Germany: Courts hold that the "rule of exhaustion" does not apply to online-distribution of e-books
Dr. Ole Jani, a partner at CMS Germany, represents some of the leading e-book vendors in Germany. Over the past few years he has fought for landmark decisions before various German courts on a question that is key to all digital media industries: Does the "principle of exhaustion" apply to e-books and other copyrighted content that is distributed online? In March 2015, for the third time, a higher regional court held that the principle of exhaustion does not apply to digital copies of copyrighted works thereby permitting right holders to restrict subsequent transfer/resale of copyrighted digital media. These decisions are widely recognized as leading for the entire media industry in Germany.
The principle of exhaustion
With respect to tangible copies of copyrighted works, the copyright holder has no control over the aftermarket of his work because the re-sale of copyrighted work (such as a used book) does not require the right holder’s permission. The reason for this is known as the “principle of exhaustion” which states, once a copy of a copyrighted work has been legally sold (i.e. with the consent of the copyright holder), the distribution rights regarding that copy are "exhausted". There are a number of legitimate reasons for this principle, but many of them do not apply to digital copies which can be transferred much more easily and usually remain on the hard drive of the transferor even after the transfer is made to a third party.
Many questions after "UsedSoft"
After the European Court of Justice’s 2012 UsedSoft judgement, which held that the principle of exhaustion does apply to non-physical copies of software, the question of whether this also applies to other copyrighted works in digital form (books, music etc.) rapidly arose. This question is essential for the entire media industry.
The Higher Regional Court's reasoning
Fought for by our Berlin partner, three higher regional courts in a row recently decided that the principle of exhaustion does not apply to copyrighted works in digital form, allowing the download industry to use terms that prevent the buyer from reselling the purchased e-books, songs, and movies. The legal question behind it required a deep understanding of both national law as well as EU law. Given the full harmonization of the exploitation rights by community law, the courts decided in line with the EU directive.
More to come
The decisions are final and cannot be challenged anymore. However the issue has yet to be addressed by the Court of Justice of the European Union. A Dutch court has recently referred the question to the ECJ for a so-called preliminary ruling, which may bring the final answer from the EU law perspective.
If you would like more information, please contact Dr. Ole Jani (ole.jani@cms-hs.com).
