Article by Morrison & Foerster LLP
Art & Allposters International BV v Stichting Pictoright Case C 419/13 22 January 2015
EU Copyright: No Resale of Digital Content Except for Software? How Does the European Court of Justice Decision on Exhaustion of the Distribution Right upon First Sale Impact the Resale of Digital Copies?
The European Court of Justice (ECJ) has decided that the rule of exhaustion of the distribution right upon first sale (in the U.S. known as the “first sale” doctrine) does not apply to post first-sale alterations to the physical medium embodying the work if such alterations constitute a new reproduction of the work (here: the transfer of a painting from paper poster onto a canvas). Consequently, such subsequent alterations require the consent of the owner of the reproduction right to the work.
The ECJ expressly states that exhaustion of the distribution right upon first sale under the EU Copyright Directive applies to the tangible object into which a protected work is incorporated. Thus, the first sale of intangible digital copies of works will likely not exhaust the distribution right to such copies. This means that the resale of digital music, film, and e-book files duly purchased by way of download from the Internet will likely be considered as copyright infringement if not authorized by the copyright holders.
What does exhaustion of the distribution right mean?
When buying a video on a DVD, a hardcover book or an art painting in the EU that was first sold in the EU with the consent of the copyright holder of such work, one can resell such DVD, book, or painting to any other person in the EU later on. The reseller does not need the copyright holder’s consent for such resale. This is possible because Art. 4 (2) of the EU Copyright Directive sets forth that the first sale in the EU of a copy, or of the original, of a copyrighted work by the copyright holder or with his/her consent causes exhaustion of the distribution right of the copyright holder. The copyright holder can neither prohibit such resale nor ask the reseller or purchaser to pay additional compensation…