You can't just resell an e-book

The website www.tomkabinet.nl - an online platform for buying and selling second-hand e-books - ceased to exist when the Court of Justice ruled that the author's or rightholder's consent is required for the resale of second-hand e-books. A brief analysis.

1. What did Tom Kabinet do?

1.1. Platform for buying and 'selling' e-books

On the Dutch online platform Tom Kabinet members could buy and 'sell' second-hand e-books. The operation of Tom Kabinet has changed several times over the years. At the time of the complaint by two interest groups of Dutch publishers, Tom Kabinet's collection consisted of e-books purchased by Tom Kabinet and e-books 'sold' by members.

However, according to the general terms and conditions, the 'sale' was considered as a donation to another member. In exchange for this donation, the donor received credits from Tom Kabinet with which e-books could be bought. These e-books could later be exchanged for credits again. Members could check in advance how many credits a particular e-book was worth. Credits could also be purchased with money.

1.2. Mediation in donation and reward with credits

According to the general terms and conditions, Tom Kabinet mediated in the donation of e-books between members. Tom Kabinet's general terms and conditions indeed stated that Tom Kabinet did not become a party to the agreement between two members:

The Website is a club where members ("Members", "Member", also referred to as "you") may purchase and donate electronic books ("E-book(s)"). This creates an agreement between the donating Member and the purchasing Member. Although Tom Kabinet is not a party to this agreement, we do mediate in the conclusion of this agreement and the principles used for the conclusion and performance of this agreement are regulated in these general terms and conditions of use ("Terms of Use"). [free translation]

Since this is a donation between two members, there should be a donor and a beneficiary, rather than a donor and a buyer. It is not clear to us how one member can be considered as a donor and the other member as a buyer when it concerns the same agreement. However, the answer to this question is not relevant for answering the copyright question (see below).

1.3. Donation conditions of Tom Kabinet

Quite apart from the question of whether this was actually a donation, Tom Kabinet imposed a number of conditions on the donation:

• The e-book had to have been purchased legally.
• The e-book had to be in EPUB-format.
• DRM-secured e-books were not accepted, so Apple and Amazon e-books were excluded.
• Donors had to state explicitly that they would not keep a copy of the e-book they donated. The general terms and conditions stipulated the following.

Tom Kabinet expressly assumes that a Member who offers, donates or sells an E-book through his Website does not withhold a copy of it. The Member declares and guarantees that the E-book will be erased after it has been offered, donated or sold, and that the E-book is therefore no longer on his computer, laptop, tablet, e-reader, telephone or other electronic device. The Member who buys an E-book through the website of Tom Kabinet becomes the new rightful owner and acquirer of the copy of the E-book. [free translation]

2. Is it legally possible to resell e-books?

2.1. What does Tom Kabinet say?

Tom Kabinet's platform was legally based on the copyright rule of exhaustion.

In principle, the author or rightholder has the right of distribution, i.e. the right to authorise or prohibit any form of distribution. However, the right of distribution is 'exhausted' after the first sale or other transfer of ownership of a work (in this case the e-book) by the author or rightholder in the European Union. In that case, the author or rightholder may not prohibit the subsequent (second-hand) sale.

Tom Kabinet's general terms and conditions stipulated the following:

New E-books are offered online (elsewhere) by webshops and publishers, among others, and can be downloaded by buyers after payment. They then download a copy of the E-book with the permission of the rightholder(s) (the author and any other rightholders). Tom Kabinet assumes - by analogy with the case law of the Court of Justice of the European Union on standard software - that after the sale of this first copy of an E-book the rightholder does not have the right to prohibit the further distribution of that copy within the European Union. By analogy with the Court's case law on standard software, Tom Kabinet also assumes that the sale of an E-book can legally be regarded as a contract of sale. In other words: Tom Kabinet assumes that an E-book, once "legally" purchased, may be resold or donated, without permission of the owner of that E-book. However, this is subject to a condition. The seller of an E-book must disable or delete any copy of the E-book at the time of sale. There may therefore only be one copy of the copy in question in circulation. [free translation]

2.2. CJEU 2012: reselling of software is allowed

In 2012, the Court of Justice already ruled that this rule of exhaustion applies to second-hand software. In concrete terms, this means that an officially purchased copy of a computer program may be resold without the consent of the author or copyright holder (UsedSoft case) if:

• the right to use the computer program is unlimited in time, and
• it was purchased for a consideration corresponding to the economic value of the copy. Whether the copy can be obtained online or on a material medium is irrelevant.

However, in 2016, the Court of Justice ruled that this does not apply to a self-made backup copy. Such a copy may not be resold without the consent of the author or copyright holder (Ranks case).

We have written about both cases in the past on our blog:

• Click here for the discussion of the UsedSoft case (on the resale of software).
• Click here for the discussion of the Ranks case (on the resale of a back-up copy of software).

2.3. CJEU 2019: reselling e-books is not allowed just like that

2.3.1. Complaint from publishers

Two interest groups of Dutch publishers were of the opinion that Tom Kabinet's platform violated the rights of authors and rightholders. Already in our blog from 2012 we had reservations about the applicability to e-books. This open question has since been answered by the Court of Justice in the Tom Kabinet case.

2.3.2. No act of distribution, so no exhaustion

The Court of Justice had to rule on whether making an e-book available via a download link in return for payment in order to use it for an unlimited period of time is covered by the right of distribution. In that case, the rule of exhaustion would apply and the author or rightholder could not oppose a second-hand sale of the e-book.

However, the Grand Chamber of the Court ruled that this was not an act of distribution, but a communication to the public. Consequently, the rule of exhaustion does not apply and the author or rightholder may oppose a subsequent second-hand sale. After all, the consent of the author or rightholder is necessary.

2.3.3. How did the court come to this conclusion?

1) The rule of exhaustion is intended only for tangible copies.

According to the Court of Justice, the context, objectives and genesis of the Infosoc Directive show that the rule of exhaustion is intended for the distribution of tangible copies, such as paper books. The 1996 WIPO Copyright Treaty, which forms the basis of the Infosoc Directive, also points in this direction.

2) A paper book and an e-book are not economically equivalent (due to wear and tear).

In the UsedSoft case, the Court of Justice ruled that computer programs on a tangible medium or via a download are economically equivalent. The Court ruled that this does not apply to a book on a material (paper) medium and an e-book, because a paper book wears out over time. So the paper book loses its value, but an e-book does not.

The interests of the author, such as the right to appropriate remuneration, could be harmed in the case of second-hand sales of e-books at a fraction of the price, while the e-book is still new from the reader's perspective. A computer program, on the other hand, ages faster than an e-book. Both situations are therefore not fully comparable. This while the objective of the Infosoc Directive is precisely to provide a high level of protection for authors, the Court of Justice ruled.

3) Offering an e-book on a website is a 'communication to the public'.

The concept of 'communication to the public' consists of two cumulative elements, namely (1) an act of communication and this (2) to an audience. By offering an e-book on a publicly accessible website to a successively indefinite number of potential recipients, both elements have been fulfilled, the Court of Justice held. After all, the concept of 'communication to the public' does not require that the e-book has actually been downloaded.

Moreover, it is a communication to a 'new' audience. The Dutch publishers stated that the user licence usually stipulates that the e-book may only be read on one's own equipment. The members of Tom Kabinet thus formed a 'new' audience, as they were not originally considered by the author or copyright holder.

3. Expectations for the future

3.1. Are e-books under pressure?

After the judgment of the Court of Justice, Tom Kabinet ceased to exist as mentioned above. After all, due to the judgment, the resale of a downloaded second hand e-book is only possible with the consent of the author or copyright holder. This makes reselling downloaded e-books almost impossible. However, it is not entirely clear to us which rules would apply to an e-book on a material medium such as a CD-ROM. Although this question may not arise in practice due to the declining popularity of the CD-ROM, there is a risk that an e-book on a CD-ROM will be regarded as a computer program to which the rule of exhaustion would apply.

Fortunately, there are other alternatives to downloading e-books. After all, alternatives such as the paper book, a subscription model or the lending of e-books seem to remain out of the question in the Tom Kabinet judgment. These alternatives each have their advantages:

• Paper book: although some people prefer to 'have' a book or read it on paper instead of using an e-reader, the paper book also has the advantage that it can be resold without the consent of the author or rightholder.
• Subscription model: a subscription model gives the user access to a collection of e-books for a monthly subscription fee, similar to the streaming of films and series (the well-known Netflix model). The advantage of the subscription formula is that it is usually financially more advantageous for the real bookworms, provided that they are interested in the collection of e-books on offer.
• Public library: Dutch-language e-books can also be borrowed from the public libraries participating in the common e-book lending platform. A film streaming service via the public libraries is still under investigation.

3.2. What about reselling downloaded video games?

For the time being, it is still an open question whether video games are considered a computer program or not.

The French consumer organisation UFC-Que Choisir took Valve Corporation, the provider of the online gaming platform Steam, to the Paris Court of First Instance. The consumer organisation was of the opinion that certain clauses in the general terms and conditions of the gaming platform were unlawful. The general terms and conditions stipulated, among other things, that video games downloaded via Steam could not be resold.

The Paris Court of First Instance found in favour of the consumer organisation and ruled that the clause prohibiting the resale was unlawful. According to the court, the rule of exhaustion applied to video games. Valve Corporation appealed to the Paris Court of Appeal, which has yet to rule on the case. To be continued.

Do you still have questions as an author, copyright holder or user about your rights? Contact Timelex.