Nederlands Uitgeversverbond v Tom Kabinet Internet – a CJEU guide on how to play it by the book
Tom Kabinet (the Defendant) is a Dutch company which sells used e-books online (the Books). The Books are purchased by the Defendant, either from individuals or official distributors, and are then re-sold for a lower price to customers who are registered on the Defendant's website as members of a "reading club".
Nederlands Uitgeversverbond and Groep Algemene Uitgevers (the Claimants) are associations that represent publishers in The Netherlands.
The Claimants applied to the Netherlands District Court for an injunction to stop the Defendant from making the Books available to the reading club. They claimed that by doing so the Defendant was infringing their copyright by making an "unauthorised communication to the public" under Article 3(1) of the Copyright Directive (2001/29/EC) (the Copyright Directive).
However, the Defendant argued that its activities were instead a "distribution to the public" under Article 4(1) of the Copyright Directive which is subject to the "rule of exhaustion" set out in Article 4(2). This rule means that if goods are initially sold in the European Union by the rightsholder or with its consent then any subsequent second-hand sale is not infringing.
The extent to which this applies to the sale of intangible digital goods has remained unanswered – until now.
The question that the Netherlands District Court referred to the CJEU was therefore whether the Defendant's sale of the Books was an "unauthorised communication to the public" under Article 3(1) of the Copyright Directive or a "distribution to the public" under Article 4(1) where the rule of exhaustion set out at Article 4(2) applied.
Communication or distribution?
The CJEU found that the Defendant's sale of the Books was an "unauthorised communication to the public" under Article 3(1) and therefore no rule of exhaustion applied.
Looking in particular at the Copyright Directive's intentions and the World Intellectual Property Organisation (WIPO) Copyright Treaty, the CJEU concluded that the rule of exhaustion should be reserved for the distribution of tangible goods only. Applying it to intangible digital goods would likely have a negative effect on the rightsholders as such goods will never deteriorate and so are perfect substitutes for the original copies.
Guidance on the meaning of a "communication to the public"
The CJEU took the view that the concept of a "communication to the public" is a broad one which involves two criteria.
Firstly, there must be an act of communication. The CJEU said that this is the "making available" of a work regardless of whether a person has actually retrieved it or not. As such, just by making the Books available to the reading club via its website the Defendant had communicated the work.
Secondly, the act of communication must be to a public. The CJEU said that account should be taken of the number of persons able to access the work at the same time and in succession, which on the facts (subject to verification) was substantial and so was deemed to be a communication to a public.
The CJEU also said that to be a "communication to the public" the work must be communicated via specific technical means that are different from those initially used. Or, failing that, the work must be communicated to a "new public" which was not initially envisaged by the rightsholders. Given that the Books would have initially been sold with a user licence authorising the purchaser to read it only from its own device, the CJEU considered that the Defendant's re-sale of the Books was to a "new public".
Comparison to the UsedSoft case
In the opinion delivered in September 2019, the Advocate General stated that this case should be distinguished from the judgment in UsedSoft. In that case the ECJ decided that the transfer of a copy of a computer program under licence (whether by means of a material medium or downloading) is a sale of that copy within the meaning of Article 4(2) of the Computer Programs Directive 2009/24 and therefore the rule of exhaustion set out in that Article applies.
The AG focussed on the fact that UsedSoft was based on different legislation (the Computer Programs Directive, rather than the Copyright Directive) and involved software rather than e-books.
Why is this important?
Not only did this decision confirm a number of key copyright principles under EU law – namely, the two criteria for a "communication to the public" and the concept of a "new public" – but it also explored for the first time the application of the "rule of exhaustion" to intangible digital goods.
Whilst it seems like a fairly common-sense approach to take, this clarification by the CJEU that e-books (or similar digital products) cannot be freely re-sold by third parties throughout the EU should provide comfort to the publishing world.