CJEU rules that lending an e-book is legal if the first sale right has been exhausted

The Third Chamber of the Court of Justice of the European Union (CJEU) ruled on 10 November 2016 that it is legal under EU law for a library to lend an electronic copy of a book. However, only one copy of the e-book can be borrowed at the time, the first sale of the e-book must have been exhausted in the EU, and the e-book must have been obtained from a lawful source. The case is Vereniging Openbare Bibliotheken v. Stichting Leenrecht, C-174-15.

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Legal framework

Article 2 of 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 (the InfoSoc Directive) provides authors exclusive rights in their works, including, under its Article 3, the exclusive right to communicate their works to the public by wire or wireless means. Its Article 4 provides that these exclusive rights are exhausted by the first sale or by other transfers of ownership of the work in the EU.

Article 6(1) of Directive 2006/115/EC of the European Parliament and of the Council of 12 December 2006 on the rental right and lending right and on certain rights related to copyright in the field of intellectual property, the Rental and Lending Rights Directive (RLR Directive), gives Member States the right to derogate from the exclusive public lending right provided to authors by Article 1 of the RLR Directive, provided that authors are compensated for such lending.

Article 15c(1) of the Dutch law on copyright, the Auteurswet, authorizes lending of a copy of a literary, scientific, or artistic work, provided that the rightsholder consented to the lending and is compensated for it. The Minister of Justice of the Netherlands set up a foundation to that effect, the Stichting Onderhandelingen Leenvergoedingen (StOL), which collects lending rights payments as a lump sum from lending libraries and then distributes those payments to rightsholders through collective management organizations.

The Dutch government took the view that e-books are not within the scope of the public lending exception of the Auteurswet and drafted a new law on that premise. The Vereniging Openbare Bibliotheken (VOB), which represents the interests of all the public libraries in the Netherlands, challenged this draft legislation and asked the District Court of The Hague to declare that Auteurswet covers lending of e-books.

The Court stayed the proceedings and requested a preliminary ruling from the CJEU on the question of whether Articles 1(1), 2(1)(b) and 6(1) of the Renting and Lending Rights Directive authorize e-lending, provided that only one library user can borrow the e-book at a time by downloading a digital copy of a book which has been placed on the server of a public library.

If this is indeed authorized by the Directive, the District Court asked the CJUE whether article 6 of the Directive requires that the copy of the e-book which is lent has been brought into circulation by an initial sale or other transfer of ownership within the European Union by the rightsholder, or with her consent within the meaning of Article 4(2) of the InfoSoc Directive.
The District Court also asked whether Article 6 of the RLR Directive requires that the e-book which is lent was obtained from a lawful source.

Finally, the District asked the CJEU to clarify whether e-lending is also authorized (if the copy of the e-book which has been brought into circulation by an initial sale or other transfer of ownership within the European Union by the right holder or with her consent) when the initial sale or transfer was made remotely by downloading.

First: Is e-lending legal under the renting and lending rights directive?

The CJEU noted that Article 1(1) of the RLR Directive does not specify whether it also covers copies which are not fixed in a physical medium, such as digital copies (§ 28). The CJEU interpreted “copies” in the light of equivalent concepts of the WIPO Copyright Treaty of 20 December 1996, which was approved by the European Community, now the European Union. Its Article 7 gives authors the exclusive right to authorize “rentals” of computer programs. However, the Agreed Statements concerning the WIPO Copyright Treaty, which is annexed to the WIPO Treaty, explains that Article 7’s right of rental “refer[s] exclusively to fixed copies that can be put into circulation as tangible objects,” thus excluding digital copies from the scope of Article 7.

The Court noted, however, that “rental” and “lending” are separately defined by the RLR Directive. Article 2(1) (a) defines “rental” as “making available for use, for a limited period of time and for direct or indirect economic or commercial advantage,” while Article 2(1) (b) defines “lending” as “making available for use, for a limited period of time and not for direct or indirect economic or commercial advantage, when it is made through establishments which are accessible to the public.” The Court examined preparatory documents preceding the adoption of Directive 92/100, which the RLD Directive codified and reproduced in substantially identical terms, and noted that there was “no decisive ground allowing for the exclusion, in all cases, of the lending of digital copies and intangible objects from the scope of the RLR Directive.” The Court also noted that Recital 4 of the RLR Directive states that copyright must adapt to new economic developments and that e-lending “indisputably forms part of those new forms of exploitation and, accordingly, makes necessary an adaptation of copyright to new economic developments” (§ 45).

The CJEU noted that borrowing an e-book as described by the District Court in its preliminary question “has essentially similar characteristics to the lending of printed works,” considering that only one e-book can be borrowed at the time (§ 53). The CJEU therefore concluded that that “lending” within the meaning of the RLR Directive includes lending of a digital copy of a book.

Second: May only e-books first sold in the EU be lent?

The InfoSoc Directive provides that the exclusive distribution rights of the author are exhausted within the EU after the first sale or other transfer of ownership in the EU of the work by the right holder or with his consent. Article 1(2) of the RLR Directive provides that the right to authorize or prohibit the rental and lending of originals and copies of copyrighted works is not exhausted by the sale or distribution of originals and copies of works protected by copyright.

The CJEU examined Article 6(1) of the RLR Directive in conjunction with its Recital 14, which states it is necessary to protect the rights of the authors with regards to public lending by providing for specific arrangements. This statement must be interpreted as establishing a minimal threshold of protection, which the Member States can exceed by setting additional conditions in order to protect the rights of the authors (at 61).

In our case, Dutch law required that an e-book made available for lending by a public library had been put into circulation by a first sale, or through another transfer of ownership, by the right holder or with his consent within the meaning of Article 4(2) of the InfoSoc Directive. The Court mentioned that Attorney General Szpunar had pointed out in his Opinion that if a lending right is acquired with the consent of the author, it may be assumed that the author’s rights are sufficiently protected, which may not be the case if the lending is made under the derogation provided by Article 6(1) (Opinion at 85). AG Szpunar concluded that therefore only e-books which had been made first available to the public by the author should be lent. The CJEU ruled that Member States may subject as condition to e-lending the fact that the first sale of the e-book has been exhausted in the EU by the right holder.

Third: May a copy of an e-book obtained from an unlawful source be lent?

Not surprisingly, the CJEU answered in the negative to this question, noting that one of the objectives of the RLR Directive, as stated by its Recital 2, is to combat piracy and that allowing illegal copies to be lent would “amount to tolerating, or even encouraging, the circulation of counterfeit or pirated works and would therefore clearly run counter to that objective” (at 68).
The Court did not answer the fourth question as it had been submitted only in the case the Court would rule that it is not necessary that the first sale of the e-books being lent had been exhausted in the EU.

This is a welcome decision since, as noted by AG Szpunar in his Opinion, it is crucial for libraries to be able to adapt to the fact that more and more people, especially younger ones, are now reading e-books instead of printed books.

Photo is courtesy of Flickr user Timo Noko under a  CC BY-SA 2.0 license.

This article was first published on the TTLF Newsletter on Transatlantic Antitrust and IPR Developments published by the Stanford-Vienna Transatlantic Technology Law Forum

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CJEU Rules French Out-of-Print Book Database Illegal Under InfoSoc Directive

The Court of Justice of the European Union (CJEU) held on November 16, 2016, that the French law which allowed for the digital exploitation of out-of-print books is precluded by article 2(a) and article 3(1) of Directive 2001/29/EC, closing the door on a scheme which allowed orphan books and other out-of-print books to be accessible online. The case is Soulier and Doke, C-301/15.

The French Law Allowing For the Digital Exploitation of Out-of-Print Books

A French law, enacted on March 1, 2012, the Law No. 2012-287 on the digital exploitation of out-of-print 20th century books, added articles L. 134-1 to L. 134-9 to the French intellectual property Code (CPI). Its February 27, 2013 décret (decree) n˚2013-182 stated how the law should be implemented.

The law introduced a mechanism allowing for the digital exploitation of out-of-print books published between January 1, 1900 and December 31, 2000, and which were no longer available for sale. Some of them are still protected by copyright. Some of them are orphan books, that is, books for which right holder is no longer known. The law directed the creation of a public database indexing all of these books, which would be available to the public for free. The Bibliothèque Nationale de France, France’s national library, was put in charge to implement and update this database, which was named ReLIRE (to read again).

Article L. 134-4 of the CPI provided the author, and the editor holding the right to reproduce the book in print, the right to opt-out of that scheme. The opt-out right had to be exercised within six months after the book had been placed in ReLIRE. After six months, a collecting society was in charge of authorizing the reproduction and the performance in digital format of the book, in return for remuneration, on a non-exclusive basis for a renewable five year period. The remuneration was shared equitably between authors and editors.

The author could exercise her opt-out right even after six months if she believed that reproducing and representing the book was likely to harm her honor or reputation. The author could also opt-out any time if she could prove that she held the exclusive right to exploit the book in a digital form.2549672390_7c7dbd415a_z

Facts and Procedure

Mr. Soulier and Ms. Doke, both authors, asked, in May 2013, the Conseil d’État, the Council of State, France’s highest administrative court, to annul the February 27, 2013, decree. They claimed that articles L.134-1 to L.134-9 of the CPI limited their exclusive right of reproduction provided by Article 2(a) of Directive 2001/29 (the InfoSoc Directive) but that this limitation was not included in the list of exceptions to this right listed by Article 5 of the same Directive.

The Council of State first asked the Conseil Constitutionnel, the Constitutional Council, to rule on the constitutionality of the law. On February 28, 2014, the Constitutional Council issued its decision. It found that the law did not violate the right of the copyright holders, that it did not prevent them from exploiting their works in other forms than the digital form and that the law did not violate the right of having a private property which is protected by article 17 of the 1789 French Declaration of Human Rights and Civic Rights.

The Council of State then stayed the proceeding and asked the CJEU for a preliminary ruling on the question of Article 2 and 5 of the InfoSoc Directive 2001/29 precluded articles L. 134-1 to L. 134-9. On November 16, 2016, the CJEU held that it does indeed.

Authors Must Be Able to Give Their Permission Prior of the Placement in the Database

The CJEU first noted that the exceptions provided by the French law do not fall within the scope of the exhaustive list of exceptions provided by Article 5 of the InfoSoc Directive, and thus Article 5 is irrelevant to this case. However, Article 2 (a) and 3(1) of the Directive both provide an exception on the rights of reproduction and communication to the public and are thus relevant to this case. They provide, respectively, that the Member States must grant authors an exclusive rights of reproducing their works or to prohibit their direct or indirect the reproduction by any means and in any form, and that the Member States must grant authors the exclusive rights to authorize or prohibit any communications to the public of their works.

For the CJEU, the rights given to authors by Article 2(a) and Article 3(1) require the consent of the author prior to the reproduction of his work. However, this consent can be implicit or explicit (Soulier at 35). The French scheme, while giving the author a right to opt-out, does not inform them that their works will be placed in the ReLIRE database prior to that placement.

As the French law does not offer “a mechanism ensuring authors are actually and individually informed…, it is not inconceivable that some of the authors concerned are not, in reality, even aware of the envisaged use of their works and, therefore, that they are not able to adopt a position, one way or another, on it. In those circumstances, a mere lack of opposition on their part cannot be regarded as the expression of their implicit consent to that use” (Soulier at 43).

While the CJEU admitted that the InfoSoc Directive cannot prevent Member States from implementing legislation allowing for the digital exploitation of out-of-prints books “in the cultural interest of consumers and society as a whole,” pursuing that objective “cannot justify a derogation not provided by the EU legislature to the protection that authors are ensured by [the InfoSoc Directive]” (Soulier at 45).

Authors Have the Exclusive Rights to Authorize the Reproduction and Communication of their Works

The CJEU was also troubled by the fact that the French law gave the editors of the books in printed format the right to authorize or not their reproduction in the digital database. For the CJEU, only authors have the right to exploit their works because the rights of reproduction and communication to the public provided to them by Article 2(a) and Article 3(1) of the InfoSoc Directive are exclusive rights. Also, Article 5(2) of the Berne Convention, to which the EU is a party and which the InfoSoc Directive is intended, in particular, to implement, requires that authors must be able to exercise their rights of reproduction and communication without any formalities.

However, if an author decided to terminate future exploitation of his work in a digital format, he had to secure, under French law, the agreement of the publisher holding the right of the work in a printed format (Soulier at 49). For all of these reasons, the CJEU held that Article 2(a) and Article 3(1) of the InfoSoc Directive preclude a national legislation such as the one implanted in France to allow the digital exploitation of out-of-print books.

What about Orphan Works?

While the CJEU recognized that exploiting such books is of value to society, it did not provide the Member States much clue as to how they could implement a scheme to make these books available to the public which would pass muster with the EU law.

Should Soulier be interpreted as only barring the commercial exploitation of out-of-print books which authors are known? The Court placed much weight on the importance of securing the consent of the author of the work prior of its placement into the database. Does that mean that orphan works can never be placed in such a database, since it is impossible to secure the consent of their unknown right holder, or, to the contrary, should Soulier be interpreted as meaning that only orphan books can be placed into the database, since it is not possible to secure the prior consent of their authors, and they are thus out of the scope of the Soulier decision?

Image is courtesy of Flickr user Ginny under a CC BY- SA 2.0 license.

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CJEU: Posting a hyperlink to infringing content not a communication to public, unless…

Is providing a hyperlink to a work protected by copyright, which was published online without the authorization of the right holder, an infringement of copyright under European Union law? In order to answer this question, the European Court of Justice (ECJ) had to decide whether providing such a hyperlink is a communication to the public within the meaning of Article 3(1) of Directive 2001/29 on the harmonisation of certain aspects of copyright and related rights in the information society (the InfoSoc Directive).

Article 3(1) provides that authors have the exclusive right to authorize or prohibit “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 them from a place and at a time individually chosen by them.” The InfoSoc Directive does not define communication of the work to the public. Its Recital 23, however, specifies that such right “should be understood in a broad sense covering all communication to the public not present at the place where the communication originates.”

The European Court of Justice (EJC) had ruled in 2014 in Svensson and Others (Svensson) that Article 3(1) must be interpreted as meaning that providing a hyperlink on one website to works made freely available  on another website is not a communication to the public because “a communication . . . concerning the same works as those covered by the initial communication and made… by the same technical means [as the initial communication] must also be directed at a new public.”16545913218_ee57b4f493_z

The ECJ defined “new public” as a “public which had not been taken into account by the copyright holders when they authorized the initial communication to the public.“ The ECJ concluded that making a work available by a clickable link does not communicate it to a new public (Svensson at 24), but did not specify if it would make a difference if the works had been made available without the authorization of the right holder.
The European Court of Justice (ECJ) answered that question on 8 September  2016 when it ruled in GS Media BV v. Sanoma Media Netherlands BV, Playboy Enterprises International Inc., Britt Geertruida Dekker (GS Media) that posting hyperlinks to protected works, if they were made freely available to the public but without the consent of the right holder, is not a communication to the public within the meaning of article 3(1). However, if the hyperlinks have been posted for profit, then it is presumed that it is a communication to the public, although that presumption is rebuttable (at 51).

Facts of the case

Here are the facts which led to GS Media. Sanoma publishes Playboy magazine. It commissioned Mr. Hermès, a photographer, to take nude pictures of Dutch starlet Britt Dekker. Samona has Hermès’ full power of attorney to represent him in enforcng his rights in the photographs. GS Media operates the GeenStijl website. In October 2011 it published a report about the leak of Ms. Dekker’s photos. The report included a hyperlink leading viewers to Filefactory, an Australian data-storage website, where, by clicking on another hyperlink, visitors could access a folder containing eleven photographs of Ms. Dekker. GeenStijl had been informed that these photos were available online by an anonymous tip, but had not published them itself on Filefactory.

Sanoma repeatedly asked GS Media to remove the GeenStijl hyperlink to Filefactory but to no avail. However, the photographs were removed from Filefactory. GS Media then published another report with a hyperlink leading to another site where the photographs were available. Playboy published Ms. Dekker’s pictures in December 2011.

Samona sued GS Media for copyright infringement in the District Court of Amsterdam and won. On appeal, the Amsterdam Court of Appeal held that GS Media had not infringed the copyright of the photographer because the photographs had already been communicated to the public when posted on Filefactory. GS Media and Sanoma cross-appealed to the Supreme Court of the Netherlands.

Samona argued that, in view of Svensson, posting a link to a website on which a work has been published is a communication to the public, whether the work was published previously with the right holder’s consent or not. The Supreme Court of the Netherlands stayed its proceeding and requested a preliminary ruling, asking the ECJ to clarify whether there is a communication to the public within the meaning of Article 3(1) if the copyright holder has not authorized to make the work available on the website to which the hyperlink directs.

AG Wathelet: Posting hyperlinks not communication to the public, unless circumvents restriction access

Advocate General Wathelet (AG Wathelet) delivered his opinion on the case on 7 April 2016. He reviewed the two cumulative criteria used by the ECJ in Svensson to analyze whether an act of communication is made to the public: there must be an “act of communication” of a work and such communication must have been made “to a public.”

For AG Wathelet, posting a hyperlink on a site which directs to works protected by copyright that are freely accessible on another website is not an “act of communication” within the meaning of Article 3(1) because it is not “indispensable” to post the hyperlink to make the protected works available to the public (AG Wathelet opinion at 60). The act which made the work available is the one made by the person who originally posted the protected work.

AG Wathelet also examined whether such communication is made “to a public” even though it was “irrelevant” to do so in this case (AG opinion at 61). AG Wathelet held that the “new public” criterion introduced by Svensson did not apply in this case because that criterion is only applicable if the copyright holder has authorised the initial communication to the public (AG opinion at 67). He noted further that, in Svensson, the ECJ had ruled (paragraphs 28 and 30) that if “there is no new public, the authorisation of the copyright holders is . . . not required for the communication to the public in question.” For AG Wathelet, even if the ECJ would apply the “made to a public” criterion to GS Media, it would not be satisfied in this case because the ECJ clearly indicated in Svensson that there is a new public only if publishing the hyperlink was “indispensable” for making the protected work available to the new public (AG opinion at 69).

In this case, the photographs had already been made available by the file sharing site. AG Wathelet noted, however, that it was not clear from the facts whether the photographs were indeed freely accessible. He invited the referring court to verify whether the file sharing sites had put access-restrictions in place, and, if it had, verifying if the link posted on GeenStijl “merely facilitated access to a certain degree” (AG opinion at 71). If the GeenStijl hyperlink had allowed users to circumvent restrictions put in place by the third-party to limit access to protected works, then it was “an indispensable intervention without which those users could not enjoy the works . . . and . . . an act of communication to a public which must be authorised by the copyright holder pursuant to Article 3(1) of Directive 2001/29” (AG opinion at 73).

Therefore, for AG Wathelet, linking to content protected by copyright made freely accessible to the public, whether such publication had been authorized by the right holder or not, is not a communication to the public, unless the website publishing the content had put in place some restriction to access.

The ECJ ruling: Posting hyperlinks not communication to the public, unless made for profit

The ECJ did not entirely follow the conclusions of its AG and ruled instead that hyperlinks to protected works, which are freely available on another website without the consent of the copyright holder, are not a communication to the public within the meaning of Article 3(1), but only if the hyperlinks are “provided without the pursuit of financial gain by a person who did not know or could not reasonably have known the illegal nature of the publication of those works on that other website” (at 56). However, if the links are published for profit, then knowledge of the illegal nature of the publication must be presumed.

The ECJ explained that this ruling allows copyright holders to act against the unauthorized publication of their work on the website, to act against “any person posting for profit a hyperlink to the work illegally published,” and also to act against any person who posted the links without pursuing financial gain, but who knew, or should have known that the work had been illegally published, or if posting such link circumvents access restrictions put in place by the website which originally published the work illegally (GS Media at 53).

Is GS Media a good decision?

GS Media is a good decision, but only because ruling otherwise, as noted by the ECJ at paragraph 46, would mean that individuals providing hyperlinks on their sites would have to check whether the content posted on the site to which they direct infringes the rights of copyholders. However, GS Media is also a potentially troubling decision as it leaves the door open to allowing right holders to sue individuals posting hyperlinks to works protected by copyright, without circumventing access protection, even if they did not post the link for profit.

Indeed, the presumption that an individual posting hyperlink not for profit “does not  . . . [have] full knowledge of the consequences of his conduct in order to give customers access to a work illegally posted on the Internet” (at 48) is rebuttable (at 51). The right holder can rebut the presumption by proving that the individual knew that the work had been illegally published, but also by proving that he “ought to have known  . . . for example . . . [if] he was notified thereof by the copyright holders” (at 49). But notification is presented as only one example of the ways it may be presumed that the individual posting the hyperlink “ought to have known” that the content had been posted illegally.

The next ECJ case about hyperlinks and article 3(1) will likely clarify the instances in which courts must rule that the individuals ought to have had such knowledge. Meanwhile, individuals posting hyperlinks to content protected by copyright illegally published, even for non-profit, remain vulnerable to, at best, cease-and-desist letters, and, at worst, lawsuits.

This article was first published on the TTLF Newsletter on Transatlantic Antitrust and IPR Developments published by the Stanford-Vienna Transatlantic Technology Law Forum.
Image is courtesy of Flickr user FaceMePLS under a CC BY 2.0 license.

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