What is the context of this case?
Four years ago, UFC Que Choisir, a French association defending consumer rights, initiated judicial proceedings against Valve Corporation, which offers via the Steam platform, an online distribution service for digital content, such as video games. The claim aimed at stating the abusive or unlawfulness nature of some clauses included in the General Terms and Conditions of sales of the platform imposed to its users and thus, to deem them unwritten and to force VALVE to modify or delete them.
Which clauses of the STEAM platform were claimed as null and void by UFC Que Choisir?
To claim that many clauses of the Steam platform terms and conditions should be null and void, UFC Que Choisir raised three main grounds: the infringement of consumer protection rules (1), of personal data protection rules (2) and of intellectual property rules (3).
French judges ruled that fourteen clauses who aimed to place consumers on an equal position with Valve Corporation were deemed unwritten, including the liability clause of Valve Corporation or the applicable law and jurisdiction (Steam TCs provided for US laws / courts).
However, the main scope of this case concerns the deletion of Clause 1.C, which prohibited the consumers to re-sell the access and use rights to Steam video games that they have acquired via the platform. French judges ruled in this decision that no distinction must be made between physical or dematerialised games as to their possible resale by consumers.
On what grounds do judges rely to authorize second-hand resale of downloaded video games?
French judges followed UFC Que Choisir’s reasoning which highlighted the European Union principle of free movement of goods, which is guaranteed regarding copyright, by the doctrine of exhaustion.
The exhaustion of intellectual property rights constitutes one of the limits of intellectual property rights under European Union Law. As such, the first sale within European Union (EU) of the original of a work exhausts the right to control the resale of that object within the EU. Therefore, the idea of a free market within the EU supersedes the intellectual property rights of the author (at least the patrimonial rights).
The issue in this case was to determine if such a doctrine could apply to any assets or supports, whether tangible or intangible, or more specifically, to downloaded video games.
French judges based their decision on directive 2001/29/CE and directive 2009/24/CE, which both deal with the principle of exhaustion of distribution rights regarding copyright, without ever excluding this principle to intangible goods. Even though Article L.122-6 of the French Intellectual Property Code refers to a “material copy”, this provision must be construed in the light of European Union Law. Moreover, Article L.111-3 of the same Code states that “intellectual property is independent of the ownership of the material object”, meaning that the “material copy” should not be restricted to the physical medium of the software, but extended to its downloaded version.
The Paris Court of First Instance then concluded that the doctrine of exhaustion applies regardless of the distribution method of the video game, whether tangible or not. As a result, the copyright holder can no longer object to the resale of the said copy even if the initial purchase has been made by download.
This reasoning led the French Court to deem the present clause unwritten, thus authorizing resale as second-hand of downloaded video games. Nevertheless, it should be noted that the conditions stated in the UsedSoft Case regarding the resale of software licenses apply in this situation as well. Such conditions are as follows:
- There has been a “first sale” of a licence within the EEA;
- The licence is a perpetual (irrevocable) licence;
- The licence has been fully paid;
- The first acquirer has made all his copies unusable; and
- Where a multi-user licence was acquired all licences must be resold.
Why could this case lead to a landmark decision?
Even though Valve Corporation appealed this decision, thus suspending the effects of the judgment of Paris Court of First Instance until the Court of Appeal’s ruling, the case could leave a deep mark on the digital world, both in France and in the European Union.
Indeed, the direct application of the principles of the doctrine of exhaustion and of the UsedSoft case prefigures an ever wider application of these principles to all intangible goods likely to be resold as second-hand.
However, the Opinion of the CJEU Advocate General, Maciej Szpunar, regarding the Tom Kabinet case (delivered on 10 September 2019 – Case C-263/18), indicates that a doctrine of digital exhaustion could only apply to computer software, which, under the CJEU’s Nintendo/PC Box jurisprudence (decision of 23 January 2014, C-355/12) would mean that computer games are excluded from its scope. In Germany, courts have ruled both before and after the CJEU’s UsedSoft decision that Valve was indeed entitled to design its product in such a way that resale of games was not possible.
It would therefore not be surprising to see this case end up before the CJEU for a final decision.