribution rights for second-hand e-books.
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This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, January 2020