Digital Exhaustion - New Law from the Old World

Abstract

Ebooks, audio files, video clips, computer programs and other digital goods have become central to our information society and sharing community. When we acquire digital goods, we are usually prompted to accept lengthy and complex contract terms that limit our rights. Scholars and consumer protection associations are worried whether we still know what we buy when we click to "buy now" - apparently few of us do, according to a recent empirical study. While the study was conducted in the new world, consumer protection associations in the old world were already trying cases in German courts, asserting that consumers were mislead when they were invited to "buy" digital goods under contract terms that precluded any resale of digital goods. Yet, interestingly, German courts have not been sympathetic to the claims. German courts held that downloads of digital goods other than computer programs do not exhaust distribution rights, consumers cannot own digital goods they download, and even if they did, they cannot temporarily reproduce them to sell a copy without the storage medium. In this article, I provide an introduction to the practical and legal dimension of digital exhaustion; examine the statutory framework in the EU and the U.S. in comparison; analyze case law on both sides of Atlantic, including very recent decisions regarding digital goods that have not been publicized in the United States yet; and provide an international perspective on exhaustion across national borders. I then apply the relevant legal principles to a set of common factual scenarios and variations to illustrate the significance of the topic and provide concrete legal results and a well-founded policy assessment. The rules on copyright exhaustion remain very complex and divergent in the United States and the European Union. They differ in both jurisdictions, differ between software and other works, differ depending on transaction terms, differ as to whether reproduction is permissible to sell copies separate from storage media, and differ as to whether exhaustion applies internationally. No wonder that many of us do not know what we buy when we "buy now." From a public policy perspective, advocates of digital exhaustion can refer to consumer expectations, public access to works, freedom of commerce and transaction privacy in favor of digital exhaustion, allowing consumers to resell copies of digital works without a need for permission from the copyright owner. Opponents can cite to the interests of copyright owners, freedom of contract principles and counterproductive disruptions that typically come with legislative changes or courts overruling established statutory interpretations. Worth noting is that German courts have so far largely rejected the concept of digital exhaustion and do not seem to be concerned about consumer confusion, despite the traditionally high standards of consumer protection in Germany. Views and findings from the German cases as well as comparative legal analysis should be considered as the topic works itself through courts in the United States and legislative reform is considered on both sides of the Atlantic.

Keywords: copyrights, first sale doctrine, exhaustion principle, digital exhaustion, US law, EU law, German law, music, ebooks, audiobooks, video games, software