Like public libraries the world over, Dutch libraries lend materials from their collections to the public. However, those materials may be protected by copyright. Consequently, Dutch law requires Dutch libraries to pay money to the copyright holders every single time a book is lent. The legal question in this case is whether that obligation extends to an ‘e-book’, and the answer depends on the word ‘lending’ in the EU’s ‘rental and lending rights’ Directive 2006/115/EC.

Background
Dutch libraries will often lend materials in their collections to the public. When those materials are protected by copyright, Dutch libraries must pay the right holders. The amount of money owed is governed by several inter-connected pieces of Dutch legislation and the activities of various public and charitable bodies.

Perhaps at the risk of gross-oversimplification, the system looks like this. Every public library in Holland is a member of the Association of Dutch Libraries, known as the ‘VOB’ [the Vereniging Openbare Bibliotheken]. The VOB is required by the Dutch Copyright Act to pay money to a copyright ‘collecting society’ specialised in ‘rental rights’,  the Dutch Rental Rights Foundation [Stichting Leenrecht]. Just how much money the VOB needs to pay the Foundation depends on prices set by another body altogether, the StoL.

Once the Foundation has its money, the Dutch Copyright Act requires the Foundation to divvy up the money among several other Dutch collecting societies. Those collecting societies include the one for the internet, the LIRA, and the audiovisual collecting society known as Pictoright. Eventually, the right holders of copyright-protected works will be paid some money.

Admittedly, the public law system looks complex and it involves a great many obscure  legal actors but the payment mechanism has been in operation for some while, and it basically enshrines in Dutch law the existing productive relations involved in getting information to the public.

However, it is also a system which has now been thrown into disarray. The cause of the system’s irritation is the arrival of new technology: e-books. About eleven years ago, the ‘price setting’ statutory body known as the StoL began to wonder whether the various planks of Dutch law would allow it to extract money from the Dutch Library Association for every e-book lent by a library. Legal advice was sought, and Dutch State-funded research was commissioned. This process took years.

In the meantime, libraries were lending e-books to their members via the Internet and were doing so in ever-increasing numbers. At first, the libraries organised a series of pilot projects. These were then rolled out to providing a dedicated centralised computer-server that contained a national, digitised, library of e-books. The libraries put this whole new technical set-up on a legal footing by means of a licence concluded directly between the VOB (the Dutch Public Library Association), and the rights holders themselves.

With all the middlemen cut out, a multi-party legal dispute erupted. On one front, the VOB libraries were sued by the Dutch Publishers Association, which represents the interests of the entire sector of the Dutch publishing industry. On another front, the VOB was also sued by the various collecting societies.

The VOB too wanted its day in court. It sought a judicial declaration that the lending of e-books was exempt from the charges levied by the price-setting body the StoL. The VOB took the view that the libraries were lending within the definition of Article 6 of the RLR Directive, and there was no legal problem here because the whole system had been put on the footing of a legal licence whereby the VOB was compensating the right holders directly.

At The Hague District Court
For their starting point, the judges accepted the evidence and definition of ‘e-lending’ provided by the library association. Namely, a digitised version of the protected work had been put on a server. Although it remained there, only one copy was ever made available at any one time – in accordance with the so-called ‘one copy one user’ model. The copy was made available to the borrower for the normal duration of a loan; thereafter, it would no longer be available to that user.

Then there was the million-euro legal question, were the libraries ‘lending’ e-books?

To answer that question, the relevant EU legislation was to be found in the EU’s Directive 2006/115/EC on rental right and lending right and on certain rights related to copyright in the field of intellectual property (codified version) (OJ [2006] L376/28).

The difficulty with the definition of ‘lending’ is that it is an amalgam of various inter-linked provisions in the Directive: namely, it is the product of Articles 1(1) and (2), read together with Article 2(1)(b), plus the derogation in Article 6.

For ease, Article 2 contains the Directive’s ‘Definitions’, and states:

1. For the purposes of this Directive the following definitions shall apply:
(a) …
(b) “lending” means making available for use, for a limited period of time and not for direct or indirect economic or commercial advantage, when it is made through establishments which are accessible to the public;
(c) …

Applied here, it could be said that despite the digitised version of the work remaining on the server, there were copies of the work which were being made available for ‘a limited period of time’.

That said, there was uncertainty. On the one hand, the legal history leading up to the Directive provided only ambivalent legal support for this being an act of lending – after all, the legislature would have been focused on paper books at the time. That said, Recital 4 suggested that the Directive should evolve to cover new forms of exploitation.

Nor was that the only source of legal uncertainty: even if the libraries could be said to be lending on the basis of those Articles in the Directive, were they still lending after Article 6 of the Directive was taken into account?

Article 6’s, ‘Derogation from the exclusive public lending right’ provides:

1. Member States may derogate from the exclusive right provided for in Article 1 in respect of public lending, provided that at least authors obtain a remuneration for such lending. Member States shall be free to determine this remuneration taking account of their cultural promotion objectives.

2. Where Member States do not apply the exclusive lending right provided for in Article 1 as regards phonograms, films and computer programs, they shall introduce, at least for authors, a remuneration.

3. Member States may exempt certain categories of establishments from the payment of the remuneration referred to in paragraphs 1 and 2.

The parties differed as to the correct interpretation of Article 6 and their discussions turned on whether e-lending was functionally and economically equivalent to lending an old-fashioned physical object.

The essence of the discussion was this: in the material world, a tangible book which had been repeatedly lent out by a library would be qualitatively inferior to a shop-bought copy. That was not the case with an e-book. For whereas an old fashioned library book would be of inferior and indeed ever-deteriorating quality, e-books were no different to the original. Furthermore, e-books did not suffer from wear-and-tear despite successive bouts of lending. The Dutch Publishers Association pointed out that as result, the effect of the libraries lending e-books on the booksellers’ market was far greater than any distortion to the market which had arisen to date from public libraries lending an old-fashioned paper book to its members.

The three judges of The Hague District Court did not know how to interpret EU law. Nor had they been helped by the legal arguments and legal authorities raised by the parties. For whereas the parties had sought to rely on the CJEU’s UsedSoft judgment ECLI:EU:C:2012:407, the judges observed that that case concerned the EU’s ‘lex specialis’ Software Directive, and the issue of exhaustion. In their view, the judgment was only relevant in so far as it touched upon the distribution right in Article 4 of the EU’s InfoSoc Directive.

Equally, the parties had sought to rely on the CJEU’s VEWA judgment ECLI:EU:C:2011:442. Again, that judgment was of doubtful utility. For whereas it did concern the Rental Rights Directive, the judgment focussed on compensation. The judges also observed that there was nothing in the judgment to suggest that the rental exception only applied to physical objects and thus not to e-books.

The Hague District Court considered a great many issues and questions which had been proposed by the parties. Most of these were batted away with reasoning that is not altogether pellucid but in the end the court confined itself to what it considered to be relevant and it made a preliminary reference to the CJEU.

Questions Referred
According to the UK Intellectual Property Office’s website, The Hague District Court has asked:

1. Are Articles 1(1), 2(1)(b) and 6(1) of Directive 2006/115 to be construed as meaning that ‘lending’ as referred to in those provisions also means making copyright-protected novels, collections of short stories, biographies, travelogues, children’s books and youth literature available for use, not for direct or indirect economic or commercial advantage, via a publicly accessible establishment:
– by placing a digital copy (reproduction A) on the server of the establishment and enabling a user to reproduce that copy by downloading it on to his/her own computer (reproduction B),
– in such a way that the copy made by the user when downloading (reproduction B) is no longer usable after a limited period, and in such a way that other users cannot download the copy (reproduction A) on to their computers during that period?

2. If Question 1 is to be answered in the affirmative: does Article 6 of Directive 2006/115 and/or any other provision of EU law preclude Member States from imposing on the application of the restriction on the lending right included in Article 6 of Directive 2006/115 a condition that the copy of the work made available by the establishment (reproduction A) must have been brought into circulation by an initial sale or other transfer of ownership of that copy within the European Union by the rightholder or with his consent within the meaning of Article 4(2) of Directive 2001/29?

3. If Question 2 is to be answered in the negative: does Article 6 of Directive 2006/115 lay down other requirements for the source of the copy (reproduction A) provided by the establishment, for instance the requirement that the copy was obtained from a lawful source?

4. If Question 2 is to be answered in the affirmative: is Article 4(2) of Directive 2001/29 to be construed as meaning that the initial sale or other transfer of ownership of material as referred to in that provision also means making available remotely by downloading, for use for an unlimited period, a digital copy of copyright-protected novels, collections of short stories, biographies, travelogues, children’s books and youth literature?

Comment
The referring court’s order contains reasoning that is a little scrappy in places. Perhaps there was division among the three judges sitting on the bench?

The new technology associated with e-books has also irritated the laws governing import tax.

Although not related to the act of lending, other provisions of the Rental and Lending Rights Directive are at stake in a recent reference from the Landgericht in Cologne.

Update – 13 November 2015
There is a preliminary reference from Poland about the principle of fiscal neutrality in respect of ebooks. The case is docketed as Case C-390/15, Rzecznik Praw Obywatelskich (RPO). Many of the official translations of the questions published on the Curia website are incomplete. However, the Bulgarian version reads:

Невалидна ли е точка 6 от приложение III към Директива 2006/112/ЕО на Съвета от 28 ноември 2006 година относно общата система на данъка върху добавената стойност […], изменена с Директива 2009/47/ЕО на Съвета от 5 май 2009 г. за изменение на Директива 2006/112/ЕО, по отношение на намалените ставки на данъка върху добавената стойност […] , тъй като в хода на законодателната процедура не е било спазено същественото процедурно изискване за консултиране с Европейския парламент?Невалидна ли е разпоредбата на член 98, параграф 2 от посочената в точка 1 Директива 2006/112/ЕО във връзка с точка 6 от приложение III към тази директива, тъй като нарушава принципа на данъчен неутралитет, доколкото тази разпоредба изключва прилагането на намалените данъчни ставки за книги, издадени в дигитална форма, и за други електронни публикации?

Update – 8 February 2016
According to the Curia website, the Third Chamber is due to hear Case C-174/15, Vereniging Openbare Bibliotheken on 9 March 2016.

Update – 3 May 2016
The Opinion of Advocate General Szpunar is due to be handed to the Chamber on 2 June 2016.

Update – 9 October 2016
The Third Chamber is due to hand down its judgment on 10 November 2016.