Review of latest cases regarding resale of digital goods, given at the IBC International Copyright Conference on 10 December 2014

1. © 2012 Edwards Wildman Palmer LLP & Edwards Wildman Palmer UK LLP
Digital Resale: What does
the future now hold?
Gareth Dickson
Edwards Wildman Palmer UK LLP
December 10, 2014

2. The CJEU tackles copyright for software
2
The Good The Bad The Ugly

3. ©Rent the
work to
the
public
Copy
the work
Make an
adaptation
Perform,
show, play
the work in
public
Issues
copies to
the public
Communicate
the work to
the public
Exclusive rights

4. Two important pieces of legislation
4
♦ 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
(InfoSoc Directive / Copyright Directive)
♦ Directive 2009/24/EC of the European
Parliament and of the Council of 23 April 2009 on
the legal protection of computer programs
(Software Directive / Computer Programs
Directive)

5. InfoSoc Directive 2001
5
Recital 28:
The first sale in the
Community of the
original of a work …
exhausts the right to
control resale of
that object
Recital 29:
The question of
exhaustion does not
arise in the case of
on-line services. This
also applies with regard
to a material copy of a
work made by a user of
such a service
Recital 50:
Articles 5 and 6 of
[Dir 91/250/EEC]
exclusively
determine
exceptions to the
exclusive rights
applicable to
computer programs
Article 4: “authors [shall have] the exclusive right to authorise or prohibit any form
of distribution to the public by sale or otherwise … The distribution right shall not
be exhausted … except where the first sale or other transfer of ownership in the
Community of that object is made by the rightholder”

6. Software Directive 2009
6
Recital 1:
The content of Council Directive 91/250/EEC of 14 May 1991 on the
legal protection of computer programs has been amended. In the
interests of clarity and rationality the said Directive should be
codified

7. Software Directive 2009
7
Article 8:
“The provisions of this Directive shall be without prejudice to any other
legal provisions such as … the law of contract”
Article 4(2):
The first sale in the Community of a copy of a program by the rightholder
or with his consent shall exhaust the distribution right within the
Community of that copy

8. FACTS: Case C-128/11 UsedSoft v. Oracle
♦ UsedSoft acquired and resold licences for software, including
Oracle software
♦ Some Oracle software had been downloaded from the Internet and
was supported by a maintenance agreement
♦ Software was made available in blocks of 25 licences
8

9. FACTS: Case C-128/11 UsedSoft v. Oracle
♦ Software was licensed on the following terms:
“With the payment for services you receive, exclusively for your
internal business purposes, for an unlimited period a non-
exclusive non-transferable user right free of charge for everything
that Oracle develops and makes available to you on the basis of
this agreement.”
9

10. QUESTION: Case C-128/11 UsedSoft v. Oracle
♦ Central question was:
“Is the right to distribute a copy of a computer program
exhausted in accordance with the first half-sentence of
Article 4(2) of Directive 2009/24 when the acquirer has made
the copy with the rightholder’s consent by downloading the
program from the internet onto a data carrier?”
10

11. Case C-128/11 UsedSoft v. Oracle
11

12. Case C-128/11 UsedSoft v. Oracle
12
42. “According to a commonly accepted definition, a ‘sale’ is an
agreement by which a person, in return for payment, transfers to another
person his rights of ownership in an item of tangible or intangible
property belonging to him”
72. Distribution right is exhausted under Article 4(2) “if the copyright
holder who has authorised, even free of charge, the downloading of that
copy from the internet onto a data carrier has also conferred, in return
for payment of a fee intended to enable him to obtain a remuneration
corresponding to the economic value of the copy of the work of which he
is the proprietor, a right to use that copy for an unlimited period.”
Grand Chamber: UsedSoft (paragraphs 42 and 72)

13. Case C-128/11 UsedSoft v. Oracle
13
♦ Creates a number of difficulties:
♦ Licence and sale are separate transactions with separate
consequences, employed to facilitate different business models
♦ What is an “item of intangible property”? How does one transfer
“rights of ownership” in items of intangible property?

14. Case C-128/11 UsedSoft v. Oracle
14
♦ What about consistency between the InfoSoc Directive and
Software Directive?
♦ “However, even supposing that Article 4(2) of Directive 2001/29,
interpreted in the light of recitals 28 and 29 in its preamble and
in the light of the Copyright Treaty, which Directive 2001/29
aims to implement … indicated that, for the works covered by
that directive, the exhaustion of the distribution right concerned
only tangible objects, that would not be capable of affecting the
interpretation of Article 4(2) of Directive 2009/24, having regard
to the different intention expressed by the European Union
legislature in the specific context of that directive.

15. Case C-128/11 UsedSoft v. Oracle
15
Recital 13: “…the acts of loading and
running necessary for the use of a
copy of a program which has been
lawfully acquired, and the act of
correction of its errors, may not be
prohibited by contract”
Recital 13: “In the absence of specific
contractual provisions, including when
a copy has been sold, any other act
necessary for the use of a copy of a
program may be performed in
accordance with its intended purpose
by a lawful acquirer”
Article 4(1)(a): “…in so far as loading,
displaying, running, transmission or
storage of the computer program
necessitate [permanent or temporary]
reproduction, such acts shall be
subject to authorisation”
Article 5(1): “In the absence of
specific contractual provisions, the
acts referred to in [Art 4(1)(a)] shall
not require authorisation where they
are necessary for the use of the
computer program by the lawful
acquirer in accordance with its
intended purpose, including for error
correction”
Reproduction right

16. Case C-128/11 UsedSoft v. Oracle
16
Paragraph 81: “in the event of a resale of the copy of the computer program by
the first acquirer, the new acquirer will be able, in accordance with Article 5(1)
of Directive 2009/24, to download onto his computer the copy sold to him by
the first acquirer. Such a download must be regarded as a reproduction of a
computer program that is necessary to enable the new acquirer to use the
program in accordance with its intended purpose”
Reproduction right

17. Case C-128/11 UsedSoft v. Oracle
17
♦ If there is positive for rights owners it is the requirement that a
reseller must “make his own copy unusable at the time of its
resale.”
♦ How can that be policed?
♦ Paragraph 79: CJEU admits it “may prove difficult”, but no
different for CD and DVD sales, and that in both cases the
distributor may “make use of technical protective measures
such as product keys”
♦ Paragraph 87: copyright holder is entitled “to ensure by all
technical means at his disposal that the copy still in the hands of
the reseller is made unusable”
♦ Does Nintendo v. PC Box impact this?

18. Digital resale markets: here we come?
18
♦ Potential for a whole new marketplace in ebooks, MP3s, movie
downloads, videogames
♦ Early excitement has proved premature
♦ Uncertainty over application of UsedSoft reasoning to InfoSoc
Directive
♦ Uncertainty over what constitutes a “computer program” under
UsedSoft

19. How far does UsedSoft go?
19

20. How far does UsedSoft go?
20
Limited to “computer programs” as
literary works (NB: VZBZ (Bielefeld))
Art 1(2); Recital 7:
Program’s
“expression” “in any
form”, including as
incorporated into
hardware, as well as
preparatory design
work “provided that a
computer program
can result from it at a
later stage”
Recital 3:
“computer
program
technology can
accordingly be
considered as
being of
fundamental
importance for the
Community’s
industrial
development”
Case C-393/09
Bezpečnostní
softwarová asociace
(C-406/10 SAS v. World
Programming Ltd):
Elements of a program,
such as GUI and
functionality, are not a
program’s “expression”.
Therefore they are
outside the Software
Directive.

21. How far does UsedSoft go?
21

22. Nintendo v. PC Box
22
If computer games are not “computer programs”, then what is?
AG Sharpston: “Where complex intellectual works
comprising both computer programs and other
material are concerned – and where the two cannot
be separated – it seems to me that the greater, and
not the lesser, protection should be accorded”.

23. Nintendo v. PC Box
23
If computer games are not “computer programs”, then what is?
CJEU: “The protection offered by [the Software
Directive] is limited to computer programs.
[V]ideogames…constitute complex matter comprising
not only a computer program but also graphic and
sound elements, which, although encrypted in
computer language, have a unique creative value
which cannot be reduced to that encryption. In so far
as … the graphic and sound elements are part of its
originality, they are protected, together with the entire
work, by copyright in the context of the system
established by [the Copyright Directive]”.

24. Case C-458/13 Nintendo v. Grund
♦ Question specifically addressed relationship between Software
Directive and InfoSoc Directive where TPM protected software as
well as other works
♦ Seems to have been pre-empted by Nintendo v. PC Box
♦ CJEU cleared it off its register by order of the President
24

25. Some Conclusions
♦ Combined works are governed by InfoSoc Directive, not Software
Directive
♦ UsedSoft of limited precedential value to development of digital
secondary market
♦ Might InfoSoc Directive be interpreted in a way that achieves the
same aims as UsedSoft?
♦ Practical ways around UsedSoft rationale: term-limited offerings;
SaaS / cloud-based services; TPM
25

26. Live issues
♦ D visits an e-commerce website and sees that the latest
release of his favourite MMORPG will be available for
download, lawfully, at half-price for the three days
following its release.
♦ D downloads the game, but completes it in a few days. D
burns it to DVD and sells it to a friend, E. E plays it, even
though D never deletes it and begins playing it again a few
months later.
♦ Is E liable for copyright infringement?

27. Thank You
Gareth Dickson
England and Wales, New York
GDickson@EdwardsWildman.com
+44 (0)207 556 4470