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The Court of Justice of the European Union (CJEU) has been making some interesting decisions that could affect libraries. A few weeks ago, it was liability for hyperlinking; this week it’s about ebooks and lending. And for once, its good news. CJEU was recently called upon to interpret a 2006 EU copyright directive on rentals and lending. In a case titled Vereniging Openbare Bibliotheken (VOB) v. Stichting Leenrecht (C-174/15), the association of Dutch public libraries (VOB), argued that the rules should be the same for digital lending of ebooks as it is for print books, and the court agreed.

THE PUBLIC LENDING RIGHT

The VOB brought an action against Stichting Leenrecht, an authors' rights collecting foundation. Unlike in the United States, the Netherlands (like other parts of Europe and Canada) has a “public lending” right. Under this right, public libraries are required by law to pay royalties for the books they lend out. These fees are distributed to writers, artists, and publishers via collecting societies such as Stichting Leenrecht. However, this public lending right in the Netherlands does not apply to ebooks. Therefore, libraries can only lend out ebooks for which they have purchased a license from the publisher. And that’s why this litigation started; the VOB wanted a declaratory judgment that the rules should be the same for digital lending of ebooks as it is for traditional books. When the case started in a Netherlands lower court, the judges of that court asked the CJEU to clarify whether VOB’s new stance on ebook lending was compliant with the 2006 EU copyright directive. The directive states that the exclusive right to authorize or prohibit rentals and loans belongs to the author of the work. However, countries may opt out of this rule for the purposes of “public lending,” if authors obtain “fair remuneration.” This “fair remuneration” often comes in the form of royalty payments made to the collecting societies on behalf of their author-members. The VOB wanted to use ebooks under the familiar “one copy, one user” model. For ebooks, this would mean a library would lend an ebook by placing a copy on the library’s server and allowing the patron to download the ebook onto her own computer (and only one copy may be downloaded during the lending period). After the loan period has expired, the downloaded copy could no longer be accessed by that patron, treating the ebooks virtually the same way as print book loans.

LENDING E- LIKE PRINT

Because this was a CJEU decision, in June 2016 the world got an early look at the possible resolution to the case. At the CJEU, the judges are assisted by Advocates General, who give their opinions on legal resolutions to cases even before the CJEU judges deliver their own ruling. In the view of assigned Advocate General in this case, the lending of ebooks was comparable to the lending of traditional books. In an interesting analysis (one that could readily be adopted in the United States) the Advocate General suggests that a “dynamic” or “evolving” interpretation of the 2006 copyright directive should be applied, and that lending of ebooks is certainly the modern equivalent of the lending of printed books. On November 10, the CJEU concurred with the June opinion of the Advocate General and said that libraries could lend ebooks just like they lend paper books. The case makes good points regarding lending legally authorized copies, e.g., those that have been put into circulation by a legal action (such as authorized purchase, first sale, or other transfer of ownership of that copy to the library). The Court emphasized that one of the objectives of the directive is to combat piracy, so an unlawful copy of an ebook would not be allowed.

FOOD FOR THOUGHT

The CJEU’s ruling does not apply here, and the United States does not have public lending right (though the idea of a U.S. collecting society, similar to the European model, has come up from time to time on copyright legislation, court cases, and policy papers). Nonetheless, the Advocate General’s opinion has some “food for thought” for our ebook situation in the United States. The advocate general added that while ebook lending hadn't been specifically included in the original 2006 EU directive (at the time the concept was, according to the opinion, “only in its infancy”), this shouldn’t preclude a modern reading of the language of the copyright directive. If only we had such forward, modern thinking in the United States about our relevant copyright law. When our courts heard a similar case in 2013, they made a strict reading of the statute, and did not offer a “dynamic” or “evolving” interpretation of our copyright law. Why? In the United States ebooks (and in fact much e-content, such as movies, music, etc.) are governed by contract or license, and are not treated the same as traditional print books. How did this happen? A good number of scholars look to the foundational underpinnings of library loaning powers, contracts, and the first sale doctrine. In the United States, one of the more important limitations on the rights of a copyright holder is the first sale doctrine, which prevents an owner from controlling subsequent or “downstream” transfers of her works. The first sale doctrine is the fundamental law that allows libraries to loan books to patrons. No additional fees like the public lending right in Europe—just many, many loans of the same book. Once a copyright holder transfers ownership of a copy, usually through a sale, she no longer has rights to that copy. Entire industries and enterprises are built upon this first sale doctrine. eBay relies on this provision when it permits users to sell copyrighted protected works through its site. It also includes any of the “secondary market”: used bookstores, used record stores, etc. And, as mentioned above, libraries are permitted to lend legally acquired copies of printed books to patrons without the requirement of permission from the copyright owner. Without this law, copyright holders could enforce rights in the secondary market, which would impact selling, loaning, or gifting any copyrighted work. (Sometimes this is referred to as exhaustion doctrine, where the copyright is said to be exhausted because it can no longer be exercised by the owner.) But because many electronic works (mp3s, PDFs, ebooks, etc.) are typically sold subject to agreements (contracts, licenses, etc.), in transactions that look less like an outright sale and more like a limited license, the United States has an ebook problem. If there is no sale, then you can’t claim protection from the first sale doctrine.

CONTRACT IS KING

What are libraries actually getting with ebook purchases? Not much. We are leasing these ebooks, at best. And because that rental/lease is subject to a license, the lessor (publisher) can put terms in the license that prevent us from doing what we normally do with print books—allow unlimited checkouts, place them on reserve, make preservation copies, loan them out to other libraries via interlibrary loan, etc. The contract rules. And our legislature and courts have certainly not offered the same “dynamic” or “evolving” interpretation of our first sale doctrine, as the Advocate General suggests in the VOB case. In 2001, the Register of Copyrights soundly rejected a recommendation to create a “digital first sale” doctrine, which would permit an owner of a digital work to transfer it to another person, provided that the original was deleted. In 2013, ReDigi, a digital music company, tried to develop a “used mp3” market. This probably would have been very successful with consumers and libraries. However, Capitol Records quickly sued, and the court’s limited reading of the first sale doctrine prevented ReDigi from continuing the business. This rejection, along with other developments of this law from its origin to the present day, make it clear that first sale rights mainly apply to physical, not digital, copies, at least for now. In the United States, there is no “digital secondary market” for mp3s, ebooks, or movies. And this works for the publishers. From a business perspective lending one ebook 1,000 times isn’t nearly as profitable as getting 1,000 fee-based rentals of one ebook. In the early days of ebooks, many of the (then) big six publishers were requiring licensing terms that they could never put into a print contract, e.g., 26 checkouts of an ebook requiring a new license purchase (“mimicking the life of the book” supposedly), no interlibrary loan, no printouts for distribution, no preservation copies allowed, three to ten times the normal price for a library to purchase an ebook, or—in some cases—no ebook sales to libraries at all.

THE NEED TO NEGOTIATE

And that’s where libraries need to be careful. If libraries are purchasing ebooks, they need to advocate for clauses in the contract that best serve their mission, their community, and their collection policies. A contract isn’t formalized until it is signed—take the time to try and negotiate. Introduce interlibrary loan clauses, preservation clauses, reject terms that harm collection development goals, or the mission of the library. To go a little deeper, in the digital context, despite the first sale doctrine’s power over the copyright owner’s distribution right, the reproduction right remains. Electronic transmissions of a work are generally forbidden because of the nature of copies in today's digital environment: files that are in PDF format, for example, can allow transfer from one party to another, but the transferor still may retain a perfect copy of the work. It’s like having your car stolen in the middle of the night, but when you wake up in the morning, the car is still in your driveway. It’s not theft— where the car would be gone physically—it’s electronic piracy. We need to stop thinking of copyright as about copies. It has become much more about access. The court in VOB did not actually address this access and piracy issue. While ebooks can feature digital rights management (DRM) to protect books, there is no mention in the case of technology that could enforce the “one copy, one user” model for ebooks. However, if there is a crystal ball for the CJEU, that might be the next case on the horizon.