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April 2, 2015
National courts in the EU continue to grapple with a range of issues related to digital exhaustion including in the context of e-lending. The Court of Justice of the European Union (CJEU)’s decision in the UsedSoft case, which extended the principle of exhaustion to software online, has caused some national courts to approach such cases cautiously and indeed one wants to the CJEU to examine the issues.
On 26 November 2014, in a case arising in The Netherlands, the Court of First Instance in The Hague indicated that it would make a reference for a preliminary ruling to the CJEU on new issues relating to digital exhaustion. The case, which involves the Dutch public library association (VOB) and the Foundation for Lending Rights (Leenrecht), supported by other author and publisher groups, saw the VOB take action seeking a finding from the Court that:
- The term ‘lending’ as defined in Dutch and EU law extends to e-lending;
- Exhaustion of the distribution rights applies to e-books;
- E-lending is not an infringement as it is covered by the lending exception.
On 1 April, the Court in the Hague finally made the formal referral of the case to the CJEU in a judgement which poses the following questions:
- Should Articles 1(1), 2(1b) and 6(1) of Directive 2006/115 [the Rental and Lending Rights Directive] be interpreted in such a way, that “Lending” should also encompass: making available to the public – through a publicly accessible institution for use without direct or indirect commercial or economic advantage- copyright-protected novels, short stories, bibliographies, travelogues, children’s books and children’s literature?
- If so, is it required for the use of the public library exception, that the work has entered into circulation through a first sale (…) of that copy in the Union by the rightholder or with his consent?
- If the answer to Question 2 is in the affirmative is it relevant whether Reproduction A was obtained from a legal source?
- If the answer to Question 2 is in the affirmative, is obtaining an ebook through a library download so that the rental is for an indefinite period, akin to a sale so that the right of distribution is exhausted?
This is the second case touching upon the principle of exhaustion that the Dutch courts have referred to the CJEU. On 22 January 2015, the CJEU rendered an interesting decision in Case C-419/13, Art & Allposters. While this case did not refer explicitly to the issue of digital exhaustion, the CJEU’s ruling that exhaustion can only apply to physical copies (“tangible objects”) is a helpful indication of where it may come down on the question of whether the rights in works offered for e-lending are subject to exhaustion. That said, it is by no means a guarantee.
A decision by the CJEU on the principle of digital exhaustion could have significant repercussions for the publishing sector as well as the music and film/TV industries. However, stakeholders which are not party to the proceedings do have an opportunity to make their views known through various avenues including through the Member States and the European Commission. For example, the UK IPO will formally consult stakeholders on whether the UK government should intervene in the EU-level proceedings – the deadline to act will be extremely short. The European Commission will intervene through its Legal Service and various services of the Commission will be consulted. This presents an opportunity for stakeholders, including publishers, producers, broadcasters and others to make representations to ensure that their views are taken into account.
For more information, please contact our IP Partner Ted Shapiro.