2 Steps Forward, 1 Step Back: The Problematic Protection of Consumers of Digital Content

I was recently lucky enough to be asked to give a short presentation at the 2014 Edinburgh Postgraduate Law Conference, entitled “Innovation in the Law: New Challenges, New Perspectives“. The organising committee, in conjunction with the Edinburgh Law School and the Institute for Academic Development put on a great two-day event, creating a brilliant opportunity for PhD students, early career researchers, established academics and interested parties to swap ideas, talk at length about their personal obsessions, bemoan the constant struggles that are funding, exercising the power to say “no”, and engage in ample usage of the term “interdisciplinary”. I’d like to thank again all involved in the organisation of a thoroughly enjoyable event, and of course the Forschungsstelle für Verbraucherrecht for continuing to finance my wanderings around Europe in the name of digital consumer protection.

The talk I gave in the panel on “Technology and Law: Confronting Uncertainty, Testing Promises“, was entitled “2 Steps Forward, 1 Step Back: The Problematic Protection of Consumers of Digital Content“, the article and slideshow for which you can find below. Rather than the traditional (and oft beset by delays) practice of publishing conference proceedings in a printed version, the conference chose the novel approach of asking the speakers to present their ideas in a 1,000-word blog post, which was then made available on the conference website for anyone who wanted to read up on the topics in advance on the talks. I thought this was a particularly useful tool in preparing for the panels I attended.


 

There has been of late much good news heralded for digital consumers, in particular consumers of directly-downloaded “digital content”[1] – from the ruling of the CJEU in the Usedsoft v Oracle case from July 2012, to the changes implemented this year by the Consumer Rights Directive (CRD)[2] and the national transpositions thereof. However, the celebration of this newfound level of protection for digital consumers may be somewhat premature. The law’s response to changes in the digital marketplace and the emergence of digital content as a serious proportion of E-Commerce have been hampered by the difficulties of regulating any continuously developing technological area.[3] There remain a number of hurdles to effective consumer protection in these areas, stemming from compromises such as attempting to designate digital content as either goods or services more often than as a sui generis category, or the concept of affording different rights and regulations to digital content when it is stored on a tangible medium. To assess the current position consumers of digital content find themselves in, it is worth analysing in more detail both the aftermath of the Usedsoft decision, as well as the more recent legislative reforms regarding digital content, in particular their effects on the video games industry.

The Aftermath of Usedsoft v Oracle

Hopes were high amongst the legally-literate in the gaming community, that the ruling in Usedsoft would lead to increased rights for “buyers” of directly-downloaded computer games, and yet the extension of the rights to resale or gifting, along with similar rights such as refunds and withdrawal, simply haven’t materialised.[4] For all the anticipation the Usedsoft decision engendered, very few in Europe seem to have taken the decision and attempted to apply it to a broader scope, and those who have done so tend to have met with little success (apart from the recent approach taken by the District Court of Amsterdam ruling e-books are susceptible to resale under the exhaustion principle by application of UsedSoft.)[5] In particular, much of the aftermath has played out in Germany, the country from whence Usedsoft originated (and indeed to which it returned after the CJEU made their ruling on the relevant matters of EU law). Yet in the first couple of cases which followed the decision the German courts seemed to restrict the application to cases involving standard software. The Oberlandesgericht Frankfurt confined the decision to cases based on the Software Directive (which was treated as lex specialis in relation to the InfoSoc Directive),[6] the Landgericht Bielefeld explicitly refused to apply the approach to the online sale of e-books,[7] and the Landgericht Berlin confirming that key-selling remains copyright infringement.[8][9]

Significantly, the Landgericht Berlin decided against the vzbv (the German Federal Consumer Association) in their second case against Valve, the company behind the online video game distribution platform Steam. The court reiterated that Usedsoft does not extend to allowing the transfer of Steam accounts (containing copies of or licenses for video games bought by the user).[10] Though this case was perhaps unhelpfully framed, in that the vzbv may have been more successful if they argued for the transferability of the individual licenses and CD keys for individual games, rather than the transferability of the whole accounts themselves. It seems that for the time being, there is little hope of extending the concepts of exhaustion and resale to video games, let alone to directly-downloaded music and video. The question is whether the EU trend will remain restrictive regarding exhaustion, along the lines of the ReDigi case in the US,[11] or follow the recent Dutch approach.

Digital Content and the Consumer Rights Directive

Though similarly heralded as a great leap forward in the protection of digital consumers, the attempts at a harmonisation of the concept “digital content” and increased rights for consumers of such content, as set out in the CRD, are sadly subject to numerous qualifications and are perhaps not as revolutionary as initially hoped or even planned. Furthermore, in light of the fully-harmonising nature of that Directive, any decisions as to where to draw the line with protection of digital consumers leave little room for more well developed regulation in member states. The CRD, replaced, as of 13 June 2014, Directive 97/7/EC[12] and Directive 85/577/EEC[13]. However, it is worth noting that both Directive 1999/44/EC[14] as well as Directive 93/13/EEC[15] were simply amended but remain in force,[16] although initial proposals for the CRD suggested fully replacing each of these Directives, as well as a number of others.[17] This Directive imposed as set out in Art 4 CRD, full harmonisation requirements on the national legislatures. Much speculation about the revolutionary nature of the CRD perhaps stems from the initial proposals,[18] without taking into account the significantly limited scope of the Directive as finally enacted – a scope which in many ways was reduced due to the difficulty of reaching consensus on any point which was to be fully harmonised, rather than the up-until-recently standard method of minimum harmonisation.[19]

The lack of clarity in the CRD is on the whole rather unhelpful, such as the understandably vague definition of “digital content” under the CRD as “data which are produced and supplied in digital form”,[20] but also the fact that the CRD itself sets out that digital content supplied on a tangible storage medium can be considered “goods”,[21] and as such subject to the rules for a sale of goods contract, but does not go into detail about the contractual framework for a supply of digital content through direct downloading, streaming or any other method not including a tangible storage medium. By inference the rules for supply of services, can be presumed to apply here, although the lack of clarity is problematic. In addition to a number of particularly welcome measures regarding the prohibition on the use of pre-ticked boxes or opt-out boxes, as well as the restriction to reasonable charges for methods on online payment, some of the most significant changes in the CRD regard increased rights of withdrawal for distance contracts – a category which nowadays primarily deals with online transactions. However, it is questionable as to whether the lot of consumers of digital content has in fact been improved, given the limitations on rights, in particular this right to withdrawal, when it comes to intangible (not delivered on a physical storage medium) digital content,[22] or “the supply of sealed audio or sealed video recordings or sealed computer software which were unsealed after delivery”.[23] These two exceptions to many of the most important changes in the CRD leave gamers in particular with little to no increased protection.

These and similar developments suggest that the trend of “two steps forward, one step back” seems set to continue in the world digital consumers.

~ Shane


 

[1] The new, if somewhat vague, definition of which is presented in Art. 2 of the Consumer Rights Directive (fn2 below) as “‘digital content’ means data which are produced and supplied in digital form;”, and which could logically cover music, films, e-books, software, apps and other computer games.

[2] Directive 2011/83/EU of the European Parliament and of the Council of 25.10.2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council, OJ

[3] See Jonathan B Wiener, “The regulation of technology, and the technology of regulation”, (2004), Technology in Society, Vol. 26, pp. 483–500, and Carolyn Abbot, “Bridging the Gap – Non‐State Actors and the Challenges of Regulating New Technology”, (September 2012), Journal of Law and Society, Vol. 39, Issue 3, pp. 329-358, 2012.

[4] “Losing Steam: Is Usedsoft v Oracle Actually Changing the Video Game Industry?”, The Undisciplined, <https://theundisciplined.com/2014/03/20/losing-steam-is-usedsoft-v-oracle-actually-changing-the-video-game-industry/>

[5] Míchel Olmedo Cuevas, “Dutch copyright succumbs to aging as exhaustion extends to e-books”, Journal of Intellectual Property Law & Practice, first published online October 26, 2014 doi:10.1093/jiplp/jpu200

[6] OLG Frankfurt, 18th December 2012 -11 U 68/11, [2013] GRUR 279-285

[7] LG Bielefeld, 5th March 2013, [2013] GRUR Prax 207

[8] Felix Hilgert, “German Court: Key Selling Infringes Copyright”, Online.Games.Law, (12 September 2014), available at <http://onlinegameslaw.com/german-court-key-selling-infringes-copyright/>

[9] See Paul L C Torremans, “The Future Implications of the Usedsoft Decision”, CREATe Working Paper 2014/2 (February 2014), CREATe Working Paper Series, doi: 10.5281/zenodo.8382

[10] Felix Hilgert and Constantin Ewald, “User accounts on distribution platforms do not have to be transferable”, Online.Games.Law, (23 September 2014), available at <http://onlinegameslaw.com/user-accounts-on-distribution-platforms-do-not-have-to-be-transferable/>

[11] Capitol Records, LLC v ReDigi Inc., United States District Court for the Southern District of New York, 30th March 2013, No. 12 Civ. 95 (RJS).

[12] Directive 97/7/EC on the protection of consumers in respect of distance contracts

[13] Directive 85/577/EEC to protect consumer in respect of contracts negotiated away from business premises

[14] Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees

[15] Directive 93/13/EEC on unfair terms in consumer contracts

[16] “The Directive on Consumer Rights”, European Commission Website, available at <ec.europa.eu/justiceconsumer-marketing/rights-contracts/directive/index_en.htm>.

[17] See Aonghus McClafferty, “Effective Protection for the E-Consumer in Light of the Consumer Rights Directive”, Hibernian Law Journal 2012, 85.

[18] Ibid at 112, see also “Proposal for a Directive on Consumer Rights” European Commission – SPEECH/08/681, 05.12.2008, available at <europa.eu/rapid/press-release_SPEECH-08-681_en.htm>.

[19] See Shane McNamee, “Implementation of the Consumer Rights Directive: Ireland”, euvr – Journal of European Consumer and Market Law, Issue 3/2014,

[20] Recital 19 and defined in Art 2 Para 1.

[21] Recital 19, “If digital content is supplied on a tangible medium, such as a CD or a DVD, it should be considered as goods within the meaning of this Directive.“

[22] For example, see the exception from the right of withdrawal for intangible digital content one performance has begun and with the consumer’s consent to exclusion set out in Art. 16(m) CRD, and its transposition in Regulation 13 Para 2 lit b 2013 Regulations.

[23] See Art 16 lit i CRD, and its transposition in Regulation 13 Para 2 lit k 2013 Regulations.

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