Contract for the Supply of Digital Content




© Springer International Publishing Switzerland 2015
Javier Plaza Penadés and Luz M. Martínez Velencoso (eds.)European Perspectives on the Common European Sales LawStudies in European Economic Law and Regulation410.1007/978-3-319-10497-3_11


11. Contract for the Supply of Digital Content



Javier Plaza Penadés 


(1)
University of Valencia, Valencia, Spain

 



 

Javier Plaza Penadés



Abstract

The main aspects of a contract for the supply of digital content are analysed in this chapter. This can be seen as the most novel part of the proposed Regulation of the European Union, and is certainly a very important part of the final content of the proposal. This type of contract is a logical consequence of the development of information technology and communication, and the evolution of an information society and knowledge economy.

Its inclusion as part of the European sales contract needed specific regulation with regard to certain aspects, and also required a degree of coordination with other areas of the Law, such as copyright, competition law, consumer law or ICTs Law.

The main aspects of these digital content contracts are here explained and discussed in a clear and systematic way.


Keywords
Digital contentCopyright lawConsumer lawServices of information society and E-commerce law



11.1 Introduction


The development of E-commerce and the transfer of digital content for storage, processing or access, and repeated use, such as the download of music or movies, has been growing rapidly and holds a great potential for further growth, but is still surrounded by a considerable degree of legal diversity and uncertainty. The Common European Sales Law (CESL) should, therefore, cover the supply of digital content irrespective of whether or not that content is supplied on a tangible medium or supplied online.

In accordance with the increasing importance of the digital economy day by day, art. 1 CESL, on the objective and subject matter, includes and incorporates within the objective of this proposal for a Regulation on cross-border transactions “the supply of digital content and for related services where the parties to a contract agree to do so”.

Moreover, art. 5, together with sales contracts of goods, provides that the Common European Sales Law may be used for “contracts for the supply of digital content”, which “can be stored, processed or accessed, and re-used by the user”, irrespective of whether the digital content is supplied in exchange for the payment of a price, and irrespective of whether a separate price was agreed for the related service, or also whether or not supplied on a tangible medium. In this sense, art. 5 emphasises the most remarkable aspect of this type of contract: that it “can be stored, processed or accessed, and re-used by the user”.

On the other hand, digital content is often supplied not in exchange for a price but alongside separate paid goods or services, involving non-monetary consideration such as giving access to personal data, or being supplied free of charge in the context of a marketing strategy based on the expectation that the consumer will purchase additional or more sophisticated digital content products at a later stage. In view of this specific market structure and of the fact that defects in the digital content provided might harm the economic interests of consumers irrespective of the conditions under which it has been provided, the availability of the Common European Sales Law should not depend on whether a price is paid for the specific digital content in question.

With a view to maximising the added value of the Common European Sales Law, its material scope should also include certain services provided by the seller that are directly and closely related to specific goods or digital content supplied on the basis of the Common European Sales Law, and in practice often combined in the same, or a linked, contract at the same time, most notably repair, maintenance or installation of the goods or the digital content.

However, the Common European Sales Law should not cover any related contracts by which the buyer acquires goods or is supplied with a service, from a third party. This would not be appropriate because the third party is not part of the contracting parties’ agreement to use the Regulation of the Common European Sales Law. A related contract with a third party should be governed by the respective national law, which is applicable according pursuant to Regulations (EC) No 593/2008 and (EC) No 864/2007 or any other relevant conflict of law rule.

The Common European Sales Law should identify well-balanced solutions, taking into account the legitimate interests of the parties, for designating and exercising the remedies available in the case of non-performance of the contract. In business-to-consumer (B2C) contracts the system of remedies should reflect the fact that the nonconformity of goods, digital content or services falls within the trader’s sphere of responsibility.

Finally, it should be noted that, in order to enhance legal certainty by making the case law of the Court of Justice of the European Union and of national courts on the interpretation of the Common European Sales Law or any other provision of this Regulation accessible to the public, the Commission should create a database containing all relevant final judgments. With a view to making this task possible, and the Member States must ensure that these national judgments are quickly communicated to the Commission. This communication from each Member State to the Commission should be obligatory in order to develop an inventory of the relevant case law of the different States of the European Union and, therefore, it would be desirable, regardless of the language of each country, for the decisions and any appeals to be in English and in an open access database.


11.2 Concept of “Digital Content”


According to art. 2, which contains the definitions for the purposes of this Regulation, “‘digital content’ means data which are produced and supplied in digital form, whether or not according to the buyer’s specifications, including video, audio, picture or written digital content, digital games, software and digital content which makes it possible to personalise existing hardware or software”.

This definition determines the legal concept of “contracts for the supply of digital content” (art. 5), delimiting the specific objects of the provision for the supply or delivery of digital goods.

Article 2(j) also specifically excludes, as the possible objects of a contract for “the supply of digital content”, the following goods and services: “financial services, including online banking services; legal or financial advice provided in electronic form; electronic healthcare services; electronic communications services and networks, and associated facilities and services; gambling; the creation of new digital content and the amendment of existing digital content by consumers or any other interaction with the creations of other users”. The reason for the exclusion of these types of contracts is, in most cases, the existence of another specific European regulation.

On the other hand, a “related service” can be the object of a contract for the supply of digital content. A related service “means any service related to goods or digital content”, such as installation, maintenance, repair or any other processing, provided by the seller of the goods or the supplier of the digital content under the sales contract, the contract for the supply of digital content or a separate related service contract which was concluded at the same time as the sales contract or the contract for the supply of digital content; it excludes: (i) transport services, (ii) training services, (iii) telecommunications support services; and (iv) financial services (art. 2(m)).

In electronic contracts for the supply of digital content the seller is also a ‘service provider’; and, therefore, falls under the provisions of arts. 9–11 of Directive 2000/31/CE of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (“Directive on electronic commerce”).

In Case C128/11, 3 July 2012, the Judgment of the Court (Grand Chamber) of European Union, on legal protection of computer programs in proceedings between UsedSoft GmbH (‘UsedSoft’) and Oracle International Corp. (‘Oracle’) concerning the marketing by licensee of used licences for Oracle computer programs downloaded from the Internet, and the exhaustion of the distribution right on copyright by application of first sale doctrine, are analysed several questions on sale contracts for the supply of digital contents (on computer software).

The facts of this Case are that software owner develops and markets computer software. It is the proprietor of the exclusive user rights under copyright law in those programs. It is also the proprietor of the German and Community word marks the software owner, which are registered inter alia for computer software.

The right holder distributes the software at issue in the main proceedings, namely databank software, in 85 % of cases by downloading from the internet. The customer downloads a copy of the software directly to his computer from Software owner’s website. The software is what is known as ‘client-server-software’. The user right for such a program, which is granted by a licence agreement, includes the right to store a copy of the program permanently on a server and to allow a certain number of users to access it by downloading it to the main memory of their work-station computers. On the basis of a maintenance agreement, updated versions of the software (‘updates’) and programs for correcting faults (‘patches’) can be downloaded from software owner’s website. At the customer’s request, the programs are also supplied on CD ROM or DVD.

Software owner offers group licences for the software at issue in the main proceedings for a minimum of 25 users each. An undertaking requiring licences for 27 users thus has to acquire two licences.

Right holder’s licence agreements for the software at issue in the main proceedings contain the following term, under the heading ‘Grant of rights’:



With the payment for services you receive, exclusively for your internal business purposes, for an unlimited period a non-exclusive non-transferable user right free of charge for everything that software owner develops and makes available to you on the basis of this agreement.

The licensee markets used software licences, including user licences for the computer programs at issue in the main proceedings. For that purpose licensee acquires from customers of the software owner such user licences, or parts of them, where the original licences relate to a greater number of users than required by the first acquirer.

In October 2005 the licensee promoted a ‘Special Offer’ in which it offered for sale ‘already used’ licences for the software owner programs at issue in the main proceedings. In doing so it pointed out that the licences were all ‘current’ in the sense that the maintenance agreement concluded between the original licence holder and it was still in force, and that the lawfulness of the original sale was confirmed by a notarial certificate.

Customers of the licensee who are not yet in possession of the software in question download a copy of the program directly from right holder’s website, after acquiring such a used licence. Customers who already have that software and then purchase further licences for additional users are induced by the licensee to copy the program to the workstations of those users.

On these facts, the Court clarifies that the wording of Directive 2009/24 does not make any reference to national laws as regards the meaning to be given to the term ‘sale’ in Article 4(2) of the directive. It follows that that term must be regarded, for the purposes of applying the directive, as designating an autonomous concept of European Union law, which must be interpreted in a uniform manner throughout the territory of the European Union. That conclusion is supported by the subject matter and purpose of Directive 2009/24. Recitals 4 and 5 in the preamble to that directive, which is based on Article 95 EC, to which Article 114 TFEU corresponds, state that its objective is to remove differences between the laws of the Member States which have adverse effects on the functioning of the internal market and concern computer programs. A uniform interpretation of the term ‘sale’ is necessary in order to avoid the protection offered to copyright holders by that directive varying according to the national law applicable.

According to a commonly accepted definition, a ‘sale’ is an agreement by which a person, in return for payment, transfers to another person his rights of ownership in an item of tangible or intangible property belonging to him. It follows that the commercial transaction-giving rise, in accordance with Article 4(2) of Directive 2009/24, to exhaustion of the right of distribution of a copy of a computer program must involve a transfer of the right of ownership in that copy.

The seller submits that it does not sell copies of its computer programs at issue in the main proceedings. It says that it makes available to its customers, free of charge, on its website a copy of the program concerned, and they can download that copy. The copy thus downloaded may not, however, be used by the customers unless they have concluded a user licence agreement with the software owner. Such a licence gives right holder’s customers a non-exclusive and non-transferable user right for an unlimited period for that program. The software owner submits that neither the making available of a copy free of charge nor the conclusion of the user licence agreement involves a transfer of the right of ownership of that copy.

In this respect, it must be observed that the downloading of a copy of a computer program and the conclusion of a user licence agreement for that copy form an indivisible whole. Downloading a copy of a computer program is pointless if its possessor cannot use the copy. Those two operations must therefore be examined as a whole for the purposes of their legal classification (see, by analogy, Joined Cases C145/08 and C149/08 Club Hotel Loutraki and Others [2010] ECR I4165, paragraphs 48 and 49 and the case law cited).

As regards the question whether, in a situation such as that at issue in the main proceedings, the commercial transactions concerned involve a transfer of the right of ownership of the copy of the computer program, it must be stated that, according to the order for reference, a customer of software owner who downloads the copy of the program and concludes with that company a user licence agreement relating to that copy receives, in return for payment of a fee, a right to use that copy for an unlimited period. The making available by the software owner of a copy of its computer program and the conclusion of a user licence agreement for that copy are thus intended to make the copy usable by the customer, permanently, in return for payment of a fee designed to enable the copyright holder to obtain a remuneration corresponding to the economic value of the copy of the work of which it is the proprietor.

In those circumstances, the operations of sale examined as a whole, involve the transfer of the right of ownership of the copy of the computer program in question.

It makes no difference, in a situation such as that at issue in the main proceedings, whether the copy of the computer program was made available to the customer by the right holder concerned by means of a download from the right holder’s website or by means of a material medium such as a CD‑ROM or DVD. Even if, in the latter case too, the right holder formally separates the customer’s right to use the copy of the program supplied from the operation of transferring the copy of the program to the customer on a material medium, the operation of downloading from that medium a copy of the computer program and that of concluding a licence agreement remain inseparable from the point of view of the acquirer, for the reasons set out before. Since an acquirer who downloads a copy of the program concerned by means of a material medium such as a CD‑ROM or DVD and concludes a licence agreement for that copy receives the right to use the copy for an unlimited period in return for payment of a fee, it must be considered that those two operations likewise involve, in the case of the making available of a copy of the computer program concerned by means of a material medium such as a CD ROM or DVD, the transfer of the right of ownership of that copy.

Consequently, in a situation such as that at issue in the main proceedings, the transfer by the copyright holder to a customer of a copy of a computer program, accompanied by the conclusion between the same parties of a user licence agreement, constitutes a ‘first sale … of a copy of a program’ within the meaning of Article 4(2) of Directive 2009/24.


11.3 European Regulation on Digital Contents


The specific objects of contracts for digital contents , according to art. 2(j) of the proposal for a Regulation, are data that are produced and supplied in a digital format, such as online digital material support, and are regulated by different articles, which are basically those related to copyright, consumer protection and information society services. However, it can also include other topics, such as Competition Law or data protection. This is the reason why digital content must conform to the specific requirements of the different Regulations and Acts.


11.3.1 Copyright Law


One of the most important aspects of the contract for the supply of digital content is derived from the application of the rules on copyright and neighbour rights, and much of the content of the contracts may be protected by copyright and other related rights, such as literary, artistic or scientific digitised works, computer programs, databases, performance, artistic photographs and simple photographs, broadcasting, movies, etc .

Obviously, the object of this type of contract must respect the rules on copyright. However, the seller should know that the contract does not include the acquisition of any copyright on its digital content (corpus mysticum); and the buyer will only acquire the material property under the contract (corpus mechanicum).

On the other hand, the exhaustion of copyright occurs by the derivation of the “first sale doctrine”, which has recently been reformulated by the Court of Justice of the European Union in UsedSoft GmbH v Oracle Int. Corp. (Case C-128/11 of 3 July 2012 regarding the ability to resell licenses for computer programs that have been lawfully acquired but have not been used by the purchaser of such licenses) .

At least, the copyright law of the European Union has been harmonised by the various copyright Directives of the European Union, which the Member States are obliged to enact into their national laws, and by the judgments of the Court of Justice of the European Union, (that is, the European Court of Justice and the General Court). This has involved a high level of harmonisation in the different Member States in this field .

The first Directive was Directive 92/100/EEC, which has been repealed and replaced by Directive 2006/115/EC. The last, for the time being, is Directive 2012/28/EU of the European Parliament and of the Council of 25 October 2012 on certain permitted uses of orphan works; but there are others, such as Directive 2011/77/EU of the European Parliament and of the Council of 27 September 2011 amending Directive 2006/116/EC on the term of protection of copyright and certain related rights; or Directive 2011/29/EU.

The Directive on the legal protection of computer programs (91/250/EEC) was a real European “first” for copyright law, the first copyright measure to be adopted following the publication of the White Paper on completing the Single Market by 1992. The objective of the Directive was to harmonise Member States’ legislation regarding the protection of computer programs in order to create a legal environment that would afford a degree of security against unauthorised reproduction of such computer programs.