Digital Exhaustion Redux: University of Tilburg

Digital Exhaustion Redux:

 An investigation on the viability of a lawful secondary market for
 digitally-distributed entertainment software after the Tom Kabinet decision.

 Francisco Duque Lima

 February 2021
 Dissertation submitted in partial fulfillment of the requirements for the degree of
 Master of Laws (LL.M.) in Law and Technology

Student Number: 2052783
First Supervisor: Paul Halliday, LL.M.
Second Supervisor: dr.ir.mr. Maurice Schellekens

Table of Contents
 CHAPTER 1 - INTRODUCTION. .............................................................................................................................. 1
 CHAPTER 2 – THE LEGAL LANDSCAPE SURROUNDING ENTERTAINMENT SOFTWARE DISTRIBUTION. .................. 7
 2.1. – LEGAL CATEGORIZATION: ‘OVERLAPPING’ SOFTWARE AND COPYRIGHT PROTECTION........................................................ 7
 2.2. – THE DOCTRINE OF EXHAUSTION IN THE EU: ELEMENTS, RATIONALES AND UNCERTAINTIES. ............................................. 11
 2.3. – RECONCEPTUALIZING THE TRANSFERENCE OF OWNERSHIP : THE IMPACT OF USEDSOFT. ................................................. 16
 CHAPTER 3 – A CRITICAL ANALYSIS OF THE LATEST DEVELOPMENT IN EUROPEAN CASE-LAW. ......................... 20
 3.1. – FIRST OF ITS KIND: OUTLINING THE FACTS AND RELEVANCE OF THE TOM KABINET CASE. ................................................ 20
 3.2. – PROGRESSIVE, BUT INSUFFICIENT: ADVOCATE-GENERAL’S BALANCED ATTEMPT TO RECONCILE ALL INTERESTS AT STAKE. ........ 24
 3.3. – ONE DOOR CLOSES, ANOTHER OPENS: THE IMPACT OF TOM KABINET ON THE DIGITAL EXHAUSTION HYPOTHESIS . ................. 27
 CHAPTER 4 – SOLVING THE DIGITAL EXHAUSTION PARADOX THROUGH AN EMPIRICAL APPROACH. ............... 34
 4.1 – TO BUILD A FRAMEWORK: CRAFTING AND REFINING THE DIGITAL EXHAUSTION TEST....................................................... 34
 4.2. – TRUTH IN NUMBERS: DEVELOPING AN ANALOG-DIGITAL ECONOMIC EQUIVALENCE STATISTICAL MODEL TO PROVE FAIR
 COMPENSATION OF THE RIGHTSHOLDER. ......................................................................................................................... 37
 4.3 – THE DEVIL IS IN THE SMALL PRINT : SEEKING EVIDENCE OF INDIVIDUAL AND PERMANENT TRANSFERS OF OWNERSHIP IN
 CONTRACTUAL AGREEMENTS. ....................................................................................................................................... 42
 4.4 - COPYRIGHT PROBLEMS REQUIRE DRM SOLUTIONS: EXPLAINING THE APPLICATION OF TECHNICAL PROTECTION MEASURES FOR THE
 ENFORCEMENT OF COPY SINGULARITY. ............................................................................................................................ 49

 CHAPTER 5 – CONCLUSION. ............................................................................................................................... 56

 BIBLIOGRAPHY. ....................................................................................................................................................I
 PRIMARY SOURCES: ................................................................................................................................................ I
 EU Legislation and Cases: .............................................................................................................................. i
 SECONDARY SOURCES: ........................................................................................................................................... II
 Books: .......................................................................................................................................................... ii
 Contributions to Edited Books:...................................................................................................................... ii
 Journal Articles:........................................................................................................................................... iii
 Working Papers and Conference Papers: ..................................................................................................... vi
 Dissertations: ............................................................................................................................................. vii
 Command Papers, Communications and Reports: ...................................................................................... viii
 Websites and Blogs: .................................................................................................................................. viii
 APPENDICES. ...................................................................................................................................................... A
 TABLE 1.............................................................................................................................................................. A
 TABLE 2.............................................................................................................................................................. B
 TABLE 3.............................................................................................................................................................. C
 TABLE 4.............................................................................................................................................................. D
 TABLE 5.............................................................................................................................................................. E
 TABLE 6.............................................................................................................................................................. E

Chapter 1 - Introduction.

 The fast development of information technologies and subsequent establishment of the
digital environment has allowed traditional business models to adapt to the opportunities
brought by new distribution channels, allowing consumers to online purchase and access the
same entertainment content they would normally do in regular stores. Despite their origin as
not a substitution, but an expansion of regular channels, online platforms heavily impacted the
market’s landscape, rendering some offline variants obsolete, mainly due to the advantages
cyber stores bring1: they are open all the time, available from anywhere, and avoid intermediary
costs (such as physical production and storage), consequently offering the customer better
deals.2 One of the most notable examples of a sector that thrived in the digital economy is the
video game industry 3: currently, every gaming console has their own centralized digital
distribution platform,4 while the computer gaming sector witnessed a spur in digital distribution
platforms, predominantly created by video game developers and publishers 5 to compete with
each other, enforce their own rules and user agreements,6 and reinforce their consumer-base
through platform-exclusive games, offers, discounts, bundles, and in-platform functionalities.7

 Overall, these digital storefronts tend to mimic every aspect of physical video game
ownership, but lack a dimension that is still reserved to tangible things: the re-circulation of
goods.8 When a consumer buys a copy of a video game through a digital distribution platform,
that sale is the first, and final transaction that can occur, meaning that, while physical copies
might be lent, offered, traded or resold, digitally-distributed video games generally can only be
used by the original buyer, depriving customers from obtaining any further value, other than
personal entertainment. The resale market is only possible for tangible copies due to copyright
exhaustion, one of the exceptions to copyright protection, consisting of a limitation of the

 1
 Eli Noam, ‘Distribution of Media and Information’, in Media and Digital Management (Springer
International Publishing 2019).
 2
 J Gregory Sidak and Robert Crandall, ‘Video Games: Serious Business for America’s Economy’ (2006)
Entertainment Software Association Report 48 
accessed 25 April 2020.
 3
 ‘2020 Video Game Industry Statistics, Trends & Data’, accessed 25 April 2020.
 4
 Such as the PlayStation Store, Nintendo eShop, and Xbox Live Marketplace.
 5
 Such as Valve, Epic Games and Electronic Arts.
 6
 Dinah Cohen-Vernik, ‘Essays on Digital Distribution of Information Goods’ (2009)
 accessed 25 April 2020.
 7
 A list of tools available for managing store presence in the Steam Store can be found at the Steamworks
developer page accessed 10 May 2020.
 8
 Jean-Pierre H Dubé and Peter Eric Rossi, Handbook of the Economics of Marketing. Volume 1 (Elsevier
Science & Technology 2019) 407 para 2.

 1

author’s right to control distribution once the product has been lawfully placed on the market. 9
Exhaustion is, supposedly, only possible when tangible goods are involved, as they represent
an individual and perishable medium used as a palpable vehicle for the work itself. 10 This
means that when the owner of a game included in and only accessible through a single physical
piece of technology like a cartridge or a CD-ROM, decides to sell it to another person, the
initial owner loses fruition of the article, conserving the total number of copies in circulation
that have been originally authorized by the rightsholder. 11 Therefore, the unique nature of
digital goods, in specific their replicability, can frustrate this purpose via the introduction of
unauthorized copies in the market, which is boosted by the easiness of digital file cloning.12
These unlawful actions can be mitigated by the implementation of technical protection
measures (such as single-use license codes) that thwart infringement but sacrifice further resale
possibilities.13 Nonetheless, it is also important to comprehend that, in a digital distribution
setting, a ‘buyer’ may never obtain actual ownership of a copy of the game, which seems to be
the case with ‘purchases’ in many digital stores, often described not as a permanent acquisition
of a digital goods, but as licenses or as a one-time fee subscriptions to services that distribute
licenses.14

 The debate on whether digital exhaustion is possible for digital entertainment software15
retail has been reignited by a recent French ruling: in UFC-Que Choisi v. Valve Corporation,16

 9
 Péter Mezei, Copyright Exhaustion: Law and Policy in the United States and the European Union
(Cambridge University Press 2018).
 10
 Jedrzej Czarnota, Co-Creation, Innovation and New Service Development (Taylor&Francis 2018).
 11
 Timothy Derdenger, ‘Technological Tying and the Intensity of Price Competition: An Empirical Analysis
of the Video Game Industry’ 2014 12 Quantitative Marketing and Economics 127.
 12
 Sam Castree, ‘A Problem Old as Pong: Video Game Cloning and the Proper Bounds of Video Game
Copyrights’ (2013) accessed 26 April 2020.
 13
 Christian Genetski and Christian Troncoso, ‘Copyright Industry Perspectives: The Pivotal Role of TPMs in
the Evolution of the Video Game Industry’ 2015 38 Columbia-VLA Journal of Law & the Arts 359.
 14
 Emma Boyle, ‘Why your digital games collection isn't yours to own’ Tech Radar (9 April 2017)
 accessed 26
April 2020.
 15
 Some scholars suggest the term “entertainment software” to be the most technically accurate and appropriate
way to refer to the entire video game industry as we know it, incorporating “software games usually played on
video game consoles, personal computers, handheld portable game players, the Internet or mobile phones”. This
terminology is the product of the apparent tension between the terms “video game” and “computer game”,
commonly used to separate between console games and PC games respectively. In spite of this tension, this
dissertation will use the informal terminology “video games” and the industry definition “entertainment software”
interchangeably, for readability purposes - as such, any instance of the former shall not be considered as a
reference to the limited technical subset of “console games”, but as equivalent to the latter.
 For more about the terminology issue, see: Frank Alpert, ‘Entertainment Software: Suddenly Huge, Little
Understood’ 2007 19(1) Asia-Pacific Journal of Marketing and Logistics, 5.
 16
 Colin Campbell, ‘French court rules that Steam’s ban on reselling used games is contrary to European law’
Polygon (19 September 2019) accessed 10 May 2020.

 2

the court considered that accessing a video game through a digital distribution platform must
be qualified as a permanent sale of a copy since the game is made indefinitely available at a
fixed price, paid in one instalment, applying the principle of exhaustion of distribution rights
in the context of computer software previously set in UsedSoft.17 Interestingly, a few months
after the French ruling, the CJEU finally issued its much-awaited decision on the Tom Kabinet
case, ruling that the online distribution of e-books consists of an act of communication to the
public, not an act of distribution for the purposes of the InfoSoc Directive, thus rejecting the
possibility of exhaustion and any posterior e-book sales without the rightsholders consent.

 Attempting to establish a parallel between digital and physical video game distribution
poses many challenges - from the object’s complex nature as both software and authorial work,
to the intricacies of digital retail, and the presumed inability of current TPMs 18 to replicate the
singular aspects of a physical copy. Therefore, it is this thesis’ objective to assess the viability
of a secondary market for digitally-distributed entertainment software by fundamentally
answering the main research question:

 ‘How can entertainment software and its digital distribution be classified within the
scope of the European legal framework, and what consequences does this classification have
in regards to copyright exhaustion and the possibility of a digital resale market, especially
after the 2019 Tom Kabinet ruling?’.

 Hence, in order to answer the main research question, each of the aforementioned
challenges will be addressed through three separate sub-questions:

 1. ‘What is the legal nature of entertainment software in the European Union and
 how does it affect (the exhaustion of) distribution rights?’

 2. ‘How can the activity of supplying entertainment software through the internet
 be classified as a distribution for legal purposes, considering the latest advances in
 European case-law on digital exhaustion?’

 3. ‘Which characteristics need to be and are present in modern digital distribution
 systems as to enable a non-infringing resale market for digitally-distributed entertainment
 software?’

 17
 Antoni Rubi-Puig, ‘Copyright Exhaustion Rationales and Used Software: A Law and Economics Approach
to Oracle v. UsedSoft’, 2013 4(3) Journal of Intellectual Property, Information Technology and e-Commerce Law.
 18
 Dinah Cohen-Vernik, ‘Essays on Digital Distribution of Information Goods’ [2009]
 accessed 25 April 2020.

 3

The academic interrogations on the nature of digital ownership, digital distribution,
digital rights management, and the legal categorization of video games have generated
abundant literature: while some authors propose to solve this quarrel through an abstract
approach to the nature of incorporeal possessions,19 others employ more meticulous methods
of legal analysis in an attempt to characterize the nature of video games as source and object
of rights.20 Such characterizations, however valuable, do not suffice for the comprehensive
understanding of the digital distribution reality. As such, the significant novelty this thesis
brings to the academic panorama lays not only in the inclusion of recent case-law, but also in
its unique approach to the debate, made not from an exclusively abstract nor object-focused
perspective, but from the premise that alternatively applying the same conceptualizing
techniques to the activity of buying and selling in the digital environment may be the actual
key to uncovering the potential of a digital resale market.

 Furthermore, and apart from academic relevance, answering these questions has great
practical importance, considering the relationship between the digital distributor and the
consumer is sometimes severely imbalanced partly due to user agreements riddled with abusive
clauses that provide little protection for the latter.21 Likewise, while discounts may be frequent
in digital platforms,22 the initial release price of Triple-A23 titles tends to match the price
adopted in physical retail, a reality that appears puzzling, since digital distribution is supposed
to be less costly - theoretically benefitting every party involved. 24 Yet, it is our opinion that a
consumer that allegedly obtains not ownership, but an “authorization” to play content, through
the same expenditure of obtaining (real) physical ownership, while not being able to ever
recover any portion of that investment, is not benefitting from this business model. In spite of

 19
 Tito Rendas, ‘Lex Specialis(sima): Videogames and Technological Protection Measures in EU Copyright
Law’, 2015 37(1) European Intellectual Property Review 39; Stavroula Karapapa, ‘Exhaustion of Rights on
Digital Content under EU Copyright: Positive and Normative Perspectives’ Forthcoming, Aplin, T. (ed) Research
Handbook on Intellectual Property and Digital Technologies (Cheltenham, Edward Elgar 2019).
 20
 Maša Galič, ‘The Legality of Resale of Digital Content after UsedSoft in Subsequent German and CJEU
Case Law’ 2015 37(7) European Intellectual Property Review 414-429; Péter Mezei, ‘Meet the Unavoidable –
The Challenges of Digital Second-Hand Marketplaces to the Doctrine of Exhaustion’, Taina Pihlajarinne, Juha
Vesala and Olli Honkkila (eds), Online Distribution of Content in the EU (Edward Elgar, Cheltenham, 2019) p.
62-78.
 21
 Will Usher, ‘Valve Slammed By Consumer Protection, Issued Cease And Desist On Anti-Consumerist
EULA’ Cinema Blend (17 September 2012) < https://www.cinemablend.com/games/Valve-Slammed-By-
Consumer-Protection-Issued-Cease-Desist-Anti-Consumerist-EULA-47038.html> accessed 10 May 2020.
 22
 Myriam Davidovici-Nora and Marc Bourreau, ‘Two-Sided Markets in the Video Game Industry’ 2012 173–
174 Réseaux 97 accessed 26 April 2020.
 23
 ‘There is also online debate about the hierarchy of game genres, the derision often afforded to casual games
versus big budget “AAA” titles’, Johanna Weststar, ‘Understanding Video Game Developers as an Occupational
Community’ 2015 18 Information, Communication & Society 1238.
 24
 Lothar Determann, ‘Digital Exhaustion - New Law from the Old World’ (2017) SSRN Electronic Journal
 accessed 26 April 2020.

 4

these considerations, the digital asset realm seems to be trying to gradually conform to the few
advantageous characteristics restricted to the tangible reality, as digital distributors now allow
consumers to return purchases, lend games to friends and share them with their family, which
makes us question whether the next step could be the conception of a resale market. 25 In order
to confront and attempt to answer the research questions, and validate such venture and its
results, a legal-dogmatic analysis supported by an interdisciplinary empiric research is
conducted throughout three distinct chapters.

 The first chapter consists of a comprehensive exploration of the distribution right and
its exceptions, in particular the principle of exhaustion, and establishes the status quo of the
relationship between video games and copyright in Europe. The first segment of this chapter
will allow us to categorize entertainment software and conceptualize copyright exhaustion
through a black-letter law analysis: relevant provisions of the WIPO Treaties, the InfoSoc
Directive, and the Software Directive will be scrutinized in order to outline the requisites and
limitations of the concepts. The second moment of the chapter will fill in the figure delineated
by the black-letter legal analysis with further dogmatic legal research, based on the
interpretation of the legal concepts through the dissection of relevant European case law 26 and
the exploration of academic literature from authoritative legal scholarship.

 In order to address the second sub-question, Chapter 2 departs from the conclusions
obtained in Chapter 1 and introduces them to the digital distribution scenario. The chapter is
based around the recent Tom Kabinet decision, the first European judgement on digital resale
platforms, and comprises an analysis of the rationales used by the Advocate-General and the
CJEU in regards to the resale of e-books, in order to establish them as a stress-test for validating
digital exhaustion. This conceptualization entails a systematic analysis of the relevant legal
provisions and academic literature, following an approach identical to the preceding chapter.

 After a strictly legal breakdown of the object, the third chapter aims to provide
conclusive and practical insight into the problem, venturing in an interdisciplinary investigation
supported by empirical research on digital storefronts and relevant academic literature. The
first moment of this chapter focuses on one of the rationales for exhaustion, the reward theory,
and attempts to prove that rightsholders derive satisfactory compensation from digital sales
through a statistical approach. The second moment of the chapter consists of a case-study of

 25
 ‘Steam Family Sharing, Share your Steam library of games with family & guests’
 accessed 26 April 2020.
 26
 Case C‑128/11 - UsedSoft GmbH v Oracle International Corp [2012] ECLI:EU:C:2012:407 (UsedSoft);
Case C‑355/12 - Nintendo Co. Ltd and Others v PC Box Srl and 9Net Srl [2014], ECLI:EU:C:2014:25 (Nintendo).

 5

the End User License Agreements (EULAs) and Terms of Service (ToS) of the leading digital
distribution platforms, deploying a methodical approach to distinguish between a de facto sale,
a license, and a subscription to a service, and evaluate the distribution platform’s sales policies
based on that distinction. The third segment entails a comprehensive assessment of the current
DRM tools employed with the objective of protecting copyright in video games,27 ultimately
contemplating the possibility of implementing non-restrictive, yet effective DRM, allowing for
the balancing of interests: on one side, rightsholders and their interest in conserving control
over their work, and, on the other, customers and their interest in recovering their investment
through a resale market.

 Through this meticulous and structured research, our hope is to accurately depict the
reality, decipher the problem and efficaciously shed light on a new perspective on the subject-
matter. However it is of critical importance to establish that this thesis does not attempt to draw
any general inferences regarding the overall contractual legitimacy of the user agreements
analysed, nor investigate the implications of an hypothetical digital resale marketplace on a
competition law level, but rather to solely observe these phenomena under the light of copyright
law in the European Union (EU), characterizing objects, actions and instrumental technology
in order to correctly define the digital distribution and perchance unravel the opportunity for a
secondary market.

 27
 Andrew Moshirnia, ‘Giant Pink Scorpions: Fighting Piracy with Novel Digital Rights Management
Technology’ 2012 23 DePaul J. Art, Tech. & Intell. Prop. L. 1.

 6

Chapter 2 – The legal landscape surrounding entertainment software distribution.

2.1. – Legal categorization: ‘overlapping’ software and copyright protection.

 Entertainment software, commonly defined as ‘electronic or computerized games
played by manipulating images on a video display or television screen’, 28 have flooded our
culture and become a landmark industry in the 21st century29 but they were not always as
complex and developed as now. The first videogames, surfacing in the 70’s, 30 brought no
narrative, intricate functions or audio-visual complexity: with most games revolving around
basic geometrical shapes moving over a black screen, supported by simplistic sound effects,
the videogame industry had some hefty strides to take in order to explore its full potential. And
it did.

 Nowadays, the remarkably complex production of entertainment software converges all
sorts of creative elements such as literature, music, and cinema into one single interactive
medium, which some dare dub as the ‘eighth art’. 31 With no intention to delve into the
metaphysical perception of what consists art or not, it is, nonetheless, obvious, that these
integrate artistic elements, and that, either they be a script, soundtrack, or artwork, those
elements are original expressions32 that attract intellectual property protection. 33 This
harmonious combination between various creative elements is, however, only possible due to
an indispensable element: software supported by computer code. 34 The underlying structure of
any video game, as an interactive medium, is the set of programmable commands that instruct
how these creative elements are displayed and allow the user to engage with them.35

 28
 ‘The Economy of Culture in Europe - Study prepared for the European Commission (Directorate-General
for Education and Culture)’ (2006) , accessed 7 July 2020.
 29
 The Interactive Software Federation of Europe (ISFE) establishes the European Union market size as €21
billion in 2018. ‘ISFE Key Facts 2019’ last accessed 7 July 2020.
 30
 The first-ever commercially available arcade game was Nutting Associate’s Computer Space, published in
1971. See: Tristan Donovan, Replay: The History of Video Games (Yellow Ant Media Limited, 2010).
 31
 Andrea Brandi, ‘Videogames: the eighth art’, blog post on Starico accessed 7 July 2020.
 32
 ‘(…) the various parts of a work thus enjoy protection under Article 2(a) of Directive 2001/29, provided
that they contain elements which are the expression of the intellectual creation of the author of the work.’ Case
C-5/08 - Infopaq International v Danske Dagblades Forening [2009] ECLI:EU:C:2009:465, Judgement of the
Court, para 39.
 33
 Andy de la Haza, ‘Video Games: computer programs or creative works?’ 2014 (4) WIPO Magazine
, accessed 2 July 2020.
 34
 Susana Cabrera and Katina Hernández, 'Protección jurídica de los videojuegos a través del derecho de
autor' 2017 16(31) Revista Opinión Jurídica Universidad de Medellín 155-174.
 35
 Susana Cabrera and Katina Hernández, 'Protección jurídica de los videojuegos a través del derecho de
autor' 2017 16(31) Revista Opinión Jurídica Universidad de Medellín 155-174.

 7

This dualistic nature of the medium as both artistic and technical points in the direction
of two concentric legal spheres: copyright protection for creative works, and copyright
protection for computer programs.36 The InfoSoc Directive is a harmonization instrument
dedicated to the protection of authors and performers’ creative and artistic work 37 through a
rigorous, effective and adequate copyright system 38 which is achieved by striking a fair balance
between the author’s exclusive rights of reproduction, distribution and communication to the
public,39 and the rights of other rightsholders as well as the interest of the public. 40 The scope
of the Directive is established in Article 1(1) as concerning the legal protection of copyright
and related rights in the framework of the internal market, followed by an explicit mention, in
Article 1(2a) that the Directive ‘(…) shall in no way affect existing Community provisions
relating to the legal protection of computer programs’, which is achieved through the Software
Directive, a piece of legislation that recognizes the increasingly important role of the subject-
matter in a multitude of industries 41 and equivalates computer programs to literary works
(within the meaning of the Berne Convention) for copyright protection purposes.42 In defining
the object of protection, the Software Directive states that it is granted to any form of computer
program43 , including those which are incorporated into hardware44 in the sense that they reflect
the author’s own intellectual creation. 45 However, understandably, no definition of computer
program is given, possibly in order to not restrict the future scope of application through the
eventual obsolescence of a definition unsuitable to new realities brought by technological
development.

 The legal categorization of videogames appears, therefore, unclear, despite the CJEU’s
attempts 46 to provide some (slight) guidance. In Nintendo, the Court confirms this logic that

 36
 F Grosheide and others, 'Intellectual Property Protection for Video Games: A View from the European
Union' 2014 9(1) Journal of International Commercial Law and Technology 1-13.
 37
 Recital 10 InfoSoc Directive.
 38
 Recitals 11 and 12 InfoSoc Directive.
 39
 Articles 2, 3, and 4 InfoSoc Directive.
 40
 Recitals 31-34 InfoSoc Directive.
 41
 Recital 3 Software Directive.
 42
 Recital 6 and Article 1(1) Software Directive.
 43
 Article 1(2) Software Directive.
 44
 Recital 7 Software Directive.
 45
 Article 1(3) Software Directive.
 46
 ‘In the 2010 Bezpečnostní and 2012 SAS judgments the CJEU addressed different elements of a computer
program itself, attempting to clarify what can and cannot be protected by copyright as a computer program under
the Software Directive, while leaving open the possibility of copyright protection of parts of software as artistic
or literary works under the Copyright Directive.’ Maša Galič, ‘The Legality of Resale of Digital Content after
UsedSoft in Subsequent German and CJEU Case Law’ 2015 37(7) European Intellectual Property Review 414-
429.

 8

computer programs are also protected by copyright, provided that they are original. 47 It goes
on to define videogames as ‘complex matter’ involving both software and graphic/sound
elements which, although encrypted in computer language, have unique value as creative
works, unreducible to mere encryption. This is followed by the apparent conclusion that these
elements, which shouldn’t be treated differently from the work itself, 48 are part of a
videogame’s own originality and therefore ‘protected, together with the entire work, by
copyright in the context of the system established by Directive 2001/29’.49 In essence, what the
Court does is push an a contrario lex specialis hermeneutic50 to its limits by implying that if a
work does not fit completely and perfectly within the specificities and boundaries of the
Software Directive (lex specialis), that law is not able to derogate the InfoSoc Directive (lex
generalis), meaning the latter is applicable. 51 Taken to its full extent, this argumentation would
imply that any program that includes copyrighted artistic elements (as is the case of almost
every single commercial computer program in the market nowadays) 52 would be classified as
a “complex work” and never placed within the scope of the Software Directive – this is, of
course, not only problematic, but rather absurd.

 The solutions provided by scholarship interpretation in regards to this classification
problem usually follow two distinct paths: 53 a distributive54 and a restrictive (unitary)
approach.55

 Adepts of the former suggest the problem be handled by compartmentalizing each
component of a videogame based on its specific primary legal type: artistic elements would be

 47
 Case C‑355/12 - Nintendo Co. Ltd and Others v PC Box Srl and 9Net Srl [2014], ECLI:EU:C:2014:25],
Judgement of the Court, para 21.
 48
 Case C‑355/12 - Nintendo Co. Ltd and Others v PC Box Srl and 9Net Srl [2014], ECLI:EU:C:2014:25],
Judgement of the Court, para 22.
 49
 Case C‑355/12 - Nintendo Co. Ltd and Others v PC Box Srl and 9Net Srl [2014], ECLI:EU:C:2014:25,
Judgement of the Court, para 23.
 50
 ‘The purpose of the principle may be seen as to provide a basis for choice to resolve the normative antinomy
resulting from two conflicting rules which apply to and regulate the same subject matter. In order to solve such
conflicts, the principle lex specialis derogat legi generali entails that, when two rules regulating the same subject-
matter conflict, priority is to be given to that which is more specific.’ Silvia Borelli, ‘The (Mis)-Use of General
Principles of Law: Lex specialis and the Relationship between International Human Rights Law and the Laws of
Armed Conflict.’ in Laura Pineschi (ed), General Principles of Law: The Role of the Judiciary (Springer 2015).
 51
 Tito Rendas, ‘Lex Specialis(sima): Videogames and Technological Protection Measures in EU Copyright
Law’ 2015 37(1) European Intellectual Property Review 39-46.
 52
 Marcella Favale, ‘A Wii too stretched? The ECJ extends to game consoles the protection of DRM- on tough
conditions.’ 2014 37(2) European Intellectual Property Review.
 53
 James Russell, ‘“Pwnership”: Is copyright appropriately equipped to handle videogames?’ (Master Thesis
LL.M. in Intellectual Property Law, Uppsala Universiteit, 2018)
 54
 Marcella Favale, ‘A Wii too stretched? The ECJ extends to game consoles the protection of DRM- on tough
conditions.’ 2014 37(2) European Intellectual Property Review.
 55
 Tito Rendas, ‘Lex Specialis(sima): Videogames and Technological Protection Measures in EU Copyright
Law’ 2015 37(1) European Intellectual Property Review 39-46.

 9

protected by the InfoSoc Directive, computer code would be protected by the Software
Directive.56 This position is often centred around the 2010 Bezpečnostní softwarová asociace57
decision, in which the Court declared that a graphic user interface of a program and the
respective computer program are entitled to two distinct forms of protection. 58 However, we
stand with the opposing side of the scholar debate: not only does this line of argumentation
completely misconstrue and decontextualize the findings of the Court (which were about the
product of the program, usually displayed on a screen, i.e. solely and simply the copyright-
protected artistic elements pertaining to the program being communicated, 59 through television
broadcast60) but we also firmly believe such fragmentary vision cannot be considered viable as
it would completely devoid further interpretation from any legal certainty 61 – after all, are we
supposed to abstractly shatter every computer program into as many copyrighted works and
pieces of code that may exist within, in order to give each of them separate protection?

 An easier, and much more fitting way to solve this problem would be to restrictively
read the Court’s interpretation as an attempt to maximize the scope of protection of technical
protection measures 62 (the subject matter under litigation). Through this vision, what the Court
in Nintendo truly intends is not to exclude entertainment software from being categorized as
software, but to establish that the Software Directive’s provisions on TPMs are only applicable
to a minority of computer programs, this is, pure computer programs that do not include
copyrighted works, and that a ‘complex’ computer program such as a videogame (but a
computer program nonetheless) is entitled to a greater level of protection concerning TPM’s,

 56
 Marcella Favale, ‘A Wii too stretched? The ECJ extends to game consoles the protection of DRM- on tough
conditions.’ 2014 37(2) European Intellectual Property Review; Tito Rendas, ‘Lex Specialis(sima): Videogames
and Technological Protection Measures in EU Copyright Law’ 2015 37(1) European Intellectual Property Review
39-46.
 57
 Case C‑393/09 - Bezpečnostní softwarová asociace – Svaz softwarové ochrany v Ministerstvo kultury [2010]
ECLI:EU:C:2010:816, Judgement of the Court.
 58
 Case C‑393/09 - Bezpečnostní softwarová asociace – Svaz softwarové ochrany v Ministerstvo kultury [2010]
ECLI:EU:C:2010:816, Judgement of the Court, paras 42 and 46.
 59
 “(…) when a video-game is streamed by a Streamer audio-visual elements that are protected by copyright
are made available to the public in that they are accessible and consumed by the Viewers of the stream and
therefore the consent or authorisation of such communication to the public must be obtained from the rightholder
in order to avoid infringing on the copyright subsisting in the video-game” Paul Halliday, ‘The DMS Directive:
One size fits all? The DSM Directive in the context of video-game streaming.’ (Master’s Thesis LL.M, Law and
Technology, Tilburg University, 2020).
 60
 Case C‑393/09 - Bezpečnostní softwarová asociace – Svaz softwarové ochrany v Ministerstvo kultury [2010]
ECLI:EU:C:2010:816, Judgement of the Court, para
 61
 Tito Rendas, ‘Lex Specialis(sima): Videogames and Technological Protection Measures in EU Copyright
Law’ 2015 37(1) European Intellectual Property Review 39-46.
 62
 Tito Rendas, ‘Lex Specialis(sima): Videogames and Technological Protection Measures in EU Copyright
Law’ 2015 37(1) European Intellectual Property Review 39-46.

 10

granted by the InfoSoc Directive. 63 In fact, the lex specialis nature of the Software Directive
means that there is not a mere overlap between two different spheres, but a sub-section within
the scope of copyright protection, as it is intended to provide specialized protection for specific
subject-matter,64 pointing us to the conclusion that as long as it qualifies as a computer
program,65 it is considered as such and entitled to that level of protection.

2.2. – The doctrine of exhaustion in the EU: elements, rationales and uncertainties.

 The right of distribution is one of the exclusive rights granted to authors, in both the
InfoSoc and Software Directive, and comprises a certain level of market control conceded to
the rightsholder,66 in the way that he can “in respect of the original of their works or of copies
thereof, (…) authorise or prohibit any form of distribution to the public by sale or otherwise” 67
and “do or to authorize any form of distribution to the public, including the rental, of the
original computer program or of copies thereof”68. However, this is not an unrestrained power,
as it would affect the free movement of goods and services, 69 as well as the ownership interests
of the acquirers of physical control over a copy of the protected work. 70 This imbalance
between competing interests is (partially) solved by the doctrine of exhaustion, a limitation to
economic rights reflecting the idea that once genuine goods have been marketed, subsequent
distribution should not be impeded.71 This exception to the distribution rights has also become
extensively positivized in modern European copyright law, including the two abovementioned
instruments.

 Recital 28 of the InfoSoc Directive explains that ‘The first sale in the Community of
the original of a work or copies thereof by the rightholder or with his consent exhausts the right

 63
 Tito Rendas, ‘Lex Specialis(sima): Videogames and Technological Protection Measures in EU Copyright
Law’ 2015 37(1) European Intellectual Property Review 39-46.
 64
 Tito Rendas, ‘Lex Specialis(sima): Videogames and Technological Protection Measures in EU Copyright
Law’ 2015 37(1) European Intellectual Property Review 39-46.
 65
 ‘For the purpose of this Directive, the term ‘computer program’ shall include programs in any form,
including those which are incorporated into hardware.’ Software Directive, Recital 7.
 66
 Ariel Katz, ‘The Economic Rationale of Exhaustion: Distribution and Post-Sale Restraints.’ in Irene Calboli
and Edward Lee (eds), Research Handbook on IP Exhaustion and Parallel Imports (Edward Elgar
Publishing 2016) 23-43.
 67
 Article 4/1 InfoSoc Directive.
 68
 Article 4/1/c Software Directive.
 69
 Directorate-General for Enterprise and Industry (European Commission), ‘Free movement of goods: Guide
to the application of Treaty provisions governing the free movement of goods’ [2010].
 70
 Péter Mezei, Copyright Exhaustion: Law and Policy in the United States and the European Union
(Cambridge University Press 2018) 3
 71
 Jens Schovsbo, ‘Exhaustion of Rights and Common Principles of European Intellectual Property
Law.’ in Ansgar Ohly (ed), Common Principles of European Intellectual Property Law (Mohr Siebeck
Verlag 2012) 169-187

 11

to control resale of that object in the Community.’ This principle is correspondingly reflected
and enlarged in Article 4(2), stating that the distribution right is exhausted in respect to the
original or sales of the work, when the first sale, or transfer of ownership in any form, is made
by the rightsholder or with his consent. Analogously, the first version of the Software
Directive,72 which predates the InfoSoc Directive, the WIPO Treaties 73 and the TRIPS
agreement,74 included a provision stating that ‘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 (…)’. This provision remained completely unchanged with the
publication of the current version of the Directive, almost 20 years later.

 It is discernible, from these definitions, that 4 requirements compose and define the
conceptual basis and scope of exhaustion: (1) the existence of a legitimate rightsholder; (2) the
subsistence of a protected subject matter, either fixated in an original or a copy of the work; (3)
a permanent act of distribution, this is, a transference of ownership; (4) lawfulness of such
transference of ownership, obtained through rightful exercise of distribution rights, or
rightsholder consent. As such, the corollary of the conjunction of these elements is that, as long
as they are met, a new, lawful owner is free to further resell any specimen of the work without
rightsholder authorization. 75 This means that exhaustion doesn’t apply to infringing works
(requirement 2 obliges the work to be protected), counterfeit, stolen or pirated products 76
(requirement 4 demands lawfulness of the transference of ownership), neither does it apply in
the case of temporary ownership through rental and lease, for example (requirement 3 requires
ownership to be permanent).

 The doctrine of exhaustion has, however, long been a part of European legal tradition.
In order to expand our understanding beyond crystallized law, it is important to explore the
historical upbringing of the doctrine in Europe so that, by comprehending its history and the
policy considerations surrounding it, we may transpose the essence of the doctrine to new,

 72
 Council Directive of 14 May 1991 on the legal protection of computer programs (91/250/EEC) repealed by
Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of
computer programs.
 73
 The WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT), both
published in 1996.
 74
 Agreement on Trade-Related Aspects of Intellectual Property Rights, published in 1995.
 75
 Stavroula Karapapa, ‘Exhaustion of Rights on Digital Content under EU Copyright: Positive and Normative
Perspectives’ in Research Handbook on Intellectual Property and Digital Technologies (Edward Elgar
Publishing 2019), 11.
 76
 Péter Mezei, Copyright Exhaustion: Law and Policy in the United States and the European Union
(Cambridge University Press 2018) 9.

 12

contemporary realities. 77 As a preliminary remark to this short legal-historical analysis, it is
important to mention that the concept of exhaustion was never radically altered or put through
major reforms, but just adapted throughout half a century of legal tradition in an effort to
conform to the ever-evolving reality of intellectual property in the internal market. It is
therefore crucial to determine the limits of the concept’s plasticity and understand whether it
withstood the test of time or if a reform is needed in order to face new technological realities,
completely unforeseen at the doctrine’s birth and early life.

 Some of the most relevant and defining moments for the assimilation and development
of exhaustion in the European legislature occurred in a first phase of CJEU case-law in the 70’s
and 80’s, a period prior to legislative harmonization in which the Court was prompted with
questions regarding the conflict between IP protection and the free movement of goods and
services 78 and took the opportunity to expand on the fundamentals of exhaustion, which still
constitute the theoretical framework of the concept as we know it today. 79 In the first EU case
applying the exhaustion doctrine, Deutsche Grammophon,80 the Court decided against a record
company trying to stop Metro, a retailer, from introducing lower-priced records bought from a
French subsidiary of Deutsche Grammophon into the German market. The Court ruled that
Deutsche Grammophon had exhausted its copyright by distributing them in France, and thus
could not further control the fate of such products. 81 A few years later, in 1979, the CJEU was
faced with a case concerning not the distribution of goods, but the transmission of a film in two
different countries, with different contractual agreements in each state. In Coditel, 82 a film
production company granted an exclusive license to Ciné Vog, a distribution company, to
publicly show a certain film in cinema performances in Belgium and, approximately 3 years
after the first performances, to broadcast the film in national television. 83 However, the same
production company assigned the right to broadcast the same film, without a waiting period, in
the Federal Republic of Germany to a national cable company, which, with no delay, included

 77
 Péter Mezei, Copyright Exhaustion: Law and Policy in the United States and the European Union
(Cambridge University Press 2018) 4.
 78
 Articles 28 to 31 of the former Treaty establishing the European Economic Community, now articles 34 to
37 of the Treaty on the Functioning of the European Union.
 79
 Péter Mezei, Copyright Exhaustion: Law and Policy in the United States and the European Union
(Cambridge University Press 2018) 37
 80
 Case C-78/70 - Deutsche Grammophon Gesellschaft mbH v Metro-SB-Großmärkte GmbH & Co. KG.
[1971] ECLI:EU:C:1971:59, Judgement of the Court.
 81
 Case C-78/70 - Deutsche Grammophon Gesellschaft mbH v Metro-SB-Großmärkte GmbH & Co. KG.
[1971] ECLI:EU:C:1971:59, Judgement of the Court, para 13.
 82
 Case C-62/79 - SA Compagnie générale pour la diffusion de la télévision, Coditel, and others v Ciné Vog
Films and others [1980] ECLI:EU:C:1982:334, Judgement of the Court.
 83
 Case C-62/79 - SA Compagnie générale pour la diffusion de la télévision, Coditel, and others v Ciné Vog
Films and others [1980] ECLI:EU:C:1982:334, Judgement of the Court, para 5.

 13

it on their regular programming schedule. The Belgian cable company Coditel was able to pick
up the signal from the German broadcaster and retransmit the film on its own cable network,
affecting the potential profit of Ciné Vog (the legitimate licensee). 84 Coditel then argued that,
since the film had already been shown with consent of the original rightsholder, the exclusive
right of the licensing production company had been exhausted to which the Court responded
that the exclusive distributor in Belgium was not prevented from enforcing its rights against
Coditel as long as that did not create unjustifiable or disproportionate barriers for the
cinematographic industry.85 Additionally, the Court held that such exercise would be restricted
if it allowed the rightsholder to charge fees that exceeded an expected fair return on
investment,86 thus concluding that the free movement of services is restricted by the objective
to give rightsholders the possibility to receive proper reward for their work. 87

 As such, while in Deutsche Grammophon the CJEU decided that restraining
rightsholder control over distributed copies served as legal protection for economic exchanges,
justified by the free movement of goods and the right of subsequent and legitimate acquirers to
explore the economic significance of the goods, in Coditel, the Court ruled that, in certain
circumstances, free movement of goods and services can be restricted in order to protect
intellectual property as a safeguard of the author’s right to receive proper (but limited) reward
for the work.88 These two pioneering decisions allow us to unearth two of the policy
considerations that support and maintain the balance of the exhaustion doctrine: market
supremacy and fair compensation. 89

 The second period of the doctrine’s establishment starts in the early 90’s with the
publication of the first copyright directive of the EEC, the Software Directive 90 and is
characterized by the extraction and application of the fundamentals laid out by the CJEU into

 84
 Case C-62/79 - SA Compagnie générale pour la diffusion de la télévision, Coditel, and others v Ciné Vog
Films and others [1980] ECLI:EU:C:1982:334, Judgement of the Court, para 13.
 85
 Case C-62/79 - SA Compagnie générale pour la diffusion de la télévision, Coditel, and others v Ciné Vog
Films and others [1980] ECLI:EU:C:1982:334, Judgement of the Court, para 15.
 86
 Case C-62/79 - SA Compagnie générale pour la diffusion de la télévision, Coditel, and others v Ciné Vog
Films and others [1980] ECLI:EU:C:1982:334], Judgement of the Court 13, 15 and 16.
 87
 Péter Mezei, Copyright Exhaustion: Law and Policy in the United States and the European Union
(Cambridge University Press 2018) 35.
 88
 Carlos Correa and Juan Correa, ‘Parallel Imports and the Principle of Exhaustion of Rights in Latin
America.’ in Irene Calboli and Edward Lee (eds), Research Handbook on Intellectual Property Exhaustion and
Parallel Imports (Edward Elgar Publishing 2016) 198–225.
 89
 Antoni Rubi-Puig, ‘Copyright Exhaustion Rationales and Used Software: A Law and Economics Approach
to Oracle v. UsedSoft’ 2013 4(3) Journal of Intellectual Property, Information Technology and e-Commerce Law
162.
 90
 Council Directive of 14 May 1991 on the legal protection of computer programs (91/250/EEC) repealed by
Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of
computer programs.

 14

extensive international and European legislative activity: in this period, dominant sources of
intellectual property law such as the abovementioned Directive, two WIPO treaties, and the
TRIPS Agreement came into existence. Additionally, the resurgence of many internal conflicts
is taken by the CJEU as an opportunity to further fortify and even broaden the tenets of
exhaustion.

 This phase, responsible for the doctrine’s ripening and positive-legal establishment
culminates with the acceptance of the InfoSoc Directive, 91 which altered the theoretical
framework of exhaustion in several ways: the right of distribution is extensively harmonized
to authors and not just rightsholders,92 and the applicability of the doctrine is extended to all
protected works, instead of copies of protected subject matter. 93 Additionally, it avowed the
applicability of the doctrine to any transfer of ownership, extending it beyond the scope of
“sale” as pre-defined.94 However, and reflecting the provisions of the WIPO treaties, 95 the
Directive limited the scope of the right by explicitly referring, in Recitals 28 and 29 that
‘copyright protection under this Directive includes the exclusive right to control distribution of
the work incorporated in a tangible article’, and ‘the question of exhaustion does not arise in
the case of services and on-line services in particular. (…) Unlike CD-ROM or CD-I, where
the intellectual property is incorporated in a material medium, namely an item of goods, every
on-line service is in fact an act which should be subject to authorization where the copyright
or related right to provides’.

 The principle of exhaustion quickly became a source of vast debate as the newly-
harmonized normative setting, still rooted in the analogue world, bears special significance
when dealing with digital goods. One of the court rulings that confirms the tangibility doctrine
is the 2015 decision of the Allposters 96 case in which the CJEU, presented with a question
regarding reproductions of graphic posters argued that the exhaustion of distribution rights
according to the InfoSoc Directive should apply only to works embodied in a tangible
medium.97 The decision is especially criticisable for its fragile exposition since exhaustion of
the distribution right does not fall upon the physical object itself, this is, it does not cover the

 91
 The Directive was first enacted in 2001 under the internal market provisions of the Treaty of Rome.
 92
 Article 4(1) of the Infosoc Directive.
 93
 Article 4(2) of the Infosoc Directive.
 94
 Article 4(2) of the Infosoc Directive.
 95
 WCT Article 6(2) and WPPT Articles 8(2) and 12(2).
 96
 Case C-419/13 - Art & Allposters International BV v Stichting Pictoright [2015] ECLI:EU:C:2015:27,
Judgement of the Court.
 97
 Case C-419/13 - Art & Allposters International BV v Stichting Pictoright [2015] ECLI:EU:C:2015:27,
Judgement of the Court, para 37.

 15

tangible object as such, but the abstract right to distribute the work, which happens to be
incorporated in an object.98 It is not a right on the material support, but a right regarding the
work’s exploitation, mitigated by property alienation.99 This very complex and dense factual
reality is why the CJEU’s intransigent approach to tangibility in Allposters is particularly
intriguing - especially since, not even 3 years prior, the very same Court had taken the first step
in the direction of a novel and actualized perspective on distribution rights, in what is generally
considered to be a bold move of judicial activism. 100

2.3. – Reconceptualizing the transference of ownership: the impact of UsedSoft.

 The policy considerations of market supremacy and fair reward laid down in Deutsche
Grammophon and Coditel may have composed the practical framework of exhaustion in the
EU, but the dawn of the digital age poses many challenges that cannot be solely solved by a
traditional approach. Arguably one of the most important and impactful CJEU decisions
regarding the concept of exhaustion in the contemporary scenario is UsedSoft, 101 which
concerned the resale of second-hand software licenses. The context and content of this decision
profoundly affected the way we perceive exhaustion in the digital age, while proving that, with
due adaptations, the decade-old rationales and policy considerations that fomented the doctrine
could and should stand in the digital age. Whilst some scholars criticize the court on its possibly
overly expansive teleology, 102 the undeniable truth is that this landmark decision shifted the
primary comprehension of the doctrine in a way that holds repercussions on the European
legislature up to the present day. 103

 In this case, Oracle, a software producer that sold its products on both tangible and
intangible mediums,104 sued UsedSoft, a corporation that resold ‘used’ software licenses.

 98
 Maša Galič, ‘The Legality of Resale of Digital Content after UsedSoft in Subsequent German and CJEU
Case Law’ 2015 37(7) European Intellectual Property Review 414-429.
 99
 Stavroula Karapapa, ‘Exhaustion of Rights on Digital Content under EU Copyright: Positive and Normative
Perspectives’ in Research Handbook on Intellectual Property and Digital Technologies (Edward Elgar
Publishing 2019), 18.
 100
 Anthony Arnull, ‘Judicial Activism and the Court of Justice: How Should Academics Respond?’ (2012) 3
Maastricht Faculty of Law Working Paper, p. 8.
 101
 Case C‑128/11 - UsedSoft GmbH v Oracle International Corp [2012] ECLI:EU:C:2012:407, Judgement of
the Court.
 102
 Paul LC Torremans, ‘The Future Implications Of The Usedsoft Decision’ (Zenodo 2014)
 accessed 2 July 2020.
 103
 Alexander Goebel, ‘The Principle of Exhaustion and the Resale of Downloaded Software – The
UsedSoft/Oracle Case’ 2012 9 European Law Reporter 226-234.
 104
 In fact, direct digital downloads comprised around 85% of the company’s distribution activity. Case
C‑128/11 - UsedSoft GmbH v Oracle International Corp [2012] ECLI:EU:C:2012:407, Judgement of the Court,
para 21.

 16