Copyright and Online Market Regulation in the EU

Mario Cistaro is a J.D. candidate, 2021 at NYU School of Law.

The recent decision of the CJEU in C‑263/18 (Tom Kabinet) has further confirmed that the advent of the digital world has reshaped both copyright law concepts and the traditional framework used to analyze the interplay between copyright and the fundamental economic freedoms of trade and competition in the EU digital single market. 

More precisely, the CJEU ruled that Tom Kabinet, which purchases e-books from both individuals and retailers and resells them online, infringed the exclusive rights of the copyright owners. Furthermore, the CJEU found that there was no exhaustion of the exclusive right of distribution in the digital sales of copyrighted works.  The CJEU rejected the argument of Tom Kabinet on the analogy between the sale of a book in physical form and the sale of digital copies. The CJEU held that in the former case the copyright is said to have been “exhausted” after the first sale, thus the purchaser is free to sell the book without violating the author’s or publisher’s right. After a digital sale, on the contrary, the exclusive right of distribution of copyright owners is not affected by the transaction.

The doctrine of the exhaustion of rights was introduced in the EU by the ruling of the CJEU in Deutsche Grammophon v Metro and plays a fundamental role in balancing the exercise of exclusive intellectual property rights with the free circulation of goods, once sold, within national borders.

However, to protect the interests of authors in digital marketplaces, the EU, in conformity with the World Copyright Treaty, introduced the new exclusive right of communication to the public of a work in Article 3 of the Copyright Directive. The broad right in question covers every form of digital dissemination, including reproduction, distribution, and display of works.  The doctrine of the exhaustion of the distribution right, as mentioned, is one of the most effective in favoring cross-border trade and for the completion of the European internal market. However, it does not apply to digital dissemination, where every act of dissemination is equivalent to the exercise of the inexhaustible right to provide service under Article 3 of the Copyright Directive. As a result, copyright owners benefit from the exclusive control of every form of digital access to their works.

This incontrovertible observation is not confuted by the decision of the CJEU in UsedSoft. In that case the CJEU held that the exhaustion of the distribution right in online sales of copies of computer software comes along with the atomization of copyright works in the EU copyright law. Therefore, the further sale of digital copies does not infringe copyright. In UsedSoft, the Software Directive prescriptions were given priority over the Copyright Directive provisions in light of the market policy arguments on which the Software Directive is based.

In short, as regards digital contents other than software, every act of online dissemination, even if economically assuming the form of a sale of goods, integrates a service provision. Thus, online distribution of music, e-books, and films must be considered under a completely different regime, where the non-exhaustible exclusive right of communication to the public precludes any unauthorized act of dissemination of a work. The protrusion of the EU Copyright law in the legal framework for completing the digital single market is now definitive.