The CJEU Confirms the Existence of Digital Exhaustion for Software
In its now famous jugdment of 3 July 2012, C-128/11, “UsedSoft”, the Court of Justice of the European Union ruled that:
“the right of distribution of a copy of a computer program is exhausted 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”.
The judgement clarifies that for the digital exhaustion to take place two requirements must be met: a) the first proprietor of the copy of the software must delete that copy; b) he must transfer the copy with exactly the same license that the software provider has sold to him (e. g. if the license allows to use the software in 25 devices, you must transfer the copy of the software plus the license to use it in 25 devices, not less).
Despite these requirements for the exhaustion to take place and the fact that the Court stated that the decision was only applicable for Directive 2009/24 on software protection and not Directive 2001/29 on copyright in the Information Society, the judgement opened the door to a huge doctrinal discussion on the introduction of the so-called “digital exhaustion” not only for software but also to other categories of works in digital format.
Up to a certain degree, the uncertainty was reduced thanks to the subsequent CJUE judgment of 22 January 2015, C-419/13, “All Posters”. In that decision, the Court stated that for works other than software “exhaustion of right applies to the tangible object into which a protected work or its copy is incorporated if it has been placed onto the market with the copyright holder’s consent”.
Recently, the Court had the chance to confirm the application of the digital exhaustion principle to software in its judgment of 12 october 2016, C-166/15, “Ranks”:
“the exhaustion of the distribution right … takes effect after the first sale of a copy of a computer program in the European Union by the copyright holder or with his consent, regardless of whether the sale relates to a tangible or an intangible copy of that program”.
Besides this confirmation, the decision is also relevant because it clarifies that the exhaustion of right applies to the original copy of the software, not to the back up copy. According to art. 5 (2) D. 2009/24 purchasers of software, can make a back-up copy of the software. Such a right cannot be prevented by contract. However, such a copy can only be made “in so far as it is necessary for that use”. Therefore, the transfer of a back-up copy to a third party is not allowed by Art. 5 (2):
“a back-copy of a computer program may be made and used only to meet the sole needs of the person having the right to use that program and that, accordingly, that person cannot – even though he may have damaged, destroyed or lost the original material medium – use that copy in order to resell that program to a third party”.
As a consequence, when the software have been sold in a tangible support, for the exhaustion of right to be applied, the proprietor of the software must transfer the original copy, not the back-up copy. Analogically, when the software has been downloaded from the Internet, the original proprietor cannot transfer the back-up copy he might have made.
The decision is highly important for situations such as the one that gave rise to the dispute in the case before the CJEU where the defendants have been charged with criminal offenses for the illegal distribution of software copies. The defendant alleged that they were selling back-up copies of software, and that this act was allowed as far as the right was exhausted. The decision closes the door to this defense for those infringers and facilitate the enforcement of software copyright holders.