What virtual products can we resell?

The free movement of goods constitutes, together with the free movement of persons, services and capital, one of the four fundamental freedoms that 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 “Policies and internal actions of the Union”. The Court of Justice considers that the provisions ensuring these freedoms are “fundamental to the Union”, which explains in particular that any obstacle, even a small one, will be prohibited (CJEU, December 5. 2013, case. C-514/12).

Copyright and Free Movement

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

According to 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 rule of exhaustion of rights. Therefore, the logic of the community would be to consider that copyright gives way to the principle of freedom of circulation of works. But it’s nothing.

Exhaustion of Rights and Software

Indeed, Article 4, § 2 i Directive 2009/24/EC of the European Parliament and of the Council of April 23, 2009 on the legal protection of computer programs has: “The first sale of a copy of a computer program in the Community by the right holder or with his consent exhausts the right to distribute that copy in the Community, except for the right to control the rental of the subsequent computer program or a copy thereof”.

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

For the latter, a license “worth selling” regardless of the qualification desired by the parties and a clause providing for its “non-transferable” nature, since the use of the software is not limited in time and at a price corresponding to that economic. the value of the copy received is paid.

What is the fate of a video game?

In 2016, the UFC – Que Choisir consumer protection association was affected by the fact that the general terms of use of Steam, an online video game platform published by the company Valve, prohibited its users from reselling dematerialized video games in this way. bought on the grounds that no change in handling was warranted by games on physical media.

From one judgment of September 17, 2019, the Court ruled in favor of the consumer association, stating that this clause among thirteen others should be considered unwritten due to its illegal or abusive nature. Valve has appealed. IN a decision of October 21, 2022, the Paris Court of Appeal partially overturned the decision, finding specifically 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 complex works that include – in addition to software components – many other elements such as graphics, a soundtrack and sound elements, a script and characters.

Therefore, the rule of exhaustion of the distribution right does not apply. Video games, on the other hand, are subject to the rules of “communication to the public” through downloading, which corresponds to “making the work available to the public so that everyone can access it from the place and time they individually choose.” Therefore, the Court reverses the decision of the first instance in that the copyright holder has the right to prevent the making available of his work, because this does not constitute an act of distribution subject to the rule of exhaustion.

What about new virtual products?

In light of recent case law, by analogy, an essential element of the analysis is whether virtual products traded in the metaverse attached to an NFT fall under copyright or common software. This precision would have the effect of limiting the scope of the exhaustion rule to tangible or intangible supports.

Linking an NFT to a virtual product presupposes the existence of a computer program called “smart contracts” allowing NFTs to be embedded in the blockchain and manage their use and transferability, as well as rights to the digital base. This smart contract is not the main object of the operation, but an accessory that allows the supply and use of the virtual product and its NFT. Therefore, the regime applicable to virtual products related to NFTs may be that of common law copyright.

For now, these are still avenues of reflection that deserve to be explored further depending on legislative initiatives and case law.

The unanswered question, caution and rigor remain the cornerstones of this new market segment.

Pascal Agostiassociate lawyer, doctor of law

Caprioli & Associatesmember of the law firm of the JurisDéfi network

Expert opinions are published under the full responsibility of their authors and in no way engage the editorial staff.

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