From poster to canvass. Exhaustion of rights in the judgment of the Court of Justice, file no. C-419/13

The origin of the case at issue, closed by a judgment of the Court of Justice of the European Union of January 22, 2015 (file no. C-419/13), lies in a dispute between the Dutch company Art & Allposters International BV and a Netherlands copyright collecting society.

According to the circumstances of the case, the company Allposters sold reproductions of popular paintings. They were produced by means of a chemical process with the use of laminate. It consisted of transferring the image from paper to canvas in a literal and… definitive manner. The whole process of the “transfer” resulted in the image being removed from paper. Just as if we removed the printed layer from the paper and put it in another place .

Pictoright as a copyright collecting society determined however that Allposters didn’t have the legally required consent of copyright holders to the “transferred” pictures and opposed “the canvas transfers”.

The key element in the whole story is the fact that the posters that formed the basis for reproductions were placed on the market beforehand. Thus, the right was exhausted. The copyright exhaustion is an institution according to which if a given copy on which a work was fixed was placed on the market by the copyright holder (copyright exhaustion) the further sale of a given copy on which such work was fixed will be allowed and legal. For example, if we buy a book in a bookstore we are entitled to – without any negative consequences whatsoever – sell it to third parties.

Considering the above, Hoge Raad der Nederlanden (an equivalent to the Polish Supreme Court) made a reference for a preliminary ruling. In the opinion of Allposters, the distribution right is exhausted, within the meaning of Article 4(2) of Directive 2001/29/EC, upon distribution of a work incorporated into a tangible object if it has been offered for sale by the copyright holder or with his consent. Should the object be changed, this would have no impact on the right’s exhaustion. Pictoright maintains, on the other hand, since the adaptation right in EU law in the field of copyright is not harmonized, the Dutch Poortvliet doctrine should be applied (judg. Hooge Raad der Nederlanden, NJ 1979/412, 19 January 1979), stating as follows:

“there is a new publication (…) where the copy of a work placed on the market by the right-holder is distributed to the public under another form, to the extent that whoever markets that new form of that copy has new opportunities for exploitation”.

Therefore, the Court has posed the question:

“whether the rule of exhaustion of the distribution right set out in Article 4(2) of Directive 2001/29 applies in a situation where a reproduction of a protected work, after having been marketed in the European Union with the copyright holder’s consent, has undergone an alteration of its medium, such as the transfer of that reproduction from a paper poster onto a canvas, and is placed on the market again in its new form”.

As was indicated above, right exhaustion involves a tangible object. Does then an alteration of medium (corpus mechanicum) have any significance at all? In order to provide a clear answer to this question, we should consider the technological process of transferring the paint along with the whole work to canvass. The entire endeavor results in a new medium being created – a new copy. It could then be considered this falls within the concept of distribution to which the copyright holder is exclusively entitled.

Allposters in its reply indicated however that when “removing” the paint from the poster and transferring it in its entirety to canvass the original copy was destroyed. For this reason, there was still only one medium in circulation. In the circumstances of the present case, there is no doubt the corpus mechanicum was altered. This fact is of such elementary and crucial importance it excluded applying the institution of right exhaustion to distribution. The Court pointed out the key is to establish whether the object that was altered, taken as a whole, is as such, physically, the same object that was placed on the market at the copyright holder’s consent.

Ultimately, the Court ruled as follows:

Article 4(2) of Directive 2001/29 must be interpreted as meaning that the rule of exhaustion of the distribution right set out in Article 4(2) of Directive 2001/29 does not apply in a situation where a reproduction of a protected work, after having been marketed in the European Union with the copyright holder’s consent, has undergone an alteration of its medium, such as the transfer of that reproduction from a paper poster onto a canvas, and is placed on the market again in its new form.

Following this train of thought, reproduction is both when we multiply the medium and when the only thing that is altered is the existing medium. Of course, there is a practical question: what changes of medium will result in the exhaustion rule being inadmissible to invoke? The matter isn’t simple and most probably will be addressed by other panels of the Court. Most certainly, we should exclude the following answer: any changes whatsoever. For example, a book purchased in a bookstore is still subject to exhaustion despite the fact that we underlined the most interesting topics and placed a dedication or a picture on the front page.

What’s interesting, the reasoning of the Court emphasizes the protection of authors and artists, raising both economic aspects and the author’s perception regarding a specific manner of exploitation of the work when granting consent for exploitation. This constitutes another argument in favor of explicitly providing in the agreements that the purchaser of rights or the licensee are entitled to transfer the work onto other methods – which may be crucial not only for film, IT or music industry, but – as it turns out – also for the art market.