Does the second-hand market for digital content still have a future?

In most cases, selling second-hand e-books is not permitted without the permission of the copyright holder. The same applies to the resale of much other digital content. In the Tom Kabinet case (19 December 2019, C-263/18), the European Court of Justice ruled that the online resale of an e-book qualifies as a "communication to the public" and not as an act of distribution. Consequently, the exhaustion principle that allows the resale of physical books does not apply to e-books. Therefore, a genuine second-hand market for digital content has a very limited legal future: anyone offering e-books, e-versions of textbooks, or similar files second-hand runs a real risk of copyright liability without the publisher's permission.

Short answer: what is and isn't allowed?

• Reselling a second-hand e-book: in principle, not without the permission of the copyright holder.
• Reading a self-purchased e-book: perfectly fine; private use is not affected.
• Reselling a paper book: allowed, thanks to the exhaustion rule.
• Reselling software: sometimes allowed under certain conditions (see the UsedSoft case), but that is a different legal framework.

Exhaustion: why a paper book does and an e-book does not

The core of this discussion is the concept of exhaustion. Exhaustion means that the rights holder "uses up" their distribution right as soon as a copy is sold for the first time within the European Union with their permission. From that moment on, the buyer may freely resell that copy without the rights holder being able to object. That is why you can simply offer a used paperback book for sale second-hand.

The situation is different for digital files. The doctrine of exhaustion was written for tangible copies. The question in the Tom Kabinet case was whether that rule also applies to a digital file that can be copied technically endlessly and without loss of quality. The Court's answer was no: exhaustion does not occur with e-books, and the rights holder retains their rights regarding resale.

The Tom Cabinet case in brief

Via the Tom Kabinet platform, users could offer purchased e-books for sale and resell them, similar to second-hand paper books. In doing so, the user lost their own copy. The Dutch Publishers Association (NUV), together with the General Publishers Group (GAU), disagreed with this and initiated legal proceedings. The core of the dispute: may a legally purchased e-book be resold in the same way as a paper book?

Because the outcome was uncertain, the Dutch court referred preliminary questions to the European Court of Justice. E-books are literary works that do not fall under the Software Directive, but under the Copyright Directive. Consequently, it was not clear in advance whether the rules applicable to software also apply to e-books.

Why software, but not an e-book?

The Court previously ruled in the UsedSoft case that purchased software can indeed be subject to exhaustion: in principle, you may resell a purchased software license subject to conditions. Many parties expected that this line of reasoning would also apply to e-books. However, the Court made a clear distinction: the UsedSoft rule is linked to the specific Software Directive and cannot simply be extended to literary works such as e-books, which fall under a different legal framework.

What did the European Court of Justice decide?

The Court ruled that offering a second-hand e-book online must be regarded as a "communication to the public" and not as an act of distribution. The consequence of this is that the exhaustion rule does not apply. In concrete terms, this means:

• In principle, the permission of the rights holder is required for the online resale of an e-book .
• The buyer of an e-book does not automatically acquire the right to further trade that file.
• It does not matter that the file is available to only one user at a time.

In doing so, the Court gave significant weight to the fact that a digital copy, unlike a paper book, does not wear out. A second-hand e-book is a perfect qualitative substitute for a new copy and is often offered at a lower price. Furthermore, it is practically impossible for publishers to verify whether a seller actually deletes their original copy. This could lead to more copies being in circulation than the publisher ever released. According to the Court, applying the exhaustion principle would therefore disproportionately prejudice the interests of the rights holders.

Consequences for the second-hand market of digital content

The ruling has made the digital second-hand market for e-books largely impossible in practice. Tom Kabinet's business model proved no longer viable following the ruling. For entrepreneurs considering a platform or service related to second-hand digital content, the consequences are significant:

• E-books and e-versions of textbooks may not be offered second-hand without the publisher's permission.
• Subscription and streaming models are becoming more relevant: with those models, you do not purchase a copy but temporary access, with agreements that do rely on the permission of the rights holder.
• The outcome applies directly to e-books. For other types of digital content (such as software, games, or music files), the outcome may vary on a case-by-case basis, depending on the applicable legal framework and the exact license terms.

It is important that the ruling concerns the resale of files. The private use of a lawfully purchased e-book is not affected by it: you may simply continue reading your own purchased e-book.

Practical example: a marketplace for digital learning resources

Suppose an entrepreneur wants to launch a platform where students sell used e-versions of textbooks to each other. At first glance, this looks like an ordinary second-hand market. Legally, however, it is not. Because e-books are involved, permission from the publisher is, in principle, required for any resale. Without such agreements, the platform infringes copyright, and the entrepreneur risks a cease and desist order and damages.

A workable alternative is a model based on licenses or subscriptions, in which publishers are involved and receive remuneration. In this way, the offering shifts from "resale of a copy" to "granting access" with the permission of the rights holder. Anyone setting up such a platform would do well to record the agreements in clear ICT and licensing contracts.

What does this mean specifically for you as an entrepreneur?

1. Do not offer e-books or similar files second-hand without permission from the copyright holder.
2. Review your revenue model: if you are building a service around digital content, base it on licenses or subscriptions instead of the resale of copies.
3. Record agreements with publishers or rights holders in clear contracts, so that it is clear what is and is not permitted.
4. Are you unsure about a specific type of digital content? Have the situation legally reviewed before you invest. The rules for software, games, and music may differ from those for e-books.

Frequently asked questions about second-hand e-books and digital content

Am I allowed to sell a purchased e-book second-hand?

As a general rule, not without the permission of the copyright holder. The European Court of Justice ruled that the online resale of an e-book constitutes a communication to the public, to which the exhaustion principle does not apply. You are free to resell a paper book.

Why is it allowed to resell a paper book, but not an e-book?

With a physical copy, exhaustion occurs after the first sale with the permission of the rights holder. In the case of an e-book, the Court views resale not as distribution but as communication to the public, for which permission remains required. Moreover, a digital file does not wear out and is a perfect substitute for a new copy.

Does this also apply to second-hand software or games?

The ruling specifically concerns e-books. Separate rules apply to software (see the UsedSoft case), where resale may be possible subject to conditions. For other digital content, it depends on the legal framework and the license terms. Have this assessed on a case-by-case basis.

Am I still allowed to use my own purchased e-book?

Yes. The ruling concerns the resale of files, not private use. You may continue to read a legally purchased e-book on your own devices.

I want to start a platform for digital content. What should I look out for?

Base your model on a basis with the permission of the rights holders, for example via licenses or subscriptions, rather than the resale of copies. Legally document the agreements properly and have your revenue model reviewed in advance to avoid liability.

Is this statement still current?

Yes. The Tom Kabinet judgment from December 2019 remains the guiding framework for the resale of e-books within the EU. There is no subsequent ruling that has reversed the main rule. However, please bear in mind that the assessment of other digital content (software, games, music) may vary depending on the situation.

What risks do I run if I offer second-hand e-books after all?

Without the permission of the rights holder, you are infringing copyright. You may then face a claim for an injunction and damages. Therefore, have an offer or platform legally reviewed beforehand.

Need help with digital content and copyright?

Do you want to set up a service or platform around digital content, or are you unsure whether your offering is compliant with copyright law? Our copyright lawyers will think practically with you and help you choose a revenue model that holds up legally. You have also come to the right place for questions regarding ICT law and related contracts

For concrete advice, contact us without obligation via our legal assistance or schedule an intake directly. This way, you know exactly where you stand beforehand.