In today’s ever expanding digital application landscape, lagging legislation is no longer the exception. Therefore pre-internet / online applications legislation often needs an evolutionary or teleological interpretation to accommodate these new developments.

A good example is the ongoing case before the European Court of Justice (the “ECJ”), ‘Nederlands Uitgeversverbond and Groep Algemene Uitgevers v. Tom Kabinet (C-263/2018)’, on the secondhand ‘sale’ of permanently downloaded literary, musical or cinematographic works across the European market, which finds its legal basis in the Information Society Directive 2001/29/EG (“InfoSoc Directive”).

Traditionally, an author of a copyright work is entitled to several rights under the InfoSoc Directive, among which are: (i) the right to communicate his work to the public and consent/object to each new communication; and (ii) the exclusive right to authorise or prohibit any form of distribution to the public by sale or otherwise (distribution rights). Commonly, distribution rights are exhausted after the first sale or other transfer of ownership by the author in the European Union, meaning that the author cannot prevent subsequent distribution / sales. For the purpose of clarity, we use the term ‘author’ for both authors and right holders.

In the current case before the ECJ, these principles have been being put into question and might have a substantial effect and even reshape the future of ownership of downloaded works in European countries, i.e.:

Will the permanent rights of ownership of downloaded literary, musical or cinematographic works belong to the past, and will the future be dominated by licenses and subscriptions without a permanent ownership right of the user?

Even though the final judgment of the ECJ has not been issued yet, the authoritative opinion of Advocate General Szpunar (the “AG”) of 10 September, 2019, suggests that downloading works with a permanent right of use as a mode of supplying online content will soon be a method of the past.

The AG has analyzed the questions before the ECJ from a: (i) legislative, (ii) jurisprudential, and (iii) teleological point of view. Overview of the considerations will be elaborated upon below.

(i) Legislative considerations

The first question that AG Szpunar analyzes is the qualification of a permanent online download as either:

- a communication to the public, i.e. consent of the author is needed for every transfer of the permanent use (e.g. transfer of every downloaded literary, musical or cinematographic work needs to be approved by the author); or

- a distribution, i.e. the author loses his right to object to further distribution after the first transfer of ownership in the European Union (exhaustion).

The qualification of a permanent online download is not clearly defined in the InfoSoc Directive since downloaded applications in their current form did not exist at the time of the drafting. This leads the AG to the interpretation of two major copyright documents: (i) the WIPO Copyright Treaty of 1996 (the “WCT”) and (ii) the aforementioned InfoSoc Directive.

While the WCT foresees the possibility of a ‘hybrid’ right (communication and distribution) for the online provision of works (with the condition that the exhaustion would have to be excluded), the InfoSoc Directive tends towards limiting the distribution right to ‘tangible copies’ and categorizes the transfer of permanent downloads under the right of communication to the public. This would mean that the transfer by permanent download would always require the consent of the author.

(ii) Jurisprudential considerations

The AG further considers the Usedsoft case on the transfer of software, where the ECJ found that the sale of a permanent license for a computer program should be considered as a distribution, i.e. can be resold without the consent of the author.

However, the AG sees important differences between Usedsoft and the current case, e.g.:

- the considerations in Usedsoft were based on the Software Directive whereas the current case is based on the InfoSoc Directive;

- a computer program can either be executed by a tangible copy (e.g. a CD) or a digital file, whereas the question in this case is limited to the qualification of a ‘download’ itself;

- users of downloaded literary, musical or cinematographic works are more likely to dispose of their copy after their first reading, listening or viewing, whereas computer programs are intended to be used for a longer period;

- a computer program loses its value quicker and needs updates from time to time and thus loses its value on the secondhand market, whereas a secondhand downloaded copy of a literary, musical or cinematographic work is interchangeable with a new copy.

These significant differences bring the AG to the conclusion that the considerations in Usedsoft are not relevant for the current case.

(iii) Teleological considerations

The goal of copyright is to strike a balance of interests between the rights of the author and those of the users. From a teleological point of view, the rule of exhaustion (i.e. the right to resell without the consent of the author) is one of the instruments that helps to maintain that balance since it increases the competitiveness of the second-hand market, promotes innovation, enhances the protection of the private life of users by removing control from the authors, etc.

Nonetheless, the AG argues that, as mentioned under (ii), permanent downloads do not lose their value with use and are therefore perfect substitutes for new copies.

This brings the AG to conclude that the balance of interests would tip over to the benefit of the user if permanent downloads were to be considered as distribution since:

- it creates an unfair competition between copies of the same quality offered at a fraction of the cost on the secondhand market, on the one hand, and the original market price on the other;

- it would cause an uncontrollable multiplication of the copies in circulation and further saturate the market.

Furthermore, it will be nearly impossible to distinguish legal copies, that is to say, those legally acquired and resold in accordance with the rules, from counterfeit copies.

Outlook

The arguments of AG Szpunar support the theory that it is inevitable that downloading with a permanent right of use (implying distribution rights with the right of exhaustion after the first sale enabling sales on the secondhand market) as a mode of supplying online content will soon be a thing of the past.

In the last few years new modes of access like streaming or subscription access have emerged and are widely approved, not only by copyright holders and distributors, but also by users. Consequently, it seems inevitable that these services will dominate the future of online entitlement to copyrightable works.