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Tom Kabinet - the Aftermath Subtitle: a Critical Evaluation of the CJEU's Judgment and Its Market Effects on Digital Distribution

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Tom Kabinet - the Aftermath Subtitle: a Critical Evaluation of the CJEU's Judgment and Its Market Effects on Digital Distribution Department of Law Spring Term 2020 Master Programme in Intellectual Property Law Master’s Thesis 30 ECTS Title: Tom Kabinet - The Aftermath Subtitle: A critical evaluation of the CJEU's judgment and its market effects on digital distribution Author: Vahagn Grigoryan Supervisor: Kacper Szkalej ACKNOWLEDGEMENTS This study has been produced during my scholarship period at Uppsala University, thanks to the Swedish Institute (SI) scholarship, which financially supported my studies. 2 ABSTRACT On the 19th of December 2019, the Court of Justice of the European Union ruled: "The supply to the public by downloading, for permanent use, of an e-book is covered by the concept of ‘communication to the public’ ..." This judgment ("Tom Kabinet judgment") solved a long debate whether "digital exhaustion" exists or not, in favour of the latter. This study is dedicated to the analysis of Tom Kabinet judgment and its effects. It analyses the judgment from several perspectives. Firstly it discusses the effects and the importance of Tom Kabinet judgment. Secondly, it analyzes the legal and non-legal arguments of the Court from a critical point of view and argues that a contrary non-contra legem solution existed. Thirdly, this study argues that in the long run, not only the end-users but also the rightholders can benefit from "digital exhaustion" and the existence of a digital secondary market. Therefore, a contrary solution of the case could be beneficial for everyone. As a proponent of "digital exhaustion," the present author offers several legislative policy considerations that are needed to give a new life to digital secondary markets. Keywords: digital exhaustion, digital secondary markets, Tom Kabinet 3 TABLE OF CONTENTS ABBREVIATIONS ..................................................................................................................................... 6 1. INTRODUCTION .................................................................................................................................. 7 1.1. Background ...................................................................................................................................... 7 1.2. Objectives (purpose) of the study ................................................................................................... 8 1.3. Research questions ........................................................................................................................... 9 1.4. Methodology and materials ............................................................................................................. 9 1.5. Delimitations ..................................................................................................................................... 9 1.6. Structure ......................................................................................................................................... 10 2. TOM KABINET: A JUDGMENT WITH "NO ALTERNATIVES" .............................................. 12 2.1. A brief historical tour: the previous judgments .......................................................................... 12 2.1.1. UsedSoft (C-128/11) ................................................................................................................. 12 2.1.2. Allposters (C-419/13) ............................................................................................................... 15 2.1.3. VOB (C-174/15) ........................................................................................................................ 16 2.2. Tom Kabinet - the background and the outcome ....................................................................... 17 2.2.1. The facts ................................................................................................................................... 18 2.2.2. The questions and the outcome ............................................................................................... 19 2.2.3. The importance ........................................................................................................................ 19 2.3. Arguments of the Court - could the CJEU decide otherwise? ................................................... 21 2.3.1. The three principles.................................................................................................................. 21 2.3.2. Compliance with WCT ............................................................................................................. 26 2.3.3. Legislative history of the InfoSoc Directive ............................................................................ 28 2.3.4. Recitals of the InfoSoc Directive ............................................................................................. 30 2.3.5. "First sale" ............................................................................................................................... 32 2.3.6. Arguments of economical nature ............................................................................................ 32 3. TOM KABINET: THE "BENEFICIAL" EFFECTS ........................................................................ 34 3.1. Shutting down the secondary markets? ....................................................................................... 34 3.1.1. Centralized platforms of digital content resale ....................................................................... 34 3.1.2. Decentralized platforms of digital content resale .................................................................... 34 3.1.3. Out-of-platform sales ............................................................................................................... 36 3.1.4. Conclusion ................................................................................................................................ 36 3.2. The problem of enforceability ....................................................................................................... 36 3.3. Digital secondary markets: good or bad? .................................................................................... 37 4 3.3.1. Innovation ................................................................................................................................ 38 3.3.2. Competition .............................................................................................................................. 39 3.3.3. Prices and affordability ............................................................................................................ 39 3.3.4. Privacy ...................................................................................................................................... 41 3.3.5. Access ....................................................................................................................................... 41 3.3.6. Other benefits for the users ...................................................................................................... 43 3.3.7. Benefits for the rightholders .................................................................................................... 43 3.3.8. Digital secondary markets - beneficial for everyone ............................................................... 48 4. A NEW "PLACE UNDER THE SUN" FOR DIGITAL SECONDARY MARKETS ................... 50 4.1. Legislative policy considerations .................................................................................................. 50 4.2. Feeding the wolves and keeping the sheep safe ........................................................................... 52 5. CONCLUSION ..................................................................................................................................... 56 BIBLIOGRAPHY ..................................................................................................................................... 58 5 ABBREVIATIONS AG - Advocate General CJEU - Court of Justice of the European Union CPD - Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs CRD - Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights ECHR - European Convention on Human Rights ECtHR - European Court of Human Rights E-Commerce Directive - Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market InfoSoc Directive - 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 infor- mation society RLD - 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 TFEU - Treaty on the Functioning of the European Union WCT - WIPO Copyright Treaty, 1996 6 1. INTRODUCTION 1.1. Background Can copyright-protected products be resold without the rightholder's consent? Article 4 of the InfoSoc Directive1 states: (1) Member States shall provide for authors, in respect of the origi- nal of their works or of copies thereof, the exclusive right to authorize or prohibit any form of distribution to the public by sale or otherwise. (2) Distribution right shall not be exhausted within the Community in respect of the original
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