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A French court last week found that the principle of exhaustion applied to videogames acquired via the Steam platform, enabling their onward sale by Steam users. Although the court’s decision included a number of surprising conclusions, it raised important copyright questions regarding the application of the principle of exhaustion in a digital environment which will need to be further addressed on appeal. With a similar question recently put to the Court of Justice of the European Union (CJEU) in the Tom Kabinet case, rightsholders are likely to be following the outcome of both cases with a keen eye.

Auteurs: Sophie Goossens Hunter H. Thomson

What happened?

Valve Corp. (Valve), operator of the videogame distribution platform Steam, was ordered by the Tribunal de grande instance de Paris (the Court) to pay €20,000 in damages to the French consumer association UFC Que Choisir (UFC) as compensation to consumers in respect of 14 clauses of the Steam Subscriber Agreement (the Subscriber Agreement) that were found to be either unlawful or abusive and therefore “deemed unwritten”. Valve announced last week that it would be appealing the decision.

Controversy

The Court’s decision is controversial for the way in which it addressed clause 1C of the Subscriber Agreement, which effectively prohibits the onward sale by Steam users of videogames downloaded via Steam. To label clause 1C abusive, the Court first had to establish why it believed the provision to be unlawful under copyright rules (in particular, under the principle of exhaustion). This is a task even the most sophisticated copyright academics find challenging and the Court’s approach in solving this issue left many readers perplexed.

Exhaustion

UFC argued that clause 1C was unlawful by alleging incompatibility with the EU principle of free movement of goods and the copyright principle of exhaustion, also known as the ‘first sale doctrine’ in the United States. In its European form, the principle of exhaustion provides that a copyright owner’s right of distribution in the original (or a copy) of a work is ‘exhausted’ on its first sale by the copyright owner (or with such owner’s consent). It is widely accepted that exhaustion of the right of distribution only applies in relation to tangible goods embodying copyright-protected content. However, the application of the concept of exhaustion in relation to digital files is less clear, particularly in light of the UsedSoft1 decision. In this decision, the CJEU ruled that the principle of exhaustion could apply to certain digital copies of software – also protected by copyright laws – where these digital copies were effectively “a digital equivalent to a sale”.