What virtual products can we resell?

The free movement of goods is, together with the free movement of persons, services and capital, one of the four fundamental freedoms which contribute to the completion of the internal market. Which is presented in Title I of Part Three of the Treaty on the Functioning of the European Union (TFEU) entitled “The internal policies and actions of the Union”. The Court of Justice considers that the provisions sanctioning these freedoms are “fundamental for the Union”, which explains in particular that any obstacle, even minor, will be prohibited (CJEU, 5 Dec. 2013, case C-514/12) .

Copyright and free movement

The Court also underlines that the free movement of goods constitutes “a fundamental principle of the Treaty” (CJEU, 19 Nov. 2020, case C-663/18, BS and CA) or even “a fundamental freedom guaranteed by the Treaty” (CJEU, 10 September 2014, case C-423/13).

Based on these developments, the buyer of a virtual good or product should in principle be able to transfer it freely within the European Union under the exhaustion of rights rule. Community logic would therefore amount to believing that copyright gives way to the principle of the free movement of works. But that’s nothing.

Exhaustion of rights and software

Indeed, Article 4, paragraph 2 of Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs provides: “The first sale of a copy of a computer program in the Community by the person entitled to the right or with his consent exhausts the right to distribute that copy in the Community, subject to the right to control subsequent rentals of the computer program or to a copy of it”.

The exhaustion of the distribution right of an intellectual work does not allow the author who has authorized its reproduction and marketing to oppose its free circulation and therefore in particular its resale. Therefore, the practice of reselling used software was recognized by the CJEU on 4 July 2012.

For the latter, a license “worth being sold” despite the qualification desired by the parties and a clause providing for its “non-transferable” character, since the use of the software is not limited in time and that a corresponding price to affordability paid the value of the copy obtained.

What fate for a video game?

In 2016, the consumer rights defense association UFC – Que Choisir was moved by the fact that the general conditions of use of Steam, the online video game platform published by the company Valve, forbade its users to resell dematerialized video games in this way purchased on the basis that no difference in treatment was warranted with games on physical media.

With a sentence of 17 September 2019, the Court ruled in favor of the Consumers’ Association, declaring that this clause, among thirteen others, had to be considered unwritten due to its illegitimate or abusive nature. Valve has appealed. With a sentence dated October 21, 2022, the Paris Court of Appeal partially overturned the sentence, holding in particular that the clause prohibiting the resale of dematerialized video games was not abusive. Video games cannot be limited to simple computer programs but must be considered as complex works including – in addition to the software components – many other elements such as graphics, soundtrack and sound elements, scenario and characters.

The rule of exhaustion of the distribution right therefore does not apply. Video games, on the other hand, are subject to the rules of “communication to the public” via download, which corresponds to “making the work available to the public so that everyone can have access to it from the place and at the time they individually choose”. The Court therefore overturns the first instance judgment on the grounds that the copyright holder has the right to prevent the making available of his work as this does not constitute an act of distribution subject to the exhaustion rule.

What about the new virtual products?

In the light of the latter jurisprudence, by analogy, an essential element of the analysis is whether virtual products marketed in the metaverse linked to an NFT fall under common copyright or software. This clarification would have the effect of limiting the scope of application of the exhaustion rule to tangible or intangible media.

The association of an NFT with a virtual product presupposes the existence of a computer program called a “smart contract” which makes it possible to register the NFTs in the blockchain and to manage their use and transferability as well as the rights to the underlying digital sub-digital. This smart contract is not the main object of the transaction, but rather an accessory that enables the provision and use of the virtual product and its NFT. The regime applicable to virtual products associated with NFTs could therefore be that of ordinary copyright legislation.

For the moment, these are still avenues for reflection that deserve to be explored in the light of legislative and jurisprudential initiatives.

The question remains unanswered, prudence and rigor remain the watchwords of this new slice of the market.

Pasquale Augustiassociate attorney, JD

Caprioli & Associateslaw firm member of the JurisDéfi network

The opinions of the experts are published under the full responsibility of their authors and do not commit the editors in any way.

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