Exhausting exhaustion – the limits of the first sale doctrine in EU copyright law
The exhaustion of intellectual property [IP] rights by the first sale of the protected work is a fundamental principle of IP law. Where a work or product covered by an IP right is sold by the rightholder, that IP right is exhausted in the sense that it can no longer be exercised by the rightholder to prevent the purchaser from selling or lending the work or product to a third party. For example, Article 4(2) of the Software Directive (Directive 2009/24/EC) provides
The first sale in the Community of a copy of a program by the rightholder or with his consent shall exhaust the distribution right within the Community of that copy, …
Article 4(2) of the InfoSoc Directive (Directive 2001/29/EC) is in similar terms. In Case C-166/15 Ranks and Vasilevics, the Court of Justice of the European Union [CJEU] explored the limits of this rule, and established the point at which the exhaustion doctrine is itself exhausted. As to the rule, the CJEU held:
…The holder of the copyright in a computer program who has sold, in the EU, a copy of that program on a material medium (such as a CD-ROM or a DVD-ROM) with an unlimited user licence can no longer oppose the subsequent resale of that copy by the initial acquirer or subsequent acquirers of that copy, notwithstanding the existence of contractual terms prohibiting any further transfer.