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Exhaustion Revisited: And Reconstructed?

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Abstract

In view and support of Prof. Hilty’s statement that the legal concept of exhaustion in IP law is exhausted, at least outside the world of physical goods, this contribution discusses the possible reconstruction of the exhaustion term. It is argued that “exhaustion” should not be considered as a legal concept that carries specific legal consequences on certain conditions. Instead the term may have two functions: either as a mere terminological requisite describing the traditional exhaustion rules (primarily related to tangible copies) or as (part of the) justification of the delineation of rights. Discussing the latter, a line is drawn from the so-called “general exhaustion doctrine” found in German (BGH) case law of the 1980s to the recent case law of the Court of Justice of the European Union (CJEU) concerning different types of exploitation of copyright works. Whereas the former rightly was criticized for not having sufficient basis as a legal principle, the arguments put forward by the BGH resemble the CJEU’s justification of various legal solutions in cases concerning re-licensing of computer programs, cross-border TV transmission, linking on the Internet and retransmissions. Thus, it is claimed that CJEU case law gives sufficient support for a “reconstruction” of the exhaustion term from a legal concept to designating (part of) the justification of delineation (or non-delineation) of IP rights.

Professor dr. juris, Department of Private Law/Centre for European Law, Faculty of Law, University of Oslo, Norway.

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Notes

  1. 1.

    Hilty RM (2021).

  2. 2.

    Hilty RM (2021), 282.

  3. 3.

    Koktvedgaard M (1970), 228. The author’s own translation from Danish.

  4. 4.

    Compare Hilty RM (2021), 275.

  5. 5.

    See DIRECTIVE 2015/2436/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 16 December 2015 to approximate the laws of the Member States relating to trade marks (hereinafter Trade Mark Directive), Article 15(2).

  6. 6.

    Compare Hilty RM (2021), 272–273.

  7. 7.

    See in particular the German scholar Josef Kohler’s early arguments in favour of an exhaustion principle in copyright law, notably Kohler J (1880), 138–139 and Kohler J (1896), 436.

  8. 8.

    See Article 6(2) of the WIPO Copyright Treaty (WCT) which states that “Nothing in this Treaty shall affect the freedom of Contracting Parties to determine the conditions, if any, under which the exhaustion of the right in paragraph (1) applies after the first sale or other transfer of ownership of the original or a copy of the work with the authorization of the author”, and which overrides the three step test in Article 10(2) of the Treaty. Note also the fact that the three step test in Article 5(5) of the 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 (hereinafter Infosoc Directive), which applies to exceptions and limitations provided for in articles 5(1)–5(4) of the Directive, but not Article 4(2) on the exhaustion of the distribution right.

  9. 9.

    See exempli gratia (e.g.). judgments of October 21, 2010, C-467/08 – Padawan, para. 43; December 1, 2011, C-145/10 – Painer, para. 132; September 3, 2014, C-201/13 – Deckmyn, paras. 27–28; July 29, 2019, C-516/17 – Spiegel Online, paragraph (para.) 54.

  10. 10.

    BGH of November 7, 1980, I ZR 24/79 – Kabelfernsehen I, English version in IIC 1982, 104–110.

  11. 11.

    Von Gamm O (1968); Schramm C (1955).

  12. 12.

    See IIC 1982, 108–110.

  13. 13.

    E.g. BGH of February 27, 1981, I ZR 186/78 – Schallplattenimport I; BGH of October 2, 1982, I ZR 81/79 – Musikverleger III; BGH of October 28, 1987, I ZR 164/85 – Schallplattenimport III, and in trademark cases BGH of January 19, 1984, I ZR 194/81 – Schamotte Einsätze; BGH of April 30, 1987, I 39/85 – Ankündigungsrecht I.

  14. 14.

    See Joos U (1991), 217.

  15. 15.

    BGH of June 4, 1987, I ZR 117/85 – Kabelfernsehen II, English version in IIC 1989, 251–257.

  16. 16.

    See IIC 1989, 256–257.

  17. 17.

    See e.g. Nordermann W (1981); Seifert (1981); von Ungern-Sternberg (1982), 95 et sequens (et seq.); Schricker G (1984), 67; Joos U (1991), 222–225.

  18. 18.

    See Joos U (1991), 223.

  19. 19.

    CJEU of March 16, 2017 – case 138/16, AKM. See further Sect. 3.5 infra.

  20. 20.

    There are numerous volumes that deal with this development, here I will as a sole example only refer to Govaere I (1996), 71–101.

  21. 21.

    CJEU of May 17 1988, case 158/86, para. 19.

  22. 22.

    First expressed in CJEU of October 16 1974, case 16/74 – Centrafarm/Winthrop.

  23. 23.

    CJEU of May 23 1978, case 102/77 – Hoffmann La Roche.

  24. 24.

    Directive 2006/115/EC of the European Parliament and of the Council of 12 December 2006 on rental right and lending right and on certain rights related to copyright in the field of intellectual property (hereinafter Rental and Lending Directive) Article 1; Trade Mark Directive Article 15(2) and 15(1); Infosoc Directive Article 4(1).

  25. 25.

    See e.g. judgments of 31 October, case 15/74 – Centrafarm/Sterling Drug, paras. 8 and 12, and of July 14 1981, case 187/80 – Merck/Stephar, paras. 4 and 10, which concerned patents, and judgment of January 1981, joined cases 55/80 and 57/80 – GEMA, paras 13 and 18 (copyright).

  26. 26.

    CJEU of May 17 1988, case 158/86 – Warner/Christiansen, para. 15: CJEU of April 28 1998, case C-200/96 – Metronome, para. 16.

  27. 27.

    CJEU of July 14 1981, case 187/80 – Merck/Stephar; CJEU of December 5 1996, case C-267/95 – Merck v. Primecrown; CJEU of January 20 1981, joined cases 55/80 and 57/80 – GEMA.

  28. 28.

    CJEU of October 16 1974, case 16/74 – Centrafarm/Winthrop, para. 8.

  29. 29.

    Judgments of July 3 2012, case 128/11 – UsedSoft; December 19 2019, case 263/18 – Tom Kabinet; 10 November 2016 – VOB.

  30. 30.

    Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs, hereinafter Computer Program Directive.

  31. 31.

    Compare Hilty RM (2018), 873; Hilty RM (2021), 280.

  32. 32.

    CJEU of July 3 2012, case C-128/11 – UsedSoft, para. 61.

  33. 33.

    Hilty RM (2021), 281.

  34. 34.

    CJEU of July 3 2012, case C-128/11 – UsedSoft, paras. 50–51.

  35. 35.

    See Rognstad OA (2014), 7–9; Mezei P (2022), 162, with further references.

  36. 36.

    CJEU of July 3 2012, case C-128/11 – UsedSoft, para. 61.

  37. 37.

    CJEU of July 3 2012, case C-128/11 – UsedSoft, para. 63.

  38. 38.

    For more elaborate arguments in favour of this view, see Rognstad (2014), 4–12.

  39. 39.

    Compare Mezei P (2022), 137, who opines that the Court’s argument in UsedSoft that a license may be “transformed” into a sale (para. 49 of that judgment) “looks entirely applicable to the supply of e-books as well”.

  40. 40.

    CJEU of December 19 2019, case C-263/18 – Tom Kabinet, paras. 33–52.

  41. 41.

    CJEU of December 19 2019, case C-263/18 – Tom Kabinet, para. 58.

  42. 42.

    Ibidem (Ibid.).

  43. 43.

    As to this discussion, see e.g. Mezei P (2022), 137–140; Sganga C (2021), 170–171; Geiregat (2022), 148 et seq.

  44. 44.

    CJEU of December 19 2019, case C-263/18 – Tom Kabinet, para. 69.

  45. 45.

    See Mezei P (2022), 139–140, claiming inter alia that “the ECJ might completely have misunderstood Tom Kabinet’s business model” (p. 139). See also Sganga C (2021), 171.

  46. 46.

    Paraphrasing para. 58, see above.

  47. 47.

    As to Sganga’s suggestion that the “lack of classification” of this situation, neither as communication to the public nor distribution, “may require the Court either to broaden the notion of public beyond its current borders or to change Its interpretation of the notion of distribution in order to make sure that no conducts remain outside the scope of InfoSoc’s exclusive rights”, see Sganga C (2021), 171, it is difficult to see how and why the Court would do that. Ever since the judgment of December 7 2006, case C-306/05 – Rafael Hoteles (para. 38), the CJEU has held on to the notion that the concept of “public” is related to “who have access, at the same time or in succession, to the same work”, which is repeated (without references) in para. 69 of the Tom Kabinet case, and even if one could have expected the Court to take a different approach to the concept of public in “one to one situations” it has refrained from doing so also in other cases, confer (cf.) CJEU in judgment of 28 October 2020, case 637/19 – BY, paras. 26 et seq., see Rognstad OA (2021a), 158. The fact that the Court consciously has chosen to delineate the communication to the public concept in this manner implies that it is not likely to broaden the scope of it (or for that sake the distribution concept to cover up for the delineation of the communication right) at a later stage.

  48. 48.

    Judgment of November 10, 2016, case C-174/15 – VOB para. 54.

  49. 49.

    Judgment of November 10, 2016, case C-174/15, paras. 63 and 64 with reference to para. 85 of the Advocate General’s opinion, cf. also para. 62 and its reference to the exhaustion rule in Article 4(2) of the Infosoc. Directive.

  50. 50.

    Judgment of March 18 1980, case 62/79 – Coditel I.

  51. 51.

    Judgment of March 18 1980, case 62/79 – Coditel I, paras. 12 and 13.

  52. 52.

    See the Proposal for EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE on the harmonization of certain aspects of copyright and related rights in the Information Society (Green Paper), COM(97) 628 final, 27, where the Commission, with reference to the Coditel decisions, explicitly states that the “provision is only a clarification of the existing legal situation at Community level, recalling that the provision of services does not give rise to exhaustion of rights”.

  53. 53.

    See e.g. Wiebe A (2009), 115 et seq., Spedicato G (2015), 46–52, Sganga C (2021), 156–158 and Mezei P (2022), 172–177, who all advocate for a redefinition of the goods vs services divide. For the recognition of the same problem but with a different approach to the solution, see Rognstad OA (2014), 15.

  54. 54.

    It is to be noted here that the statements allegedly cited from the judgment by Spedicato G (2015), 48, that exhaustion is excluded from the performance right and “[I]f there is no material medium the criterion of marketing cannot be used to determine the extent of the exclusivity of the right” are not taken from the Court’s decision but from the pleadings of the Commission in the case (ECR 1980, 894). The Court itself makes no explicit general observations of this kind in Coditel I.

  55. 55.

    CJEU of November 4 2011, joined cases C-403/08 and C-429/08 – Premier League.

  56. 56.

    Advocate General of February 3 2011, joined cases C-403/08 and C-429/08 – Premier League, paras 188 et seq.

  57. 57.

    Advocate General of February 3 2011, joined cases C-403/08 and C-429/08 – Premier League, para. 191–192.

  58. 58.

    CJEU of November 4 2011, joined cases C-403/08 and C-429/08 – Premier League, para. 108.

  59. 59.

    CJEU of November 4 2011, joined cases C-403/08 and C-429/08 – Premier League, paras. 113–116.

  60. 60.

    CJEU of November 4 2011, joined cases C-403/08 and C-429/08 – Premier League, para. 119.

  61. 61.

    Judgments of October 6 1982, case 262/81 – Coditel II and of October 4 2011, joined cases C-403/08 and 429/08 – Premier League, paras. 134–146.

  62. 62.

    For the view that the Premier League rationale regarding free movement of services might be limited to satellite broadcasting, see e.g. Doukas D (2012), 625 and Bacthelor and Montani (2015), 598. For counterarguments, see Rognstad OA (2021b), 296–298 with further references.

  63. 63.

    CJEU of February 13 2014, case C-466/12 – Svensson, para. 24.

  64. 64.

    Ibid.

  65. 65.

    CJEU of February 13 2014, case C-466/12 – Svensson, para. 31. See also e.g. CJEU of March 9 2021, case 392/19 – VG BildKunst, para. 40.

  66. 66.

    CJEU of September 8 2016, case C-360/15 – GS Media, para. 43.

  67. 67.

    CJEU of March 9 2021, case C-392/19 – VG BildKunst, para. 46.

  68. 68.

    CJEU of August 7 2018, case C-161/17 – Renckhoff.

  69. 69.

    CJEU of August 7 2018, case C-161/17 – Renckhoff, paras. 35 and 32–33. The finding has been criticized by Oprysk L (2020), 240, for being “a mere misinterpretation of non-exhaustion provision under Article 3(3) of Infosoc”, apparently because the uploading was not an act of secondary, but an act of primary exploitation that would have required the right holders consent irrespective of Article 3(3), see also Oprysk L (2022), 1328. This is certainly a question of definition, but holding that the reference to the non-exhaustion rule in a situation where a photograph already uploaded to a website was uploaded to a different website represents «a mere misinterpretation» of that rule seems like an exaggeration, although the situation demonstrates that the (non-)exhaustion term in this context works better as justification than as a legal concept (rule).

  70. 70.

    CJEU of August 7 2018, case C-161/17 – Renckhoff, para. 34.

  71. 71.

    CJEU of August 7 2018, case C-161/17 – Renckhoff, para. 44.

  72. 72.

    Several authors have discussed the “exhaustion-like” character of the new public criterion and its application in linking cases, see in particular Kur A (2016), p. 452 who, in an argument against ALAI’s assertion that the CJEU case law on linking conflicts with article 3(3) of the Infosoc. Directive (and international copyright conventions) – in this author’s opinion – rightly emphasizes that “while the parallels do exist, simply tagging the CJEU’s approach as “exhaustion” and discarding it in that capacity ignores the substance between exhaustion as a technical term and the fundamental principles out of which the concept was derived as one particularly obvious and practically relevant consequence of the application”. The argument comes close to the distinction between exhaustion as a legal concept and exhaustion as justification as advocated here. For other discussions of the exhaustion/linking/new public interface, see e.g. Mezei P (2022), 170, who uses the term “exhaustion-plus” to characterize the case law concerning this interface, and Oprysk L (2022), 1325–1330, who after a discussion of what exhaustion is and is not raises the question whether the new public criterion works as an “exhaustion-like norm” for hyperlinking (seemingly without answering it).

  73. 73.

    CJEU of March 16 2017, case C-138/16 – AKM.

  74. 74.

    CJEU of March 16 2017, case C-138/16 – AKM, para. 29.

  75. 75.

    CJEU of March 7 2013, case C-607/11 – ITV Broadcasting, para. 30.

  76. 76.

    See e.g. Peukert (2017), 893 et seq.; Rosati E (2020), 814; Oprysk L (2020), 247–249.

  77. 77.

    CJEU of March 16 2017, case C-138/16 – AKM, para. 26.

  78. 78.

    CJEU of December 7 2006, case C-306/05 – Rafael Hoteles, paras. 36 and 40.

  79. 79.

    CJEU of November 4 2011, joined cases C-403/08 and C-429/08 – Premier League, paras. 186 and 199.

  80. 80.

    See Hilty RM (2021), 182 and Hilty RM (2016), where he inter alia points to the doubtfulness of “overburden[ing] copyright law with the objective of establishing workable competition on copyright-related markets”. See also Geiregat S (2022), 136 and 184, at the latter noting that “the transferability of rights to digital content is primarily a matter of contract law, not of IP”.

  81. 81.

    This would apply also to what I have called “accessory exhaustion”, referring to case law where copyright could not be invoked to override results that followed from exhaustion of other rights exactly because the rights should not extend beyond their justification, see Rognstad (2021c).

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    Ole-Andreas Rognstad

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  1. Rechtswissenschaftliche Fakultät, Universität Zürich, Zürich, Schweiz

    Florent Thouvenin

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    Alexander Peukert

  3. Institut für Europarecht, Internationales Recht und Rechtsvergleichung, Universität Wien, Wien, Österreich

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Rognstad, OA. (2024). Exhaustion Revisited: And Reconstructed?. In: Thouvenin, F., Peukert, A., Jaeger, T., Geiger, C. (eds) Kreation Innovation Märkte - Creation Innovation Markets. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-68599-0_17

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