Tom Kabinet - The Aftermath: A critical evaluation of the CJEU's judgment and its market effects on digital distribution

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Department of Law Spring Term 2020

Master Programme in Intellectual Property Law Master’s Thesis 30 ECTS

Title: Tom Kabinet - The Aftermath

Subtitle: A critical evaluation of the CJEU's judgment and its market effects on digital distribution

Author: Vahagn Grigoryan

Supervisor: Kacper Szkalej

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ACKNOWLEDGEMENTS

This study has been produced during my scholarship period at Uppsala University, thanks to the Swedish Institute (SI) scholarship, which financially supported my studies.

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3 ABSTRACT

On the 19th of December 2019, the Court of Justice of the European Union ruled: "The supply to the public by downloading, for permanent use, of an e-book is covered by the concept of

‘communication to the public’ ..." This judgment ("Tom Kabinet judgment") solved a long debate whether "digital exhaustion" exists or not, in favour of the latter.

This study is dedicated to the analysis of Tom Kabinet judgment and its effects. It analyses the judgment from several perspectives. Firstly it discusses the effects and the importance of Tom Kabinet judgment. Secondly, it analyzes the legal and non-legal arguments of the Court from a critical point of view and argues that a contrary non-contra legem solution existed. Thirdly, this study argues that in the long run, not only the end-users but also the rightholders can benefit from

"digital exhaustion" and the existence of a digital secondary market. Therefore, a contrary solution of the case could be beneficial for everyone.

As a proponent of "digital exhaustion," the present author offers several legislative policy considerations that are needed to give a new life to digital secondary markets.

Keywords: digital exhaustion, digital secondary markets, Tom Kabinet

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TABLE OF CONTENTS

ABBREVIATIONS ... 6

1. INTRODUCTION ... 7

1.1. Background ... 7

1.2. Objectives (purpose) of the study ... 8

1.3. Research questions ... 9

1.4. Methodology and materials ... 9

1.5. Delimitations ... 9

1.6. Structure ... 10

2. TOM KABINET: A JUDGMENT WITH "NO ALTERNATIVES" ... 12

2.1. A brief historical tour: the previous judgments ... 12

2.1.1. UsedSoft (C-128/11) ... 12

2.1.2. Allposters (C-419/13) ... 15

2.1.3. VOB (C-174/15) ... 16

2.2. Tom Kabinet - the background and the outcome ... 17

2.2.1. The facts ... 18

2.2.2. The questions and the outcome ... 19

2.2.3. The importance ... 19

2.3. Arguments of the Court - could the CJEU decide otherwise? ... 21

2.3.1. The three principles... 21

2.3.2. Compliance with WCT ... 26

2.3.3. Legislative history of the InfoSoc Directive ... 28

2.3.4. Recitals of the InfoSoc Directive ... 30

2.3.5. "First sale" ... 32

2.3.6. Arguments of economical nature ... 32

3. TOM KABINET: THE "BENEFICIAL" EFFECTS ... 34

3.1. Shutting down the secondary markets? ... 34

3.1.1. Centralized platforms of digital content resale ... 34

3.1.2. Decentralized platforms of digital content resale ... 34

3.1.3. Out-of-platform sales ... 36

3.1.4. Conclusion ... 36

3.2. The problem of enforceability ... 36

3.3. Digital secondary markets: good or bad? ... 37

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3.3.1. Innovation ... 38

3.3.2. Competition ... 39

3.3.3. Prices and affordability ... 39

3.3.4. Privacy ... 41

3.3.5. Access ... 41

3.3.6. Other benefits for the users ... 43

3.3.7. Benefits for the rightholders ... 43

3.3.8. Digital secondary markets - beneficial for everyone ... 48

4. A NEW "PLACE UNDER THE SUN" FOR DIGITAL SECONDARY MARKETS ... 50

4.1. Legislative policy considerations ... 50

4.2. Feeding the wolves and keeping the sheep safe ... 52

5. CONCLUSION ... 56

BIBLIOGRAPHY ... 58

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ABBREVIATIONS

AG - Advocate General

CJEU - Court of Justice of the European Union

CPD - Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs

CRD - Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights

ECHR - European Convention on Human Rights ECtHR - European Court of Human Rights

E-Commerce Directive - Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market

InfoSoc Directive - Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society

RLD - Directive 2006/115/EC of the European Parliament and of the Council of 12 December 2006 on rental right and lending right and on certain rights related to copyright in the field of intellectual property

TFEU - Treaty on the Functioning of the European Union WCT - WIPO Copyright Treaty, 1996

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1. INTRODUCTION

1.1. Background

Can copyright-protected products be resold without the rightholder's consent? Article 4 of the InfoSoc Directive¹ states: (1) Member States shall provide for authors, in respect of the original of their works or of copies thereof, the exclusive right to authorize or prohibit any form of distribution to the public by sale or otherwise. (2) Distribution right shall not be exhausted within the Community in respect of the original or copies of the work, except where the first sale or other transfer of ownership in the Community of that object is made by the rightholder or with his consent.

The doctrine of exhaustion (Article 4(2) of InfoSoc Directive) was introduced to EU copyright law in order to allow the buyers of copyright-protected products to resell that product in the future without the rightholder's consent.

This doctrine did not create any issues in the "tangible world." As long as the copyright- protected product is tangible, no ambiguities arise concerning the applicability of the doctrine of exhaustion.

However, the modern world is not merely a world of tangible objects. Nowadays, we live in a digital era. The digital era affected every aspect of our lifestyle, including the consumption of copyright-protected products. The consumption of such products has become mainly digital.

In the digital era, the essential question is narrowed down - can copyright-protected digital products be resold without the rightholder's consent? While the doctrine of exhaustion provides a straightforward answer for tangible objects, in the digital era, the issue becomes really complex.

Preparatory works of the InfoSoc Directive began in the 1990s, which can hardly be considered as "digital era." The drafters of the Directive did not and could not clearly envisage the technological advancements that were yet to come. The InfoSoc Directive, as such, was not desig- ned to answer the question in a purely digital context.

When the law is not clear enough, scholars come into play. A heated debate existed whether Article 4 (2) of the InfoSoc Directive applies to digital objects. An obstacle against such applica-

1 “Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the Harmonisation of Certain Aspects of Copyright and Related Rights in the Information Society,” Pub. L. No. 32001L0029, OJ L 167 (2001), http://data.europa.eu/eli/dir/2001/29/oj/eng.

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tion exists in Article 3 of the InfoSoc Directive². The main problem is the fact that, together with the right of distribution, the rightholders also have a right to communicate their works to the public - a right which is never exhausted according to Article 3(3) of the InfoSoc Directive³.

Thus, when a copyright-protected digital work (with no tangible medium) is acquired, is it

"distributed" to the acquirer, or is it "communicated"? If it is distributed, it can be freely resold by the buyer. If it is communicated, then exhaustion does not happen, and the work can not be freely resold. However, the InfoSoc Directive does not offer a clear answer to this question.

As a result, it became the task of the CJEU to clarify whether the doctrine of exhaustion is applicable to purely digital objects. As regarding software, a positive answer was given in 2012 in the case of UsedSoft⁴. However, UsedSoft was a case about software. It was solved in the context of CPD⁵, which, according to its Article 1, is applicable only to software.

The fate of other types of protected works was decided in Tom Kabinet,⁶ and the answer was negative. The CJEU solved the "distribution vs. communication" issue in favour of the latter and stated that a secondary market of digital content unreasonably harms the rightholders' interests.

1.2. Objectives (purpose) of the study

The objective of this study is to analyze Tom Kabinet judgment and to evaluate the Court's legal and non-legal (economical) arguments from a critical point of view.

Proving that CJEU was wrong in Tom Kabinet is not an objective of this study. Rather, this study will argue that the Court could have reached a contrary final conclusion and that contrary conclusion could be beneficial to all the stakeholders - consumers and rightholders alike.

Based on the analysis, this study will offer several recommendations and outlooks of legal and technological nature about the fate and the future of the digital secondary market.

2 Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society.

4 Judgment of 3 July 2012, C-128/11, UsedSoft GmbH v Oracle International Corp., ECLI:EU:C:2012:407.

5 “Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the Legal Protection of Computer Programs (Codified Version) (Text with EEA Relevance),” Pub. L. No. 32009L0024, OJ L 111 (2009), http://data.europa.eu/eli/dir/2009/24/oj/eng.

6 Judgment of 19 December 2019, C-263/18, NUV and GAU v Tom Kabinet, ECLI:EU:C:2019:1111.

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9 1.3. Research questions

The research questions which will be answered in this study are:

(1) What does Tom Kabinet judgment mean for the society and the digital secondary market? Who is "affected" by the judgment?

(2) How could the Court reach a different non-contra legem conclusion in Tom Kabinet?

(3) Can the digital secondary market be considered as beneficial for both the users and the rightholders?

1.4. Methodology and materials

The study is based on both legal and non-legal sources. Legal sources include: (1) WCT and InfoSoc Directive which directly address the issue of exhaustion; (2) CPD, CRD, RLD and E- Commerce Directive which can be used to evaluate separate issues concerning exhaustion; (3) case -law of the CJEU which is directly or indirectly related to digital exhaustion; (4) doctrinal sources.

Non-legal sources are mainly used to support the arguments of economic and technological nature, as presented in this study. These sources primarily consist of journal publications and articles.

As the area of exhaustion is harmonized within the EU, the current study is limited to the EU copyright law framework. National laws or national court decisions will not be analyzed.

The primary method used in this study is the legal dogmatic method (doctrinal research).

With its help, this study: (1) identified the relevant legal framework for analysis, (2) identified the relevant case-law, (3) identified and analyzed the legal issues that exist in the context of digital exhaustion, (4) identified the interpretations that could solve these legal issues in favour of digital exhaustion.

Analysis of the digital secondary markets' benefits was conducted with the help of doctrinal research, law-in-context approaches, and evidence-based approaches.

1.5. Delimitations

Firstly, there is a debate on whether the issue of digital exhaustion is important nowadays⁷. It could be argued that the emergence of new content-dissemination subscription-based techno-

7 Lothar Determann, “Digital Exhaustion: New Law from the Old World,” Berkeley Technology Law Journal 33, no.

1 (2018): 223.

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logies (such as streaming, cloud computing, cloud gaming⁸) makes the issue of digital exhaustion irrelevant⁹. The issue is not considered as important by the EU legislator¹⁰. AG Szpunar took a similar position in the case of Tom Kabinet¹¹. This issue will not be discussed in depth. Many authors have given various reasons¹² why digital exhaustion is still important. Generally, all these reasons are agreeable for the present author.

Secondly, several authors argue that in the absence of digital exhaustion, the rightholders will be able to prevent (public) resales of used devices (iPods, tablets, etc.) that contain copyright- protected digital content¹³. This issue has no significance for the current study. As stated by Deter- mann, this problem has no practical significance (at least, presently)¹⁴.

1.6. Structure

The study is divided into four parts. The first part will offer a brief analysis of the previous CJEU judgments which are relevant to the topic. It will go on discussing the case of Tom Kabinet and CJEU's line of arguments. This part will be concluded with a discussion of how CJEU could reach a contrary non-contra legem conclusion in Tom Kabinet.

8 Vincenzo Franceschelli, “International Report,” in Compatibility of Transactional Resolutions of Antitrust Proceedings with Due Process and Fundamental Rights & Online Exhaustion of IP Rights, ed. Bruce Kilpatrick, Pierre Kobel, and Pranvera Këllezi, LIDC Contributions on Antitrust Law, Intellectual Property and Unfair Competition (Cham: Springer International Publishing, 2016), 485, https://doi.org/10.1007/978-3-319-27158-3_18.

9 Péter Mezei, “Digital Exhaustion in the European Union and the US,” in Copyright Exhaustion: Law and Policy in the United States and the European Union (Cambridge University Press, 2018), 140,

https://doi.org/10.1017/9781108135290.005; John Enser, “The 1709 Blog: Tom Kabinet Decision - No Digital Exhaustion of e-Books,” The 1709 Blog (blog), December 19, 2019, http://the1709blog.blogspot.com/2019/12/tom- kabinet-decision-no-digital.html; Stavroula Karapapa, “Exhaustion of Rights on Digital Content under Eu

Copyright: Positive and Normative Perspectives,” SSRN Scholarly Paper (Rochester, NY: Social Science Research Network, November 4, 2018), 29, https://papers.ssrn.com/abstract=3278149.

10 Caterina Sganga, “A Plea for Digital Exhaustion in EU Copyright Law,” Journal of Intellectual Property, Information Technology and Electronic Commerce Law 9, no. 3 (2018): 213–14, 233.

11 AG opinion of 10 September 2019, C-263/18, NUV and GAU v Tom Kabinet, ECLI:EU:C:2019:697, paras 95-96.

12 “Old Habits Die Hard?: UsedSoft v Oracle,” SCRIPTed, /01/7, 13, https://doi.org/10.2966/scrip.00.; Mezei,

“Digital Exhaustion in the European Union and the US,” 141; Christopher B. Graber, “Tethered Technologies, Cloud Strategies and the Future of the First Sale/Exhaustion Defence in Copyright Law,” Queen Mary Journal of Intellectual Property 5, no. 4 (2015): 397–400; Péter Mezei, “Digital First Sale Doctrine Ante Portas -- Exhaustion in the Online Environment,” SSRN Scholarly Paper (Rochester, NY: Social Science Research Network, June 7, 2015), 51, 52, https://papers.ssrn.com/abstract=2615552.

13 Louise Longdin and Pheh Hoon Lim, “Inexhaustible Distribution Rights for Copyright Owners and the Foreclosure of Secondary Markets for Used Software,” IIC - International Review of Intellectual Property and Competition Law 44, no. 5 (August 1, 2013): 545–46, https://doi.org/10.1007/s40319-013-0063-0; Gary Donatello,

“Killing the Secondary Market: How the Ninth Circuit Interpreted Vernor and Aftermath to Destroy the First Sale Doctrine Comment,” Seton Hall Journal of Sports and Entertainment Law 22, no. 1 (2012): 82; Karapapa,

“Exhaustion of Rights on Digital Content under Eu Copyright,” 15.

14 Determann, “Digital Exhaustion,” 222, 223.

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The second part will analyze the effects of Tom Kabinet. It will discuss who is affected by the judgment, and what are its consequences. This part will be concluded with a discussion that a digital secondary market is beneficial for both the users and the rightholders.

The third part will offer general legislative policy considerations that will allow the doctrine of digital exhaustion to exist after Tom Kabinet. The same part will discuss the technological measures which are needed to protect the rightholders' interests in a world with a digital secondary market. The fourth and final part of the study is a brief conclusion.

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2. TOM KABINET: A JUDGMENT WITH "NO ALTERNATIVES"

2.1. A brief historical tour: the previous judgments

Before discussing the case of Tom Kabinet in detail, let us take a short historical tour and have a look at the previous judgments of the CJEU, which tackle the subject of digital exhaustion.

2.1.1. UsedSoft (C-128/11)

Oracle International Corp. was a developer/distributor of software. UsedSoft GmbH was buying used user licenses from Oracle's users and was subsequently selling them. UsedSoft's cus- tomers were buying the user licenses from UsedSoft and downloading the software from Oracle's website. Oracle tried to stop UsedSoft's practices and brought court proceedings against UsedSoft.

In the end, the case was brought to CJEU, who solved the case in favour of UsedSoft.

The judgment of UsedSoft contains several essential findings:

(1) Under Article 4 (2) of CPD, the rightholder's distribution right to a copy of a software is exhausted if the "first sale" of that copy has taken place¹⁵. According to the Court, the notion of

"first sale" has three cumulative criteria: (1) transfer of the physical or digital medium to the buyer¹⁶; (2) conclusion of a perpetual license agreement; (3) a lump-sum fee which enables the rightholder to get a remuneration corresponding to the economic value of the copy¹⁷.

(2) In order to justify that the principle of exhaustion under Article 4 (2) of CPD applies to both tangible and intangible copies of computer programs, the Court stated that it makes no diffe- rence whether one downloads a copy of a software or buys it on a CD-ROM/DVD. From an economical point of view, these transactions are functionally equivalent and have to be treated equally¹⁸.

(3) CJEU's overall logic is based on the assumption that a software distributor can calculate and set appropriate prices for the software¹⁹. The rightholder can be remunerated via the first sale,

15 C-128/11, UsedSoft, para 38.

16 Andreas Lober, Susanne Klein, and Florian Groothuis, “The Long and Winding Road of Digital Distribution. Or:

Why the ECJ’s UsedSoft Decision Is of No Use to Keysellers,” Interactive Entertainment Law Review 1, no. 1 (June 20, 2018): 46, https://doi.org/10.4337/ielr.2018.01.03.

17 C-128/11, UsedSoft, paras 41-48.

18 C-128/11, UsedSoft, paras 47, 61.

19 Ole-Andreas Rognstad, “Legally Flawed but Politically Sound? Digital Exhaustion of Copyright in Europe after UsedSoft,” Oslo Law Review 1, no. 01 (2014): 16, https://doi.org/10.5617/oslaw977.

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and he should not be entitled to earn further revenues from any subsequent sales of the same product²⁰. The situation in the digital world should not contradict this logic, either²¹.

Thus, if the criteria of "first sale" are satisfied, then the distribution right to the sold copy is exhausted. The copy can be resold not only by its first buyer but also by the subsequent buyers²². Importantly, in case of a "first sale," the right of resale can not be limited by the contract.

CJEU solved the "distribution vs. communication" issue in favour of distribution by noting that CPD is a lex specialis in relation to the InfoSoc Directive. Importantly, CPD does not contain a right of communication to the public. This fact allowed CJEU to adopt its lex specialis approach.

The Court offered the rightholders some comfort²³ by saying that sellers must make their own copies unusable upon resale, in order not to infringe the exclusive right of reproduction. O- racle argued that it would be difficult to be sure that the seller's copy is deleted. The Court answered that the same difficulty also exists in the world of tangible distribution. The solution here is not to ban digital exhaustion, but to implement technical measures to ensure such deletion²⁴.

UsedSoft judgment raised many debates. Most of the arguments of the Court were criticized²⁵. However, the judgment was supported by many²⁶. Others argued that UsedSoft was a "Pyrr- hic victory," as the rightholders can still enforce their interests with the help of technology²⁷ or by

20 Rita Matulionyte, “Lending E-Books in Libraries: Is a Technologically Neutral Approach the Solution?,”

International Journal of Law and Information Technology 25, no. 4 (December 1, 2017): 267, https://doi.org/10.1093/ijlit/eax016.

22 C-128/11, UsedSoft․

23 “Oracle Loses to UsedSoft in Software Resale Case,” Managing Intellectual Property, August 7, 2012, 8–8.

24 C-128/11, UsedSoft, paras 70, 79, 87.

25 Reto M. Hilty, Kaya Köklü, and Fabian Hafenbrädl, “Software Agreements: Stocktaking and Outlook – Lessons from the UsedSoft v. Oracle Case from a Comparative Law Perspective,” IIC - International Review of Intellectual Property and Competition Law 44, no. 3 (May 1, 2013): 269, 274, 276, 279–80, https://doi.org/10.1007/s40319-013- 0041-6; “Old Habits Die Hard?,” 7–8; Rognstad, “Legally Flawed but Politically Sound?,” 7; Sganga, “A Plea for Digital Exhaustion in EU Copyright Law,” 229.

26 Lazaros G. Grigoriadis, “The Distribution of Software in the European Union after the Decision of the CJEU UsedSoft GmbH v. Oracle International Corp. (UsedSoft),” Journal of International Commercial Law and

Technology 8, no. 3 (2013): 202; “Old Habits Die Hard?,” 5, 7–8; Martina Gillen, “The Software Proteus – UsedSoft Changing Our Understanding of Software as ‘Saleable Goods,’” International Review of Law, Computers &

Technology 28, no. 1 (March 2014): 5, 17, https://doi.org/10.1080/13600869.2013.869911.

27 Karen Bolipata, “What the CJEU’s UsedSoft Decision Means for Software Resales,” Managing Intellectual Property, August 7, 2012, 14–14.

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changing their business models²⁸. Also, there was a debate on whether the principles of UsedSoft would have a broader application in the future²⁹.

Importantly, the scope of UsedSoft is limited, and it does not extend to videogames. In the case of Nintendo v PC Box, CJEU noted that videogames are not only code; they also have a story, music, and graphics³⁰ that have a creative value. Therefore, a videogame is protected also under the InfoSoc Directive³¹. Moreover, every software has a graphic user interface (GUI). Though CJEU held that GUI is not protected by CPD, still it can be protected under the InfoSoc Directive if it meets the requirements of originality³². As a result, UsedSoft will not fully extend to videogames and software with an original and creative GUI.

The following aspects of UsedSoft are particularly noteworthy for the present author:

(1) In the FAPL case, CJEU stated that the specific subject-matter of intellectual property entitles the rightholders to demand an appropriate (but not the highest possible) remuneration for the use of their works³³. UsedSoft (at least) implies a presumption that "appropriate remuneration"

always equals to the price set by the rightholder on his own free will.

(2) In UsedSoft, the Court noted: "... even supposing that Article 4(2) of [InfoSoc Directive]

... indicated that ... exhaustion of the distribution right concerned only tangible objects ... ."³⁴ This at least indicates that in 2012 the Court had serious doubts whether the right of distribution and its exhaustion was limited to tangible objects³⁵.

(3) The Court stated that the existence of a transfer of ownership changes an "act of communication to the public" into an "act of distribution³⁶." This conclusion was reached in the context of not only CPD but also InfoSoc Directive and WCT. This can be seen as an attempt to differen-

28 “Old Habits Die Hard?,” 14; Grigoriadis, “The Distribution of Software in the European Union after the Decision of the CJEU UsedSoft GmbH v. Oracle International Corp. (UsedSoft),” 204–5.

29 Hilty, Köklü, and Hafenbrädl, “Software Agreements,” 284, 288, 290; “Old Habits Die Hard?,” 2, 9; Rognstad,

“Legally Flawed but Politically Sound?,” 18.

30 Lober, Klein, and Groothuis, “The Long and Winding Road of Digital Distribution. Or,” 48.

31 Judgment of 23 January 2014, C-355/12, Nintendo v PC Box, ECLI:EU:C:2014:25, para 23.

32 Mezei, “Digital First Sale Doctrine Ante Portas -- Exhaustion in the Online Environment,” 48, 49; Mezei, “Digital Exhaustion in the European Union and the US,” 138.

33 Judgment of 4 October 2011, C-403/08 and C-429/08, Football Association Premier League and Others, ECLI:EU:C:2011:631, para 108.

35 “Old Habits Die Hard?,” 10.

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tiate between digital distribution (where the buyer is left with an independent and permanent copy of the work) and online services (where such copies are not left)³⁷.

2.1.2. Allposters (C-419/13)

Art & Allposters International BV was buying reproductions of famous paintings on posters. Then it was transferring the images from the posters to canvases via a special technique. The images on the posters were disappearing. The canvases were being sold by Allposters. Stichting Pictoright was a copyright collective society which wanted to stop the foregoing business practice.

In Pictoright's view, the rightholders' exclusive right of reproduction was being infringed³⁸. The case reached CJEU, where it had to decide whether Allposters could rely on the rule of exhaustion, considering that Allposters was altering the medium of the protected works. The Court decided that Allposters could not rely on exhaustion³⁹.

Based on the wordings of the InfoSoc Directive (Recital 28, Article 4(2)) and Agreed State- ment to Article 6 of WCT, the Court found that: "... exhaustion of the distribution right applies to the tangible object into which a protected work ... is incorporated ...⁴⁰." The fact that Allposter's canvases were more valuable than the posters initially were, was also important for the Court⁴¹.

Lastly, the Court said that a new object (a new reproduction) was created as a result of the replacement of the medium. The canvas is physically not the same object that was placed onto the market with the consent of the rightholder⁴².

Allposters is based on a broad definition of reproduction. According to it, if there is duplication, there is reproduction. But even if there is no duplication, there can still be reproduction⁴³. This concept was heavily criticized by Griffiths, and the present author agrees with that criticizm⁴⁴.

37 Grigoriadis, “The Distribution of Software in the European Union after the Decision of the CJEU UsedSoft GmbH v. Oracle International Corp. (UsedSoft),” 203.

38 Judgment of 22 January 2015, C-419/13, Art & Allposters International BV v Stichting Pictoright, ECLI:EU:C:2015:27, paras 14-21.

39 C-419/13, Allposters․

40 C-419/13, Allposters, paras 34-40.

41 Jonathan Griffiths, “Exhaustion and the Alteration of Copyright Works in EU Copyright Law—(C-419/13) Art &

Allposters International BV v Stichting Pictoright,” ERA Forum 17, no. 1 (April 1, 2016): 77, https://doi.org/10.1007/s12027-016-0414-7.

42 C-419/13, Allposters, paras 41-48.

43 Griffiths, “Exhaustion and the Alteration of Copyright Works in EU Copyright Law—(C-419/13) Art &

Allposters International BV v Stichting Pictoright,” 77.

44 Griffiths, 79–80.

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Many commentators read Allposters as a "final "no" to digital exhaustion under the InfoSoc Directive."⁴⁵ The present author does not agree. CJEU did not expressly address the issue of digital exhaustion in this judgment⁴⁶. Allposters can be read in various ways⁴⁷. However, Allposters does not mean that "exhaustion is inapplicable to intangible (digital) objects."

2.1.3. VOB (C-174/15)

The case of VOB⁴⁸, between Vereniging Openbare Bibliotheken and Stichting Leenrecht, is mainly about the interpretation of RLD⁴⁹.

(1) RLD states that the authors have an exclusive right to authorize the rental and lending of their works. However, Member States can derogate from the exclusive lending right in respect of public lending. This means that libraries will not need an authorization from the authors to offer their books for lending, but the authors have to be remunerated⁵⁰. The relevant fees are distributed to writers and publishers (in some countries)⁵¹ via copyright collecting societies⁵².

The first question was: can this derogation apply to the lending of e-books? CJEU answered - yes, if the e-lending is organized in a way that is equivalent to "normal" lending⁵³. In this respect, CJEU's following arguments are particularly noteworthy.

45 Griffiths, 78; Eleonora Rosati, “Online Copyright Exhaustion in a Post-Allposters World,” Journal of Intellectual Property Law & Practice 10, no. 9 (September 1, 2015): 676–77, https://doi.org/10.1093/jiplp/jpv122; Sganga, “A Plea for Digital Exhaustion in EU Copyright Law,” 225; Eleonora Rosati, “CJEU Says That Copyright Exhaustion Only Applies to the Tangible Support of a Work,” Journal of Intellectual Property Law & Practice 10, no. 5 (May 1, 2015): 330, https://doi.org/10.1093/jiplp/jpv033.

46 Rosati, “Online Copyright Exhaustion in a Post-Allposters World,” 678.

47 Péter Mezei, “The Doctrine of Exhaustion in the Copyright Law of the European Union,” in Copyright

Exhaustion: Law and Policy in the United States and the European Union (Cambridge University Press, 2018), 49, https://doi.org/10.1017/9781108135290.003; Karapapa, “Exhaustion of Rights on Digital Content under Eu Copyright,” 19.

48 Judgment of 10 November 2016, C-174/15, Vereniging Openbare Bibliotheken v Stichting Leenrecht, ECLI:EU:C:2016:856.

49 “Directive 2006/115/EC of the European Parliament and of the Council of 12 December 2006 on Rental Right and Lending Right and on Certain Rights Related to Copyright in the Field of Intellectual Property (Codified Version),”

Pub. L. No. 32006L0115, OJ L 376 (2006), http://data.europa.eu/eli/dir/2006/115/oj/eng.

50 Directive 2006/115/EC of the European Parliament and of the Council of 12 December 2006 on rental right and lending right and on certain rights related to copyright in the field of intellectual property (codified version).

51 Matulionyte, “Lending E-Books in Libraries,” 262.

52 Kyle K. Courtney, “Technology: EU Court: Treat Ebooks Like Print,” Library Journal; New York 141, no. 20 (December 1, 2016): 16.

53 C-174/15, VOB.

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(a) The Court noted that there was no evidence in the preparatory works of RLD confirming that e-lending should be excluded from the scope of RLD⁵⁴. Interestingly, the Court did not look for evidence confirming that e-lending should be included in the scope of RLD.

(b) The Court noted that the explanatory memorandum on the Proposal for RLD mentions the Commission's desire to exclude electronic data transmissions from the scope of RLD. Howe- ver, the examples brought in the document were related exclusively to films, not to e-books (which were not popular at that time). So CJEU could not presume that the Commission had really wished to exclude electronic transmissions of e-books from the scope of RLD⁵⁵.

Thus, CJEU used the examples provided in the memorandum in order to interpret a general (but a very explicit) idea from the same memorandum narrowly. Moreover, based on the realities of the era when the memorandum was drafted, the Court decided what the Commission could have meant and what it could not have meant. However, most commentators are of the opinion that the legislative history of RLD does not support the Court's view⁵⁶.

(2) The second question, which the Court had to decide on, was the following: can Member States introduce a requirement that the public lending exception/derogation (Article 6 (1) of RLD) is applicable only to the e-books the distribution rights to which have been exhausted? The Court answered that introduction of such an additional requirement is possible⁵⁷.

Though the Court essentially stated that exhaustion does not affect the lending right or vice versa⁵⁸, the judgment in VOB was read as possibly opening the doors to digital exhaustion⁵⁹.

2.2. Tom Kabinet - the background and the outcome

In this part, we will discuss the facts of the case, the questions that were asked to CJEU and CJEU's answer. Next, we will discuss why was Tom Kabinet important and why it received a lot of attention.

54 C-174/15, VOB, para 40.

55 C-174/15, VOB, paras 41-42.

56 Matulionyte, “Lending E-Books in Libraries,” 271–72.

57 C-174/15, VOB, paras 55, 57, 61, 62, 64.

58 Emma Linklater-Sahm, “The Libraries Strike Back: The ‘Right to e-Lend’ under the Rental and Lending Rights Directive: Vereniging Openbare Bibliotheken,” Common Market Law Review 54, no. 5 (October 1, 2017): 1562.

59 Linklater-Sahm, 1565.

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18 2.2.1. The facts

Tom Kabinet was the operator of an internet website on which "second-hand" e-books were bought and sold. This "secondary market" was launched in 2014. Eight days after the launch, the website was sued by NUV and GAU (associations defending the rights of Netherlands publishers).

The District Court of Amsterdam rejected their application as it found no prima facie breach of copyright. This decision was appealed by NUV and GAU, but the Court of Appeal of Amsterdam upheld the appealed decision.

However, the Court of Appeal prohibited Tom Kabinet from allowing the sale of illegally downloaded e-books⁶⁰. According to the secretary-general of Dutch Publishers Association, most of the books sold via Tom Kabinet were pirated copies⁶¹. The Court found that Tom Kabinet was facilitating infringement⁶². Therefore, at this stage, rather than relating to the "distribution vs. communication" dichotomy, the contemplated problem was piracy.

Initially, the users of Tom Kabinet (sellers) were uploading their copies on the website and offering them for sale for a desired price. The buyers were downloading the e-books from the sellers' accounts. After the sale, the e-book was subsequently removed from the sellers account⁶³.

Since 8 June 2015, as a response to the judicial attacks⁶⁴, Tom Kabinet changed its business model. It replaced its former services with a "reading club" within which Tom Kabinet was an e- book trader. The reading club offered its members "second-hand" e-books, which were purchased by Tom Kabinet (either from official distributors or from other individuals⁶⁵) or donated to Tom Kabinet.

NUV and GAU applied to the District Court of Hague for an injunction against Tom Ka- binet, arguing that Tom Kabinet is making unauthorized communications of e-books to the public.

In its interim judgment, the court found that Tom Kabinet's actions did not constitute a "communication to the public" under the InfoSoc Directive. However, the court was unsure whether Tom Kabinet's actions could be classified as "distribution." Because of this uncertainty, as well as se-

60 C-263/18, Tom Kabinet, paras 20-23.

61 John Charlton, “Philanthropy and Secondhand Ebooks,” Information Today 31, no. 8 (October 2014): 16; John Charlton, “Substantive Proceedings,” Information Today 32, no. 3 (April 2015): 9.

62 Karapapa, “Exhaustion of Rights on Digital Content under Eu Copyright,” 26.

63 Sganga, “A Plea for Digital Exhaustion in EU Copyright Law,” 214.

64 Sganga, 215.

65 AG opinion of 10 September 2019, C-263/18, NUV and GAU v Tom Kabinet, ECLI:EU:C:2019:697, para 18.

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veral other legal uncertainties, the District Court of Hague decided to stay the proceedings and to turn to the CJEU⁶⁶.

Importantly, Tom Kabinet implemented measures (hash codes stored on the website⁶⁷, digital watermarks⁶⁸, requirements to delete the seller's copy upon sale⁶⁹, validation scans⁷⁰ and a notice-and-take-down system to remove illicit content⁷¹) to ensure that only legal copies could be bought and sold via the website. Whether these measures were truly sufficient to reach that goal, is a separate question. Anyway, for the Dutch Publishers Association, these measures were clearly not enough⁷².

Moreover, Tom Kabinet was willing to cooperate with the rightholders. It tried to negotiate with NUV and GAU⁷³ and was ready to share its revenues with the authors via a donation system⁷⁴.

2.2.2. The questions and the outcome

CJEU was asked whether the notion of "distribution" in the InfoSoc Directive includes the making available remotely by downloading, for use for an unlimited period, of e-books for a lump- sum fee⁷⁵.

The answer to this question was: "The supply to the public by downloading, for permanent use, of an e-book is covered by the concept of "communication to the public" and, more specifical- ly, by that of "making available to the public of [authors’] works in such a way that members of the public may access them from a place and at a time individually chosen by them ... ."⁷⁶

2.2.3. The importance

Can copyright-protected digital content (without a tangible medium) be resold without the rightholder's consent? In order to answer this question, one needs to address the following issues.

67 Karapapa, “Exhaustion of Rights on Digital Content under Eu Copyright,” 26.

68 C-263/18, Tom Kabinet, para 24.

69 AG opinion of 10 September 2019, C-263/18, NUV and GAU v Tom Kabinet, ECLI:EU:C:2019:697, para 18.

70 Charlton, “Philanthropy and Secondhand Ebooks,” 16.

72 Charlton, “Philanthropy and Secondhand Ebooks,” 16.

73 Míchel Olmedo Cuevas, “Dutch Copyright Succumbs to Aging as Exhaustion Extends to E-Books,” Journal of Intellectual Property Law & Practice 10, no. 1 (January 1, 2015): 8, https://doi.org/10.1093/jiplp/jpu200.

74 Mezei, “Digital First Sale Doctrine Ante Portas -- Exhaustion in the Online Environment,” 39; Charlton,

“Substantive Proceedings,” 9; Sganga, “A Plea for Digital Exhaustion in EU Copyright Law,” 215.

75 C-263/18, Tom Kabinet, para 30.

76 C-263/18, Tom Kabinet.

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Firstly, it must be decided whether the file was "distributed" to the buyer or "communicated" to him. If it was "communicated," then the buyer can not resell it. If the buyer wants to resell the file, he will have to "communicate" it to the next potential buyer, but that will be illegal without the rightholder's consent as the right of "communication to the public" still belongs to the rightholder and is never exhausted (Article 3(3) of the InfoSoc Directive)⁷⁷.

Secondly, it must be decided whether the buyer really bought the file or merely got a license to use it. Exhaustion of the distribution right can happen only in case of a "sale" (transfer of ownership). It is evident that a license can not fall within this notion.

Thirdly, it must be decided whether exhaustion doctrine can apply to digital files at all. The wording of Recital 28 of the InfoSoc Directive⁷⁸ assumingly speaks against any digital exhaustion.

Fourthly, it must be decided whether the transaction in question can be qualified as an "online service." In that case, according to Recital 29 of the InfoSoc Directive⁷⁹, exhaustion can not happen.

Lastly, it must be decided whether the resale of digital content can be done without infrin- ging the rightholder's exclusive right of reproduction. The problem is - when the acquirer is transferring a file to the next potential buyer, from a technical point of view, he/she is always making a reproduction (even if no duplication is taking place). Article 2 of the InfoSoc Directive states that the exclusive right of reproduction belongs to the rightholder⁸⁰. That right is not "exhaustible."

The outcome of Tom Kabinet means that digital purchases are communicated to the buyers.

For the society, it means that end-users can not resell their digital content which is protected under InfoSoc Directive without the rightholders' consent. This rule applies not only to e-books but also to music, films, and videogames (which are protected under InfoSoc Directive as well⁸¹). The only digital content that can be freely resold is software which does not have an original/creative GUI.

The importance of Tom Kabinet does not concern the end-users only. There are platforms on which used digital goods are bought and sold at low prices. These platforms form the secondary

81 C-355/12, Nintendo, para 23.

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market of digital goods/content. The problem is: if end-users can not resell their digital content, then these platforms (and the "digital secondary market" as a whole) will not be able to operate.

The main suppliers of the digital secondary market are the end-users⁸², and now they can not supply this market any longer. Thus, it is not surprising that European Writers Council welcomed the outcome of Tom Kabinet⁸³.

When the CJEU decided the fate of Tom Kabinet, at stake were these issues and the future of secondary markets of digital content. Therefore, one can not overestimate the importance of the case. Naturally, the case received a lot of attention in media⁸⁴ and scholarly circles⁸⁵.

2.3. Arguments of the Court - could the CJEU decide otherwise?

In this part, we will discuss the arguments that were put forward by CJEU in Tom Kabinet, as well as the counter-arguments to these arguments. However, the discussion will start with iden- tification of three fundamental principles on which the present author's reasoning is based.

2.3.1. The three principles

(1) Legislative texts per se are not an "impassable" obstacle for supreme courts. Most often, they had not prevented supreme courts from reaching a desirable conclusion.

82 Liliia Oprysk, Raimundas Matulevicius, and Aleksei Kelli, “Development of a Secondary Market for E-Books:

The Case of Amazon,” Journal of Intellectual Property, Information Technology and Electronic Commerce Law 8, no. 2 (2017): 133.

83 “EWC Welcomes the Decision against ‘Re-Sale’ of e-Books – EWC | European Writers Council,” accessed March 3, 2020, http://europeanwriterscouncil.eu/tom-kabinet-2019-cjeu/.

84 Charlton, “Substantive Proceedings”; Charlton, “Philanthropy and Secondhand Ebooks”; “EU Copyright Law – Online Resale of an EBook Requires Consent of the Copyright Holder,” LCII (blog), December 20, 2019, https://www.lcii.eu/2019/12/20/eu-copyright-law-online-resale-of-an-ebook-requires-consent-of-the-copyright- holder/; “CJEU: THE SALE OF SECOND-HAND E-BOOKS REQUIRES AUTHORIZATION FROM THE RIGHTS HOLDER (TOM KABINET CASE),” Propiedad Intelectual (blog), January 14, 2020,

https://blog.cuatrecasas.com/propiedad-intelectual/cjeu-the-sale-of-second-hand-e-books-requires-authorization- from-the-rights-holder-tom-kabinet-case/?lang=en; “Resale of E-Books Requires Copyright Authorization, Rules CJEU,” IPWatchdog.Com | Patents & Patent Law (blog), December 20, 2019,

https://www.ipwatchdog.com/2019/12/20/resale-e-books-requires-copyright-authorization-rules-cjeu/id=117378/;

“European Court: reselling e-books violates copyright law,” bureau Brandeis (blog), December 19, 2019, https://www.bureaubrandeis.com/european-court-reselling-e-books-violates-copyright-law/; Enser, “The 1709 Blog”; Manon Rieger-Jansen, “E-Books: Digital Exhaustion under the InfoSoc Directive?,” Mediawrites.Law (blog), August 23, 2017, https://mediawrites.law/e-books-digital-exhaustion-under-the-infosoc-directive/.

85 Sganga, “A Plea for Digital Exhaustion in EU Copyright Law”; Karapapa, “Exhaustion of Rights on Digital Content under Eu Copyright”; Mezei, “Digital First Sale Doctrine Ante Portas -- Exhaustion in the Online Environment”; Eleonora Rosati, “BREAKING: CJEU Rules That the Provision of Ebooks Is an Act of

Communication to the Public (so There Is NO Digital Exhaustion under the InfoSoc Directive),” The IPKat (blog), accessed March 3, 2020, http://ipkitten.blogspot.com/2019/12/breaking-cjeu-rules-that-provision-of.html.

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For example, since 1979, the ECtHR has ruled that the ECHR is a "living instrument,"

which must be interpreted in the light of "present-day conditions."⁸⁶ It was first mentioned in the judgment of Tyrer v United Kingdom⁸⁷. The "living instrument doctrine" allows the ECtHR to interpret the provisions of ECHR (or "creatively update their interpretation"⁸⁸) in such a way as the constantly changing present-day conditions require, without formally amending the text of the ECHR⁸⁹. It is a tool of interpretation which allows the ECtHR to act flexibly in a rapidly changing environment⁹⁰.

This anti-textualist and anti-originalist doctrine's⁹¹ legitimacy was questioned by many authors⁹² who rightfully noted that the doctrine is not based on proper (any) legal justification⁹³. Still, the ECtHR used the doctrine⁹⁴ and continues to use it in many of its judgments.

The present author thinks that the doctrine is more than justified. Firstly, it is not an easy task to amend the text of ECHR⁹⁵. Secondly, if this doctrine did not exist, ECtHR would not be able to act flexibly. It would be bound by the outdated text of ECHR and its drafters' old-fashioned intent. As a result, the ECHR would become a stagnated instrument⁹⁶.

86 Pavel Bureš, “Evolution Interpretation and the European Consensus before the European Court of Human Rights,”

Espaço Jurídico Journal of Law [EJJL] 20, no. 1 (June 28, 2019): 74, https://doi.org/10.18593/ejjl.20214.

87 Andreas Føllesdal, Birgit Peters, and Geir Ulfstein, Constituting Europe: The European Court of Human Rights in a National, European and Global Context (New York, UNITED STATES: Cambridge University Press, 2013), 109, http://ebookcentral.proquest.com/lib/uu/detail.action?docID=1182952; Milan Brglez, Samo Novak, and Stasa Tkalec, “Stereotyping and Human Rights Law: An (Un)Conventional Approach of the European Court of Human Rights 1,” Teorija in Praksa; Ljubljana 53, no. 5 (2016): 1130.

88 Alastair Mowbray, “The Creativity of the European Court of Human Rights,” Human Rights Law Review 5, no. 1 (2005): 69.

89 Bureš, “Evolution Interpretation and the European Consensus before the European Court of Human Rights,” 76.

90 Kanstantsin Dzehtsiarou, “European Consensus and the Evolutive Interpretation of the European Convention on Human Rights Legitimacy and the Future of the European Court of Human Rights,” German Law Journal 12, no. 10 (2011): 1731, 1732.

91 Føllesdal, Peters, and Ulfstein, Constituting Europe, 123; Mowbray, “The Creativity of the European Court of Human Rights,” 63.

92 Føllesdal, Peters, and Ulfstein, Constituting Europe, 138; Kanstantsin Dzehtsiarou and Conor O’Mahony,

“Evolutive Interpretation of Rights Provisions: A Comparison of the European Court of Human Rights and the U.S.

Supreme Court,” Columbia Human Rights Law Review 44, no. 2 (2013 2012): 312, 317.

93 Mowbray, “The Creativity of the European Court of Human Rights,” 61, 71.

94 Mowbray, 62 ,63, 69; Dzehtsiarou and O’Mahony, “Evolutive Interpretation of Rights Provisions,” 322, 323.

95 Dzehtsiarou and O’Mahony, “Evolutive Interpretation of Rights Provisions,” 318.

96 Dzehtsiarou, “European Consensus and the Evolutive Interpretation of the European Convention on Human Rights Legitimacy and the Future of the European Court of Human Rights,” 1732; Dzehtsiarou and O’Mahony,

“Evolutive Interpretation of Rights Provisions,” 314.

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Thus, the risk of "stagnation" and the difficulty of amending ECHR let the ECtHR (who is supposed to refrain from explicit lawmaking⁹⁷) interpret the text of ECHR based on the needs of modern society, without any purely legal justification.

Moreover, the U.S. Supreme Court is using interpretation techniques similar to the "living instrument doctrine."⁹⁸

The "living instrument doctrine" was never used by CJEU⁹⁹. However, CJEU uses a different approach to achieve the same result. For example, CJEU is using the "rightholder-friendly"

recitals of the InfoSoc Directive when it wants to reach a "rightholder-friendly" conclusion. At the same time, it cites "user-friendly" recitals when the final conclusion is "user-friendly."¹⁰⁰ CJEU's decisions concerning technology-enabled uses of copyright-protected works are sometimes "formalistic" and sometimes - "flexible."¹⁰¹ Contrary to "formalistic" decisions, in "flexible" decisions the Court "circumvents" a legal constraint by: (1) not interpreting the relevant rights in broadest possible manner, (2) not interpreting the relevant exceptions in strictest possible manner, or (3) creating a new exception or a new "user's right."¹⁰²

Moreover, several interpretation techniques of CJEU were considered as "harmonization by stealth."¹⁰³ CJEU's notion of "new public" has been called a "judge-made doctrine" with weak legislative grounding¹⁰⁴. CJEU's judgment in FAPL was called "flexible"¹⁰⁵ and "re-casting [the]

legislation."¹⁰⁶

From a purely legal perspective, CJEU's UsedSoft judgment was heavily criticized. It was considered as "contra legem,"¹⁰⁷ "going beyond the wording of the [InfoSoc] Directive,"¹⁰⁸ "cont-

97 Dzehtsiarou and O’Mahony, “Evolutive Interpretation of Rights Provisions,” 360.

98 Dzehtsiarou and O’Mahony, 315, 329.

99 The present author thinks that such use would be justified at least by the difficulty of amending EU directives and regulations, as well as the risk that these legal instruments will become "stagnated."

100 Griffiths, “Exhaustion and the Alteration of Copyright Works in EU Copyright Law—(C-419/13) Art &

Allposters International BV v Stichting Pictoright,” 83.

101 Tito Rendas, “Copyright, Technology and the CJEU: An Empirical Study,” IIC - International Review of Intellectual Property and Competition Law 49, no. 2 (February 1, 2018): 171, https://doi.org/10.1007/s40319-017- 0664-0.

102 Rendas, 179, 180.

103 Martina Gillen, “Exhaustion--Harmonization by Case Law or the Clarification of a Long Standing Principle?,”

Journal of Internet Law 18, no. 11 (May 2015): 17–18.

105 Rendas, “Copyright, Technology and the CJEU,” 162.

106 Bill Batchelor and Luca Montani, “Exhaustion, Essential Subject Matter and Other CJEU Judicial Tools to Update Copyright for an Online Economy,” Journal of Intellectual Property Law & Practice 10, no. 8 (August 1, 2015): 592, https://doi.org/10.1093/jiplp/jpv093.

107 Mezei, “Digital Exhaustion in the European Union and the US,” 139.

108 Hilty, Köklü, and Hafenbrädl, “Software Agreements,” 284.

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radicting the WCT,"¹⁰⁹ and "a result of legal gymnastics."¹¹⁰ An author argues that in UsedSoft, the CJEU wanted to apply the rule of exhaustion, and thus, it qualified the facts according to the desired outcome¹¹¹.

This approach is justified. No legislation is perfect. Laws often contain "conflicts" of two or more protected values¹¹². The task of the courts is to try and find the fair balance between these values¹¹³ - often in the total absence of any exactly formulated criteria of how such balance can be reached. Moreover, the legislator is usually unable to foresee the emergence of new technologies.

And when the new technologies are "already here," it is not possible to update the laws quickly¹¹⁴. While many authors will argue that the courts should not re-write the legislator's intentions, we still have to accept that sometimes the "stakes are high,"¹¹⁵ and the negative consequences of not doing so can outweigh the positive ones.

Concluding, supreme courts who are not "happy" with the wording of the law, can always find a way to circumvent that wording¹¹⁶. Non-explicit legal constraints will not prevent the supreme courts to reach a desired conclusion if the courts are willing to "bypass these constraints."¹¹⁷ In cases such as Tom Kabinet, where no explicit regulations exist, and no clear answer is available¹¹⁸, the Court can take several pathways of interpretation. There is no single right choice.

The solution of the Court does not have to be uncriticizable. Scholars have always criticized the courts' judgments and will always do so. The solution of such cases has to be "fair," balanced, and maximally beneficial for all the interested parties.

Moreover, there is no such thing as "contra legem interpretation given by supreme courts."

Even if such court's interpretation is contra legem, from the moment of its adoption it becomes the only valid legal interpretation (as the court's decision is not subject to appeal). From that moment,

109 P. Sean Morris, “Beyond Trade: Global Digital Exhaustion in International Economic Regulation,” Campbell Law Review 36, no. 1 (2014 2013): 123.

110 Batchelor and Montani, “Exhaustion, Essential Subject Matter and Other CJEU Judicial Tools to Update Copyright for an Online Economy,” 591.

111 Gillen, “The Software Proteus – UsedSoft Changing Our Understanding of Software as ‘Saleable Goods,’” 12.

112 An example of this can be found in Recital 31 of the InfoSoc Directive. The Recital speaks about safeguarding a fair balance between the rights and interests of the end-users and the rightholders (which are contradictory).

113 Martin Husovec, “Intellectual Property Rights and Integration by Conflict: The Past, Present and Future,”

Cambridge Yearbook of European Legal Studies 18 (2016): 244.

114 Rendas, “Copyright, Technology and the CJEU,” 160.

116 Rendas, “Copyright, Technology and the CJEU,” 160–61.

117 Rendas, 169–70.

118 A fact, which was admitted by the CJEU itself.

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the criticism of such interpretations (as being contra legem) is acceptable only in academic texts.

As Robert H. Jackson said, "the [US] Supreme Court is not final because it is infallible, but it is infallible only because it is final."¹¹⁹

(2) InfoSoc Directive is outdated. It is poorly adapted for solving issues that are fundamental to online business models¹²⁰. Its principles concerning (digital) exhaustion do not reflect the current state of technology¹²¹. This statement is also true for WCT¹²².

(3) InfoSoc Directive was not only about rightholders. According to Recital 31, it was a- bout balance¹²³. The same is true for Copyright Law in general¹²⁴. The need to strike a fair balance between copyright and other fundamental rights was repeatedly stated by the CJEU¹²⁵.

The exhaustion doctrine was one of the tools to keep that balance. However, in the digital era, the balance was violated in favour of the rightholders. They have more control over their works and more ability to dictate their rules in the digital environment. It is not a surprise that copyright law has become a tool for generating profits (instead of pursuing its original goals)¹²⁶. At least, it is considered as such by many¹²⁷. As a result, copyright law suffers a crisis of legitimacy¹²⁸.

The violated balance needs to be restored. It can be restored with the help of a "reasonable dose of flexibility."¹²⁹ Importantly, the balance was "violated" in favour of the rightholders, so the

"flexibility" should be shown in favour of the end-users.

Keeping these principles in mind, let us turn to Tom Kabinet judgment.

119 “Robert H. Jackson,” in Wikipedia, March 19, 2020,

https://en.wikipedia.org/w/index.php?title=Robert_H._Jackson&oldid=946290809.

121 Franceschelli, “International Report,” 467; Sganga, “A Plea for Digital Exhaustion in EU Copyright Law,” 232–

33. 122 Mezei, “Digital First Sale Doctrine Ante Portas -- Exhaustion in the Online Environment,” 54.

124 Aaron Perzanowski and Jason Schultz, “Digital Exhaustion,” UCLA Law Review 58, no. 4 (2011 2010): 892;

Matulionyte, “Lending E-Books in Libraries,” 276.

125 T. E. Synodinou, “The Renckhoff Case: 6 Degrees of Separation from the Lawful User,” ERA Forum 20, no. 1 (July 1, 2019): 31, https://doi.org/10.1007/s12027-019-00558-w.

126 Mark Jansen, “Applying Copyright Theory to Secondary Markets: An Analysis of the Future of 17 U.S.C. § 109(a) Pursuant to Costco Wholesale Corp. V. Omega S.A.,” Santa Clara High Technology Law Journal 28, no. 1 (January 1, 2011): 158.

127 Giorgio Spedicato, “Online Exhaustion and the Boundaries of Interpretation,” in Balancing Copyright Law in the Digital Age: Comparative Perspectives, ed. Roberto Caso and Federica Giovanella (Berlin, Heidelberg: Springer, 2015), 29, https://doi.org/10.1007/978-3-662-44648-5_2.

128 Spedicato, 27.

129 Synodinou, “The Renckhoff Case,” 32.

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26 2.3.2. Compliance with WCT

The Court noted that the InfoSoc Directive has to be interpreted according to WCT, under which, the distribution right does not apply to intangible items - a conclusion drawn from Article 6(1) of WCT and its Agreed Statements¹³⁰. The first part of this statement is not disputable¹³¹. The question is - does WCT preclude digital exhaustion?

According to Article 6 of WCT: (1) Authors ... shall enjoy the exclusive right of authorizing the making available to the public of the original and copies of their works through sale or other transfer of ownership. (2) Nothing in this Treaty shall affect the freedom of Contracting Parties to determine the conditions, ... under which the exhaustion of the right in paragraph (1) applies after the first sale or other transfer of ownership of the original or a copy of the work with the authorization of the author¹³². The wording of this article does not limit the distribution right or its exhaustion to tangible objects. It does not prohibit digital distribution or digital exhaustion per se.

According to Article 8 of WCT: "... authors ... shall enjoy the exclusive right of authorizing any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them¹³³". However, nothing in this Article can be used to prove that any digital dissemination of works has to be covered exclusively by the right of communication to the public.

Articles 6 and 8 of WCT mean that the rightholders generally have a distribution right and a right to communicate their works to the public. The distribution right (which can be exhausted) can apply to tangible or intangible objects. The right of communication to the public can apply to intangible objects. Digital dissemination of protected works (intangible objects) can be covered by either of these rights¹³⁴ - the countries have the freedom to choose.

131 Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society; Lorna Woods, “Beyond Murphy, Films and Football: Audiovisual Content in Europe Broadcasting in an Age of Commercialism,” Journal of Media Law 4, no.

2 (2012): 212. See also Judgment of 21 June 2012, C-5/11, Donner, ECLI:EU:C:2012:370, para 23; Judgment of 17 April 2008, C-456/06, Peek & Cloppenburg KG v Cassina SpA, ECLI:EU:C:2008:232, para 31.

132 “WIPO Copyright Treaty (WCT),” 1996, https://www.wipo.int/treaties/en/ip/wct/index.html.

133 “WIPO Copyright Treaty (WCT).”

134 Emma Linklater, “UsedSoft and the Big Bang Theory: Is the e-Exhaustion Meteor about to Strike,” Journal of Intellectual Property, Information Technology and Electronic Commerce Law 5, no. 1 (2014): 16; Sganga, “A Plea for Digital Exhaustion in EU Copyright Law,” 219–20.