Limiting The Regulation Of Exhaustion? Cjeu Prohibits The Resale Of Back-Up Copies Of Figurer Programs

Roosa Tarkiainen

Last calendar month the Court of Justice of the European Union (CJEU) issued its conclusion in Microsoft, a reference for a preliminary ruling from Republic of Latvia concerning the regulation of digital exhaustion every bit applied to calculator programmes. 

At the fourth dimension of the decision, this weblog did non comment on it. Thankfully, i of my talented students at the University of Southampton, Roosa Tarkiainen, has come upwards to rescue.

Here's what Roosa writes:

“In its conclusion on 12 Oct 2016 the Court of Justice of the European Union (CJEU) held that the acquirer of a re-create of a calculator computer program accompanied past times an unlimited user licence is non entitled to render a back-up re-create of that computer program to a novel acquirer without the authorization of the rightholder nether Article 4(a) together with (c), together with Article 5(1) together with (2) of Council Directive 91/250/EEC of xiv May 1991 on the legal protection of calculator programs. 

This reference for a preliminary ruling from the Criminal Law Division of the Riga Regional Court concerned the interpretation of Article 4(2), together with Article 5(1) together with (2) of Directive 2009/24 (‘the Software Directive’). Article 10 of the Software Directive repealed the before Directive 91/250/EEC of May 1991 on the legal protection of calculator programs. The dispute inward the chief proceedings concerns offences allegedly committed betwixt 28 Dec 2001 together with 22 Dec 2004. As the Software Directive entered into strength v years afterwards the latest engagement of the offences, the Court inward its ruling considered the equivalent provisions of Directive 91/250/EEC instead. 

Background

This reference arose inward the context of a dispute betwixt 2 Latvian nationals, Mr Ranks together with Mr Vasiļevičs (‘the defendants’), together with Microsoft. The defendants were charged alongside having sold thousands of copies of diverse copyright-protected calculator software together with programs published past times Microsoft betwixt 2001 together with 2004. The copies had been allegedly bought past times the defendants from individuals every bit used copies, together with so incorporated into a cloth medium other than the master copy cloth medium, together with in conclusion sold through online marketplace www.eBay.com.

The defendants were charged for the unlawful sale, every bit role of a criminal organisation, of objects protected past times copyright. They were flora guilty at laid about illustration of all relevant offences nether Latvian criminal police line together with ordered to pay partial compensation.

All parties to the proceedings appealed to the Criminal Law Division of the Riga Regional Court, which ready aside the laid about illustration judgment on finding the defendants guilty of the unlawful sale of objects protected past times copyright.

The conclusion was appealed to the Supreme Court which ready aside the judgment of the preceding courtroom together with referred the illustration dorsum to that courtroom for re-examination. In the class of the re-examination, the defendants asked the Riga Regional Court to refer questions to the CJEU on the interpretation of Article 4(2), together with Article 5(1) together with (2) of the Software Directive inward the context of the unlawful sale of objects protected past times copyright.

The Riga Regional Court asked whether nether Articles 5(1) together with 4(2) an private tin rely upon the exhaustion of the correct to distribute a re-create of the computer program where he has acquired that computer program alongside a used licence on a non-original run a jeopardy where the master copy disk is damaged together with the laid about purchaser no longer uses it. If the response to the laid about interrogation is inward the affirmative, together with so whether that private has, inward reliance of the exhaustion of the distribution right, the correct to resell that calculator computer program on a non-original disk to a 3rd someone nether Article 4(2) together with 5(2). 

AG Saugmandsgaard Øe

What the courtroom said

Following the Opinion of Advocate General Saugmandsgaard Øe, the Court began past times confirming that the dispute is covered past times Directive 91/250 together with non past times Directive 2009/24. Article 4(c) of Directive 2009/24 contains the dominion of exhaustion of the distribution correct which provides that the resale of a re-create of a computer program past times an initial acquirer on a cloth medium, accompanied past times an unlimited licence for the usage of that program, cannot hold out opposed past times the holder of the copyright who sold it inward the European Union.

The Court upheld the dominion nether Article 4(c) following UsedSoft, but chop-chop dismissed Microsoft’s submission, referred to every bit the “strict” approach past times the Advocate General Saugmandsgaard Øe, ie that the provision applies exclusively to the master copy material. This is because the dominion of exhaustion of distribution concerns the computer program itself, together with makes no distinction betwixt tangible together with intangible forms of the copy.

The Court together with so reasserted the correct of reproduction contained inward Article 4(a) of the directive, confirming that a lawful acquirer may resell a re-create of a calculator computer program provided that it does non adversely demeanor on the reproduction correct inward the underlying work. This agency that the resale has to hold out authorised past times the holder of the copyright, or autumn nether the exceptions inward Articles 5 together with six of the directive. Under what the Advocate General categorised every bit the “liberal” approach, the defendants submitted that the dominion of exhaustion allows the resale of a re-create of a calculator computer program on a non-original cloth medium if the master copy medium has been damaged. This is given that that the weather in UsedSoft, namely that at that spot is an unlimited licence for the usage of that computer program together with whatever other copies are made unusable at the fourth dimension of resale, are satisfied.

The Court confirmed that inward that case, the making of a re-create of a calculator computer program on a non-original medium would autumn nether the exceptions inward Articles 5(1) together with (2) together with would thence hold out authorised. Of these exceptions, Article 5(1) provides that a rightholder’s authorization is non required where whatever reproduction of the computer program is necessary for its use, together with article 5(2) allows for the making of back-up copies provided that the re-create is made past times a someone that has a correct to usage that program, together with provided that the back-up re-create is necessary for that use.

With regard to Article 5(1), the Court distinguished UsedSoft from the acquaint illustration on factual grounds inward that at that spot is cypher to advise that the defendants initially purchased together with downloaded copies of the programs from the rightholder’s website which would convey satisfied a reproduction necessary for the usage of the program. Nonetheless, the Court went on the affirm that the initial acquirer of a re-create of a calculator computer program – where the copyright holder’s distribution correct is exhausted nether Article 4(c) – is authorised to resell a re-create but must brand whatever re-create inward his possession unusable at the fourth dimension of its resale. 

More importantly, however, the Court, referring (without much farther elaboration) to Painer that Article 5(2) on the other manus must hold out given a strict interpretation. Having said that, it confirmed that the back-up re-create tin hold out exclusively used to run into the sole needs of the someone alongside the correct to usage that program. This meant that a back-up re-create of the computer program cannot hold out resold to a 3rd political party fifty-fifty if the master copy i is lost or damaged.  

Following from the inward a higher house analysis, the Court in conclusion concluded that, nether Articles 4(a) together with (c), together with 5(1) together with (2) of Directive 91/250, an initial acquirer is permitted to resell a re-create of a calculator computer program because of the regulation of exhaustion of the exclusive distribution correct of the rightholder. However, that initial acquirer is non permitted to brand a back-up re-create together with sell that back-up copy, fifty-fifty if the master copy re-create initially delivered to him has been lost or destroyed. 

Non-digital exhaustion

Implications of the decision

The conclusion inward the acquaint illustration raises the interrogation every bit to whether allowing the resale of the master copy re-create together with prohibiting the sale of a back-up re-create undermines the regulation of exhaustion inward relation to calculator programs together with software. In theory, the center of a back-up re-create is identical to that of the original. 

Therefore past times selling a back-up copy, the acquirer is inward essence selling the exact same production every bit he would hold out if he was selling the original. By creating the barrier to the secondary marketplace for back-ups, it could hold out thus argued that the exhaustion of the correct of distribution becomes redundant. 

However the conclusion of the Court is justified just because of this indistinguishable nature of the back-up programs. Following the Advocate General’s view, the inability to distinguish dissimilar types of copies makes it to a greater extent than hard to fighting counterfeits on secondary markets. Prohibiting the sale of back-up copies could thus bound the quantity of unlawful center on the market, although it may non convey been the close technologically efficient method of doing so. Furthermore, the Court was non inward the seat to depart from the requirement of strict interpretation of the exception inward Article 5(2). 

Nonetheless, the conclusion is meaning inward that it confirmed the dominion in UsedSoft that distribution rights inward calculator programs are extinguished upon sale, allowing for the creation of a secondary marketplace for these programs nether Article 4(c) of the Software Directive. Although questionable on technical grounds, the Court was ultimately carrying out the hard balancing deed betwixt giving result to costless motility inward the internal marketplace through the regulation of exhaustion, together with protecting the rightholder – inward this illustration from existence undercut past times criminal activities.” 

Thanks so much Roosa!