How does the law define e-books?

Posted by Simon Stokes on

What is an e-Book? - licensing and acquiring rights

There are a variety of e-book types – the classic format being a digital version of the printed text and illustrations (if any) with very limited interactivity (limited to a table of contents, search facility and ability to add notes).

Other e-books (“enhanced e-books”) contain much more content and are more akin to multimedia works. The definition is important as in a typical author-publisher contract the author will grant exclusive rights to the publisher to exploit his or her work together typically with the right for the publisher to also sublicense others to do so (through so-called subsidiary rights). These rights need to be defined as the royalty payable to the author will typically vary. The publisher also needs certainty that it has acquired the rights it needs to create an e-book and then sell it through an online platform.

Parallel trade: Exhaustion of rights/first sale doctrine and licensing/distribution models

Having acquired the rights and created the e-book the publisher then needs to “sell” the book. The publishing industry has been finding its way as to how best to “sell” e-books. For example are they sold to a distributor and then resold (with the distributor being free to set prices) or does the distributor act as an agent rather than a reseller allowing the publisher to set the end user price assuming this complies with competition law? In academic publishing the role of content aggregators and online libraries is also important to understand.

In fact e-books are not strictly speaking “sold” (they cannot be "sold" as they are not a piece of tangible property although the expression is still used) – they are licensed (in the US “rented”) – the purchaser acquires a limited non-exclusive licence to read the e-book much as in the same way that software is licensed with resale or transfer of the licence to another person typically being prohibited (unless the publisher or platform provider permits this). There is an ongoing debate about whether “used” e-books can be "resold" (just as used/second-hand books and records/CDs can be lawfully resold through the application of the first sale/exhaustion of rights doctrine).

The first sale/exhaustion of rights doctrine says that once a copyright work (e.g. a printed book) is put on the market with the copyright owner's consent the copyright owner has "exhausted" their rights to prevent the further resale and distribution of the work by asserting copyright. In the EU there is "community exhaustion" – a book sold in the UK (or Germany) can then be freely resold within the EU. The position is more complex as regards the importation of goods into the EU – here the generally understood position is that unless the copyright owner has consented to this then there is no "international exhaustion" – the EU only recognises regional/community exhaustion where the first sale is within the EU – so the importation of English language books from the USA into the UK could potentially be stopped assuming the books were only licensed by the author/publisher for the USA/North American market. In the USA itself however the legal position is different – in Kirtsaeng v John Wiley & Sons[1] the US Supreme Court recently ruled that in relation to copyright the USA recognised international exhaustion – in that case textbooks lawfully available in Thailand could be lawfully imported into the USA.

Whilst this case has caused much comment and concern in publishing circles, UK publishers can take some comfort that the EU applies a more limited, territorial approach to the exhaustion of rights than the USA. Also in the EU exhaustion of rights traditionally only applies to tangible goods (e.g. a printed book) – not an eBook which is typically licensed on restrictive terms – although UsedSoft GmbH v Oracle International Corp[2] (a recent case which permitted the resale of software) suggests that this traditional distinction between tangible goods (e.g. printed books) and intangible products ( e.g. eBooks) might be breaking down as far as European law is concerned.

Public lending right and eBooks

Unlike printed books, eBooks are not currently covered by public lending right. The Digital Economy Act 2010 opened the door for this to happen but this part of the Act has not yet been implemented. However in July 2013 the government announced that the public lending right scheme would be extended to eBooks and audio books borrowed on-site at public libraries during 2014.

[1] 568 U.S.__(2013)

[2] Case C-128/11, 3 July 2012.

About the Author

Leading the firm's technology practice in London, Simon specialises in information technology law, including outsourcing, cloud services, protecting software IP and licensing of market leading data analytics software.

Simon Stokes
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