1971 revisited – who will be the first Charter martyr?

Should the Crime and Courts Bill become law it looks likely that some publications, perhaps led by the more independent spirits, will decide not to be regulated under the Royal Charter recognition scheme.  The Spectator has said it won’t sign. Ian Hislop has said that Private Eye is unlikely to. 

Not to join the voluntary Charter club of officially respectable news publications would be a brave decision, since it risks a heavy penalty: exemplary damages if found liable for a Charter-related claim (defamation, privacy and some others); or an order to pay an unsuccessful litigant’s legal costs even if the publisher wins. 

Will a non-signatory then refuse to pay?  At this point it gets quite interesting.  Human rights arguments may possibly take the sting out of sanctions for a Charter refusenik.  But if it comes to it, when a publication’s assets are seized - not for breaking hacking laws, or for bribing public officials, or for doing anything else unlawful, but in the final analysis simply because it refused to join the official club - the State coercion that lurks in the shadows behind this scheme steps blinking into the light. 

The notion that this is a voluntary arrangement, that there is some fundamental difference between State regulation and statutory underpinning, is then exposed for the fiction that it is.  We are back in the territory of village Hampdens, Milton, John Wilkes and the rest.  Some courageous little journal (or perhaps, if the clauses remain in their current form, some unfortunate smalltime blogmeister) will have the opportunity to become a Charter martyr.

The last time something comparable happened was not in the 17^th century, but 40 years ago.  A plan with remarkable similarities to the Charter, devised to tempt an unruly and irresponsible bunch of institutions into joining a State approved scheme, failed spectacularly when said bunch of irresponsibles refused to play the game that the government of the day had designed for them. 

The scheme was the 1971 Industrial Relations Act.  The irresponsibles were the trade unions.  At the heart of the Act was a voluntary registration scheme.  The purpose of registration was, according to Employment Secretary John (later Lord) Carr: “to make trade unions responsible organisations and with freedom upon that foundation of responsibility to conduct their activities in the ordinary way as responsible representative bodies.” (Hansard, 26 November 1970).   Familiar stuff.

A registered union had to have its rule book approved by the Registrar. Unions had a choice whether or not to register.  But if a union didn’t register it was at risk if its members went on strike.  Unlike a registered union it had no immunity from liability for inducing a breach of contract.  It was thus exposed to injunctions preventing strike action.   

Behind all this were teeth, in the shape of the specially created National Industrial Relations Court, to which the Act gave jurisdiction over labour disputes. 

The corporatist-minded Heath government, whose brainchild the 1971 Act was, never seriously considered that the unions would not register.  But that is what happened.  Many unions, determined to maintain their independence from the State, refused to accept State regulation of their activities and deregistered either from the start or later on during the lengthy saga of resistance to the Act.  They took the loss of immunities on the chin. 

Things got worse for the government.  Strikes, NIRC injunctions, disobedience, refusal to pay fines for contempt of court, strikers queuing up for martyrdom, imprisoned strikers rescued by the Official Solicitor.  The government’s pet industrial relations scheme finally lay in shreds. 

This time around hold-outs will come as less of a surprise, and will not be backed by an organised mass labour movement.  Seizure of assets to pay exemplary damages or costs orders, rather than imprisonment or fines for contempt, are the more likely end-point of the Charter scheme. 

Once the scheme is in place the government will have no way of determining who is on the receiving end of sanctions.  Politically that is a massive hostage to fortune.  Like the 1971 Act and its imprisoned shop stewards, will the Charter eventually founder under the weight of public opinion when the might of the state is deployed not against a multinational publishing empire, but some small magazine or refusenik blog?

The War on Gossip renewed

Should the Crime and Courts Bill become law in its Levesonised form, it will have the dubious distinction of being the first UK statute in which the word ‘gossip’ appears.  As such, it can perhaps be seen as a new phase in the War on Gossip commenced by Warren and Brandeis in their seminal article “The Right to Privacy”, published in the Harvard Law Review in December 1890.

Most of the article consists of a measured and closely reasoned articulation of a right of privacy from the perspective of the individual.  But it opens with a tirade against the press which contains a more than passing swipe at modern civilisation in general.  While focusing to a degree on the victim, this also displays a positively Reithian mission to elevate the morals of the uneducated classes and save them from the evils of gossip. 

The passage speaks for itself (paragraph breaks inserted):

“Gossip is no longer the resource of the idle and of the vicious, but has become a trade, which is pursued with industry as well as effrontery. To satisfy a prurient taste the details of sexual relations are spread broadcast in the columns of the daily papers. To occupy the indolent, column upon column is filled with idle gossip, which can only be procured by intrusion upon the domestic circle.

The intensity and complexity of life, attendant upon advancing civilization, have rendered necessary some retreat from the world, and man, under the refining influence of culture, has become more sensitive to publicity, so that solitude and privacy have become more essential to the individual; but modern enterprise and invention have, through invasions upon his privacy, subjected him to mental pain and distress, far greater than could be inflicted by mere bodily injury.

Nor is the harm wrought by such invasions confined to the suffering of those who may be the subjects of journalistic or other enterprise. In this, as in other branches of commerce, the supply creates the demand. Each crop of unseemly gossip, thus harvested, becomes the seed of more, and, in direct proportion to its circulation, results in the lowering of social standards and of morality.

Even gossip apparently harmless, when widely and persistently circulated, is potent for evil. It both belittles and perverts. It belittles by inverting the relative importance of things, thus dwarfing the thoughts and aspirations of a people. When personal gossip attains the dignity of print, and crowds the space available for matters of real interest to the community, what wonder that the ignorant and thoughtless mistake its relative importance.

Easy of comprehension, appealing to that weak side of human nature which is never wholly cast down by the misfortunes and frailties of our neighbors, no one can be surprised that it usurps the place of interest in brains capable of other things. Triviality destroys at once robustness of thought and delicacy of feeling. No enthusiasm can flourish, no generous impulse can survive under its blighting influence.”

So the great unwashed have to be rescued from their addiction to gossip.  Whether or not one regards that as paternalistic tripe, who could have predicted that the UK Crime and Courts Bill 2013 would be the vehicle that finally gives statutory force to the War on Gossip?

A handy visual of the Leveson clauses

Summary of the main Leveson clauses in the Crime and Courts Bill.  Some detail omitted (particularly the schedules excluding specific categories of publisher).  E&OE!

 

Click image to view full size chart.

Tamiz v Google - the Court of Appeal verdict

The Court of Appeal has delivered its Tamiz v Google judgment on Google’s potential defamation liability for comments posted to a blog hosted on its Blogger platform. 

Although the court ultimately decided that the claim against Google was an abuse of process, the judgment is of most interest for what it said about Google’s position as a publisher at common law and its possible defences as a secondary publisher under the Defamation Act 1996. 

When analysing the decision it is as well to remember that this was a jurisdiction challenge by Google Inc, the US provider of the Blogger platform.  For Google to succeed on the issues under appeal the court would have had to be satisfied that there was no good arguable case against Google – on the face of it a high hurdle. 

At first instance Eady J decided that Google could not be characterised as a publisher at common law, even after being notified of the defamatory statement - so no case could be made against it.  To reverse that decision the Court of Appeal did not have to decide that Google was a publisher, only that there was an arguable case that it was; and then that there was an arguable case that Google was not covered by any available defences.

Eady J’s judgment laid down a bright line precluding defamation liability for at least some types of intermediary.  The position after the Court of Appeal’s decision is fuzzier.   While confirming that pre-notification Google was not a publisher, the Court of Appeal decided that at some point after notification it was arguably a publisher. 

Also arguably, on the facts, Google was not able to avail itself of defences under the 1996 Defamation Act.  The court found it unnecessary to address the possibility of a hosting defence under the ECommerce Directive.

The finding of abuse of process was founded on the short amount of time for which the comments were available in the period after Google could be considered liable as a publisher and before they were removed.  Jurisdiction was declined on that basis. 

So what can we take from the Court of Appeal’s decision?   The three key points are that Google was:

-           Not a publisher pre-notification.

-           Arguably a publisher at some point post-notification

-           Arguably not protected by S1 1996 Act at some point after notification.

Not a publisher pre-notification

Strictly this aspect of the Court of Appeal’s judgment was obiter, since Tamiz’s claim only covered the period after Google was notified of his complaint.  Nevertheless, like Eady J at first instance, the Court of Appeal considered the position pre-notification.

At common law there are two categories of publishers: primary publishers, who are strictly liable for statements they publish; and secondary publishers who, while they still are regarded as having participated in the publication, have at common law an ‘innocent dissemination’ defence available to them.  Someone who merely facilitates publication is not a publisher at all.

The Court of Appeal found that Google’s provision of the Blogger service plainly facilitated publication of the blog and comments.  However its involvement was not such as to make it a primary publisher.  It was not in a position comparable to that of an author, an editor or the corporate proprietor of a newspaper.  Bloggers were plainly independent of Google and did not act in any sense on its behalf or in its name.

The court was less certain that Google’s role was not that of a secondary publisher, expressing itself only ‘very doubtful’ that it was so.   The court’s reasoning on this point on the face of it conflates what one would think should be three separate issues.

●             the degree of involvement necessary to be regarded as a publisher (facilitation versus participation),

●             the distinction between primary and secondary publisher, and

●             the conditions under which a secondary publisher can escape strict liability.

However the same confusion has bedevilled the innocent dissemination cases since at least Vizetelly v Mudie’s Select Library, a century-old case in which Romer LJ and Vaughan Williams LJ got in a tangle about whether innocent dissemination precluded publication or absolved the disseminator from liability for publication.

In any event the Court of Appeal in Tamiz held that the argument that Google was a secondary publisher could get nowhere for the pre-notification period since it could not be said that Google either knew or ought reasonably to have known of the defamatory comments.

Although the Court of Appeal did not address the point directly, there remains a fundamental difficulty in reconciling a finding that Google was not a publisher (whether primary or secondary) with the broad ground on which Morland J considered in 1999 in Godfrey v Demon Internet that Demon Internet was a publisher of Usenet newsgroups hosted by it: that whenever there was a transmission of a defamatory posting from the storage of the defendant's news server, the defendant was a publisher of that posting. 

As I suggested in my commentary on the first instance decision in Tamiz v Google, this looks like the death throes of that aspect of Godfrey v Demon Internet.

A publisher post-notification

At first instance Eady J held that Google was not a publisher even after notification of the existence of a defamatory comment to a blog that it hosted.  He likened Google to the owner of a wall on which people chose to inscribe graffiti, for which the owner was not responsible. 

The Court of Appeal preferred to think of Google as more like the provider of a notice board: one for which, moreover, Google provided a blogger with design tools for his part of the notice board and facilities for displaying advertisements alongside notices; and, according to the Court of Appeal most importantly, Google provided the notice board on terms of its choice and could readily remove or block access to any notice which did not comply with those terms.

As such Google’s blog platform fell within the scope of the reasoning of Byrne v Deane.  In that case from the 1930s an anonymous defamatory notice was affixed to a wall in a golf club and remained there after it was drawn to the attention of the golf club’s secretary.  The golf club proprietor and the secretary were held to have published the notice after notification, on the basis that by failing to remove it they had made themselves responsible for its continuing presence.

The Court of Appeal held that:

“if Google Inc allows defamatory material to remain on a Blogger blog after it has been notified of the presence of that material, it might be inferred to have associated itself with, or to have made itself responsible for, the continued presence of that material on the blog and thereby to have become a publisher of the material.” 

Google argued that the vast difference in scale between the Blogger set-up and the small club-room in Byrne v Deane made such an inference unrealistic and that nobody would view a comment on a blog as something with which Google had associated itself or for which it had made itself responsible by taking no action to remove it after notification of a complaint.

While the court acknowledged that those were matters for argument, they were not decisive in Google’s favour where the court was concerned only with whether there was an arguable case of publication.

One issue that is left uncertain when applying Byrne v Deane is whether it is relevant to consider if the defendant platform has knowledge of the words complained of and their illegality or potential illegality.  Eady J at first instance in Tamiz thought these might be relevant.  The Court of Appeal said that no inference of publication should be drawn until Google had had a reasonable time in which to act to remove the defamatory comments; and that it was arguable that five weeks was sufficiently long for an adverse inference to be drawn against Google. 

However a reasonable time in which to act to remove the defamatory comments is not the same thing as a reasonable time in which to determine actual or potential illegality.  The judgments in Byrne v Deane itself strongly suggest that the trigger is responsibility not for the defamation, but for the continued publication.  There was no suggestion in Byrne v Deane of any need to show that the defendant knew the statement was defamatory or unlawful, or of any grace period in which to determine unlawfulness. 

At any rate a single poem written on a piece of paper stuck a to a golf club wall in August 1935 does seem a shallow foundation on which to construct an entire edifice of answers for a 21^st century internet platform that hosts blogs and associated comments amounting to, according to Eady J. at first instance, half a trillion words and 250,000 new words every minute.

Defence under Section 1 Defamation Act 1996

In the event that it was held to have published the statement Google invoked the statutory ‘secondary publisher’ defence under Section 1 Defamation Act 1996.  This defence has three elements: that the defendant:

(a)  Was not the author, editor or publisher of the statement complained of.  Each of these has specifically defined meanings.  In particular a ‘publisher’ is someone whose business is issuing material to the public.  This is completely different from a publisher at common law as discussed above.

(b)  Took reasonable care in relation to its publication.  This provision creates the notorious ‘Catch 22’: how can one take reasonable care without becoming an editor under S 1(a)?

(c)  Did not know, and had no reason to believe, that what he did caused or contributed to the publication of a defamatory statement.

Eady J had held that Google was not a publisher under these provisions.  The Court of Appeal agreed.  It could not sensibly be said to have “issued” the defamatory comments.  Its involvement was of a kind analogous to the example given in S1(3)(e) of someone who should not be regarded as an author, editor or publisher:

“only involved … as the operator of or provider of access to a communications system by means of which the statement is transmitted, or made available, by a person over whom he has no effective control.” 

Eady J considered that by ‘effective control’ it was likely that the draftsman had in mind effective day-to-day control rather than the possibility of intervention in reliance on a contractual term about the permitted content of a web page. 

These comments may be compared with the rulings of Gray J in MORI v BBC (unreported, 17 June 1999 - not cited by either Eady J or the Court of Appeal) concerning the meaning of ‘effective control’ in the live broadcast exception under S1(3)(d).  Although Eady J’s approach was generally similar, they appear to diverge on the possible relevance of a contractual relationship. 

The Court of Appeal agreed with Eady J.  The existence of a contractual term about the content of blogs was not sufficient to give Google effective control over the person who posted the defamatory comments.

Both Eady J and the Court of Appeal concentrated on S1(3)(e) as the closest analogous example to the Blogger host.  However s1(3)(e) is on the face of it aimed more at transmission-type operations.  Section 1(3)(c), which does not contain a “no effective control” limitation, appears to be more obviously aimed at operations in the nature of hosting.   It applies to any person “only involved … in operating or providing any equipment, system or service by means of which the statement is retrieved, copied, distributed or made available in electronic form.” 

While the distinction between S1(3)(c) and S1(3)(e) is by no means clear and they may possibly overlap, the focus on S1(3)(e) for a blogging platform is mystifying.

1996 Act defence pre-notification

For the period prior to notification the Court of Appeal agreed with Eady J that Google would if necessary have a defence under S1.  There was no basis for concluding that Google had not taken reasonable care in relation to the publication (S1(1)(b)), or that it knew or had reason to believe that what he did caused or contributed to the publication of a defamatory statement (S1(1)(c)).  

It is noteworthy that in McGrath v Dawkins, a case not discussed by the Court of Appeal, H.H.J. Moloney Q.C. speculated that it might be reasonable for a wholly automated large website such as Amazon to take no pre-publication steps at all in relation to user-submitted book reviews.  That also seems to be the import of the Court of Appeal’s conclusion in Tamiz as regards the pre-notification period.

1996 Act defence post-notification

For the period after notification the Court of Appeal agreed with Eady J that Google had taken reasonable care in relation to the continued publication of the comments.  Unlike in Godfrey v Demon Internet, where Demon Internet had taken no steps at all after notification, Google had passed on the complaint about the comment to the blogger. 

However the Court of Appeal disagreed with Eady J about S1(1)(c).  For the same reasons as applied to its publication analysis under Byrne v Deane the court held that is was arguable that at some point following notification it knew or had reason to believe that its continued hosting of the material in question caused or contributed to the publication of a defamatory statement.  For this reason the court was not satisfied that Google had an unassailable defence under S1 of the 1996 Act. 

This was the approach of H.H.J. Parkes Q.C. in Davison v Habeeb, which the Court of Appeal preferred to that of Eady J at first instance.  

However Davison v Habeeb concerned statements made in posts by the actual blogger, not in comments to the blogger’s posts.  In Tamiz the blogger was itself, as regards comments, an intermediary who had the ability to remove comments.  It is questionable whether, when the blog platform has notified the complaint to a more proximate intermediary, S1(1)(c) should be applied to the underlying blog platform as strictly as when the complaint is made about postings by the blogger himself. 

In any event the Court of Appeal found only that the point on S1(1)(c) was arguable against Google – not that Google would be unable to rely on the defence.

Conclusion

As regards common law publication and Section 1 of the 1996 Act, the upshot of the Court of Appeal’s decision is that for a blog platform to pass a defamation complaint back to the blogger is not necessarily sufficient to avoid liability.  It may still be at risk of becoming a publisher at common law and of being unable to rely on the 1996 Act. 

This leaves the Electronic Commerce Directive, for damages, as potentially a stronger line of defence for a hosting platform.  It has always been thought to be so, because to preclude reliance on the defence requires actual or constructive knowledge not just of the defamatory nature of the statement, but of illegality.  That requires some information about the claim and possible defences (see Bunt v Tilley). 

However the Directive does not provide a complete defence to proceedings, since it does not prevent a claim for an injunction.  A platform that is keen to remove itself completely from initiated proceedings will still, therefore, have an incentive to remove allegedly defamatory material even if it is not fixed with knowledge of illegality.

In search of copyright’s Goldilocks Zone

Banning things rarely produces the results hoped for by the putative suppressors.  Alice Cooper famously sent Mary Whitehouse a bunch of flowers when her complaint about School’s Out being performed on Top of the Pops launched his career into the stratosphere.

Today’s news that the US Republican Study Committee has disowned and pulled a discussion paper on copyright less than 24 hours after issuing it sent this reader, and no doubt many others, rushing to find out what was so terrible that it had to be removed from public gaze. 

Well, it’s a paper somewhat in the Hargreaves mould, though more radical.  Far removed from the ‘copyright is my castle’ school of thought, it emphasises balance and the economic effects of copyright.  Being American it starts from the US Constitution’s recitation that copyright exists not for its own sake, or for the sole benefit of creators, but in order “To promote the Progress of Science and useful Arts”.  It is good to know that a 200 year old revolutionary document can in 2012 still seem dangerously subversive.

The paper’s perspective is unashamedly classical liberal, with its analysis of current copyright legislation from the perspective of whether it is consistent with laissez-faire capitalism (answer an emphatic ‘No’).  In social welfarist UK and Europe that is likely to be a minority concern, illuminating though the discussion is.  It is as if Lord Macaulay had risen from the grave and taken forward his analysis of copyright as a necessary evil to which we must submit for the sake of the good. 

Memorably, the paper invokes the Goldilocks principle.  Just as you can have too little copyright, you can have too much copyright.  The objective is to get it just right – to find the Goldilocks Zone for copyright.  A radical idea indeed.

How tech law principles are starting to mould copyright

This has been a hectic couple of weeks for copyright.  Ten days ago the EU Court of Justice published the UsedSoft decision, which will have us thinking in a completely new way about exhaustion of rights online.  On Thursday this week the Canadian Supreme Court delivered five separate copyright judgments on subjects ranging from fair dealing to communication to the public, each in its separate way reinforcing a more user-centric, less author-centric, approach to copyright. 

The Canadian decisions could have come straight out of the pages of the Hargreaves Review.  They stressed the need in copyright for:

“a balance between promoting the public interest in the encouragement and dissemination of works of the arts and the intellect and obtaining a just reward for the creator”, which requires recognising the “limited nature” of creators’ rights (SOCAN v Bell Canada [2012] SCC 36 at [8], quoting the 2002 SCC case of Théberge.)  

This reflected:

“a move away from an earlier, author-centric view which focused on the exclusive right of authors and copyright owners to control how their works were used in the marketplace … Théberge focused attention instead on the importance copyright plays in promoting the public interest, and emphasized that the dissemination of artistic works is central to developing a robustly cultured and intellectual public domain.”

The Canadian decisions also evince, in common with the ECJ’s UsedSoft decision, a desire to mould copyright in the digital and online area so that it applies in the way that it did (and still does) to physical copies.  “The traditional balance between authors and users should be preserved in the digital environment.” ESA v SOCAN  2012 SCC 34 at [8].

It is by now a commonplace observation that, thanks originally to the accident of technology that both accessing a digital copyright work and any dealings with it require the making of at least transient copies, copyright enjoys greater reach over digital copies than over hard copies. 

This extended ambit gives us the bizarre (to anyone other than techie copyright lawyers) spectacle of courtroom debates over exactly how many fragmentary milliseconds of what kind of copyright works are held in a memory buffer at any given moment (see e.g. FAPL v QC Leisure [2008] EWHC 1411 (Ch) and ITV v TV Catchup [2011] EWHC 1874 (Pat)).

It also gives copyright owners more far-reaching control over online consumer behaviour compared with offline and provides new opportunities to extract royalties.  It was an attempt to double-dip royalties for downloaded online games that provoked the disfavour of the Canadian Supreme Court in ESA v SOCAN.   

Both the ECJ and the SCC kicked back hard against what they perceived as imbalance between hard copy and digital copyright outcomes.  The ECJ strove to achieve ‘functional equivalence’ between a fully paid permanent download and a sale on physical media.  It said that what would otherwise be a communication to the public would be converted into a distribution to the public if a ‘transfer of ownership’ (defined in economic rather than legal terms) had taken place.  The ability to rely on the first sale doctrine in order to acquire second-hand software applied in equivalent situations, regardless of whether the transactions took place on physical media or by download. 

The SCC invoked a similar concept of ‘technological neutrality’ in several of its judgments, two of which together held that the right of communication to the public applied to streaming but not to downloads.  The principle of technological neutrality:

“requires that the Copyright Act apply equally between traditional and more technologically advanced forms of the same media. … In our view, there is no practical difference between buying a durable copy of the work in a store, receiving a copy in the mail, or downloading an identical copy using the Internet.  The Internet is simply a technological taxi that delivers a durable copy of the same work to the end user.” (ESA v SOCAN)

It is, probably, no coincidence that these user-centric decisions were made in cases concerning tariff-setting and an attempt to control further dealings in legitimately purchased items.  In these cases the rightsholders’ positions could easily be portrayed as unmeritorious attempts to reap an advantage from an over-technical application of copyright.  In piracy cases, on the other hand, rightsholders can reckon on a more sympathetic audience for pleas that expansive rights and remedies are required in order to restrain unbridled infringement. 

Tech lawyers have for many years advocated that laws affecting technology should, all other things being equal, be technology neutral and should seek to achieve functional equivalence online and offline.  

As long ago as 1999 the US UETA model law for electronic transactions was based on the notion of achieving functional equivalence between electronic transactions and their paper counterparts. 

Technological neutrality is also a desirable goal, mostly as a guiding principle for drafting legislation.  The drafter should seek a level of generality that will ensure that the legislation does not become out of date or skewed in its effect as technology develops.  While it can be dangerous to elevate technological neutrality to a principle that overrides all other considerations, the Canadian Supreme Court's invocation of the principle was appropriate in order to correct a perceived legislative skew resulting from an unforeseen accident of technology.

Courts have previously shown themselves to be willing to reach outside the four corners of copyright statutes in order to beat copyright into better shape.  We can think of implied licence, non-volitional copying, the fundamental right of freedom of expression, public interest, public benefit, derogation from grant and principles extracted from the Electronic Commerce Directive. 

Now we can add to the list two technology law doctrines, the deployment of which at the highest judicial levels perhaps, along with Hargreaves, heralds a sea change in attitudes to the appropriate scope and function of copyright.

UsedSoft - not just about software?

Tuesday's decision of the EU Court of Justice in UsedSoft has set the software industry aflutter by largely giving the green light to resale of permanent software licences, regardless of whether the original provision of the software was on a physical medium such as CD or DVD or was downloaded, so long as the original purchaser renders its copy unusable. 

The principle applied in UsedSoft is that the original transaction 'exhausts' the rightsowner's ability to control further dealings with the copy.  The Court has held that this even extends to permitting a resale of the bare licence, where the purchaser owner downloads a new copy of the software from the rightsowner's website.  For fuller details of the decision see here.

But buried in the middle of the judgment is what at first sight appears potentially to be an even more radical statement, suggesting that the same principle may apply not just to computer programs but to all copyright works.  At paragraph 52 the Court states: 

"the existence of a transfer of ownership changes an ‘act of communication to the public’ provided for in Article 3 of [the Copyright in the Information Society directive] into an act of distribution referred to in Article 4 of the [Infosoc] directive which, if the conditions in Article 4(2) of the [Infosoc] directive are satisfied, can, like a ‘first sale … of a copy of a program’ referred to in Article 4(2) of [the Software] Directive 2009/24, give rise to exhaustion of the distribution right."

The key statement is that an act of communication to the public 'changes' into an act of distribution if there is a transfer of ownership.  The court said that transfer of ownership includes a download from the internet where the rightsholder has also "conferred, in return for payment of a fee intended to enable him to obtain a remuneration corresponding to the economic value of the copy of the work of which he is the proprietor, a right to use that copy for an unlimited period".

The Infosoc Directive specifically states that an act of communication to the public does not give rise to exhaustion.  But if there is no act of communication to the public because it has changed into an act of distribution, then it would seem that the 'no exhaustion' exception can be sidestepped.

In principle the broad economic test of transfer of ownership applied in UsedSoft could then also be applied to works within the Infosoc Directive, such as music and video.

This could suggest that fully paid-for permanently licensed authorised downloads under the Infosoc Directive, such as of music and video, are capable of being exhausted thus allowing purchasers to transfer them like secondhand CDs or DVDs. The bright line for exhaustion would then seem to be not between physical copies and downloads, but between downloads (when they satisfy the economic value test described above) and streaming or other service-type online offerings.  

However there are some obstacles in the way of applying exhaustion to online downloads of non-computer program works.  First, Recitals (28) and (29) of the Infosoc Directive lean very strongly in favour of a distinction between tangible and non-tangible copies:

“(28) Copyright protection under this Directive includes the exclusive right to control distribution of the work incorporated in a tangible article. The first sale in the Community of the original of a work or copies thereof by the rightholder or with his consent exhausts the right to control resale of that object in the Community. This right should not be exhausted in respect of the original or of copies thereof sold by the rightholder or with his consent outside the Community. …

(29) The question of exhaustion does not arise in the case of services and on-line services in particular. This also applies with regard to a material copy of a work or other subject-matter made by a user of such a service with the consent of the rightholder. Therefore, the same applies to rental and lending of the original and copies of works or other subject-matter which are services by nature. Unlike CD-ROM or CD-I, where the intellectual property is incorporated in a material medium, namely an item of goods, every on-line service is in fact an act which should be subject to authorisation where the copyright or related right so provides.”

This apparent distinction between tangible and non-tangible is reflected in the reference in Article 4(2) of the Infosoc Directive to the distribution right being exhausted on first sale or other transfer of ownership within the EU of an 'object'. 

The Advocate General in his Opinion discussed these provisions of the InfoSoc Directive and concluded that they did not prevent a download being regarded as a distribution capable of being exhausted. If that is right, then UsedSoft could admit of a possibility not mentioned in recitals (28) and (29), that of an online download that is not in the nature of a service.

However applying exhaustion to online non-software would also do violence to the Agreed Statement interpreting Articles 6 and 7 of the WIPO Copyright Treaty, which the Infosoc Directive implements:

"As used in these Articles, the expressions "copies" and "original and copies," being subject to the right of distribution and the right of rental under the said Articles, refer exclusively to fixed copies that can be put into circulation as tangible objects."

Ultimately the Court in UsedSoft based its decision on the narrower ground of the Software Directive being a lex specialis that takes precedence over the lex generalis of the Infosoc Directive.  In doing so it left open, albeit in somewhat sceptical terms, the possibility that the exhaustion of the distribution right under the Infosoc Directive concerns only tangible objects: "even supposing" that to be right "that would not be capable of affecting the interpretation of Article 4(2) of the Software Directive, having regard to the different intention expressed by the European Union legislature in the specific context of that directive".

At a more general level the distinction between tangible and non-tangible is the very distinction that the Court in UsedSoft has rejected in favour of an economic value test.

The Court in UsedSoft did make a distinction between computer programs and works under the Infosoc Directive.  It said:  "The use of a computer program, unlike the use of other works protected by copyright, generally requires its reproduction." 

It is unclear whether the Court meant this to favour or oppose the possible application of exhaustion to non-program downloads.  If anything the implicit lack of need to take account of the reproduction right would suggest that it would be conceptually easier to apply exhaustion. 

However in fact the enjoyment of other works on a computer does, as with computer programs, involve transient reproduction.  So it would seem that in the way that the Court invoked the Article 5(1) 'lawful acquirer' provisions of the Software Directive in Usesoft to bypass the reproduction right, in order to achieve the same result it would have to find a way of doing the same with the Article 5(1) 'lawful use' provisions of the Infosoc Directive.

We can speculate that UsedSoft may open up the path to genuine file-shifting of all sorts of copyright works - not the type of illegitimate file-sharing that multiplies and proliferates infringing copies by uploading to public sites, but person to person transfers where the original purchased copy is deleted: the functional equivalent of passing on second hand CDs or DVDs.  Whether this is the direction that is in fact signposted by UsedSoft will have to await further debate and court rulings.

[Updated 29 June 2013 to include reference to WIPO Copyright Treaty Agreed Statement.]