Social media sites are transforming not only the daily lives of consumers, but also how companies interact with consumers. Here at Morrison Foerster, across all of our practice groups, we are seeing complex, cutting-edge legal issues arising out of social media. As with the Internet boom during the mid-to-late 1990s, social media is generating new legal questions at a far faster pace than the law’s ability to provide answers to such questions. In an effort to stay on top of these emerging issues, and to keep our clients and friends informed of new developments, Morrison Foerster publishes this blog devoted to the law and business of social media.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Aaron is the chair of the firm’s Technology Transactions Group and co-chair of the Interactive + Digital Media Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals.Aaron’s practice focuses on advising both established and emerging companies in a variety of data- and technology-intensive sectors, including software, SaaS, cloud-based technology, digital media (social media, AR/VR, gaming, streaming media, AdTech), AI, healthcare, consumer electronics, e-commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on branding and marketing, trademark licensing, and content-related transactions, as well as the intellectual property aspects of mergers, acquisitions, asset spin-offs, and private equity investments.He has represented clients such as Autodesk, Meta, OpenAI, Splunk, Konami, Kaiser Permanente, SoftBank, Visa, and Yahoo, among others.Aaron has been recognized by numerous publications for his work on market-defining technology transactions. He is currently ranked by Chambers USA for “Technology Transactions.”Aaron also serves as co-editor of Socially Aware, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics. Aaron is also a sought-after speaker on new and emerging areas of law, and is a frequent presenter and panelist at conferences and legal services programs. In addition to his active practice, Aaron regularly provides pro bono assistance to various nonprofit and charitable organizations such as Common Sense Media and the Starlight Children’s Foundation. He is a member of the board of directors of California Lawyers for the Arts.While in law school at the University of California, Berkeley, Boalt Hall School of Law, Aaron served as executive editor of the California Law Review and was elected to the Order of the Coif. Following law school, Aaron served as law clerk to the Honorable William H. Orrick and the Honorable Martin J. Jenkins, both United States District Judges for the Northern District of California.

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Aaron is the chair of our Technology Transactions Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals. Aaron’s practice focuses on advising both established and emerging companies in a variety of data– and technology–intensive sectors, including software, SaaS, cloud computing, AR/VR, AI, gaming, healthcare, consumer electronics, social media, e–commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on the intellectual property aspects of mergers, acquisitions, asset spin–offs, and private equity investments.

Aaron P. Rubin

Lawrence Gallick is of counsel in the firm’s Austin office and a member of the Technology Transactions Group.Lawrence focuses his practice on technology transactions and licensing matters. His diverse experience includes advising on SaaS agreements, cross-licensing agreements, research and collaboration agreements, development agreements, and distribution agreements. He counsels a broad range of companies across the software, hardware, life sciences, biotech and FinTech spaces, as well as other entities including universities.He advises clients in connection with general corporate matters including contract negotiations, and leasing and technology placement agreements.Lawrence also serves as co-editor of <a href="https://www.sociallyawareblog.com/" target="_blank">Socially Aware</a>, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics.Prior to joining the firm, Lawrence was counsel at another major law firm. Before earning his law degree, Lawrence was a web consultant, project manager, and web developer in Portland, Oregon, where he managed and consulted on projects using industry methodologies and performed custom development and integration of content management systems.Lawrence was named a Super Lawyers “Rising Star” in 2015 and 2018–2022, and is licensed in both California and New York. Lawrence earned his J.D. from the University at Buffalo School of Law, where he was the electronic systems editor for the Buffalo Law Review and awarded the ABA-BNA Award for Excellence in the Study of Intellectual Property Law.

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Lawrence Gallick

Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster.Anthony advises clients on general commercial and transactional matters. He regularly advises companies on the IP aspects of their M&A transactions. His clients include technology, digital media and content for television and music, financial services, and communications companies with diverse intellectual property assets and issues.His practice focuses on the legal aspects of developing, licensing, and commercializing technology and intellectual property, as well as negotiating general commercial contracts, including outsourcing transactions, as well as content and data licenses. He regularly assists clients with legal issues relating to licensing and commercialization of digital media and content, digital content that is distributed over the Internet or streamed, mobile applications and social media, as well as the licensing of recorded music for distribution via digital platforms. Anthony is also experienced with issues relating to open-source software, software development, artificial intelligence and machine learning, cloud-based technology, and protection of proprietary information.Anthony has extensive experience working on matters involving disruptive technologies, such as blockchain. He has helped fintech clients with general intellectual property issues in connection with terms of service for online financial products and services.Anthony is an integral part of the outside pro bono legal team for nonprofit organizations based in New York, including advising clients on legal issues regarding entertainment, social media, privacy rights, and the negotiation of outsourcing and service agreements. Anthony received his J.D. from the University of Michigan Law School in 2009. He received his B.S. from Cornell University in 2004.

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Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster. He advises clients on general commercial and transactional matters. His clients include technology, media, and communications companies with considerable intellectual property assets. His practice focuses on the legal aspects of licensing and commercializing technology and intellectual property, as well as negotiating general commercial contracts. He also regularly assists clients with legal issues relating to mobile applications and social media.

Anthony M. Ramirez

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How Does the European Court of Justice Decision on Exhaustion of the Distribution Right upon First Sale Impact the Resale of Digital Copies? The European Court 

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EU Copyright: No Resale of Digital Content Except for Software?

EU Copyright: No Resale of Digital Content Except for Software? | Socially Aware

Kristina Ehle

How Does the European Court of Justice Decision on Exhaustion of the Distribution Right upon First Sale Impact the Resale of Digital Copies?The European Court of Justice (ECJ) has decided that the rule of exhaustion of the distribution right upon first sale (in the U.S. known as the “first sale” doctrine) does not apply to post first-sale alterations to the physical medium embodying the work if such alterations constitute a new reproduction of the work (here: the transfer of a painting from paper poster onto a canvas). Consequently, such subsequent alterations require the consent of the owner of the reproduction right to the work.The ECJ expressly states that exhaustion of the distribution right upon first sale under the EU Copyright Directive applies to the tangible object into which a protected work is incorporated. Thus, the first sale of intangible digital copies of works will likely not exhaust the distribution right to such copies. This means that the resale of digital music, film, and e-book files duly purchased by way of download from the Internet will likely be considered as copyright infringement if not authorized by the copyright holders.WHAT DOES EXHAUSTION OF THE DISTRIBUTION RIGHT MEAN?When buying a video on a DVD, a hardcover book or an art painting in the EU that was first sold in the EU with the consent of the copyright holder of such work, one can resell such DVD, book, or painting to any other person in the EU later on. The reseller does not need the copyright holder’s consent for such resale. This is possible because Art. 4 (2) of the EU Copyright Directive sets forth that the first sale in the EU of a copy, or of the original, of a copyrighted work by the copyright holder or with his/her consent causes exhaustion of the distribution right of the copyright holder. The copyright holder can neither prohibit such resale nor ask the reseller or purchaser to pay additional compensation.THE CASEIn the case, Allposters, a Dutch company, bought art posters depicting copyrighted paintings of famous artists that were sold in the EU with the consent of the respective copyright holders. Allposters transferred the image of the painting from the purchased paper poster onto a canvas by a chemical process so that the image no longer appeared on the paper poster but only on the canvas. Thus, there was still only one reproduction of the painting – only that it was on a canvas medium instead of on the original paper poster. The image of the painting itself was not altered. The canvases looked much better and bore a much closer resemblance to the original painting than the paper posters did, and Allposters offered such canvases for sale on its websites. Allposters argued that (i) alterations made to a sold copy after the distribution right to such copy was exhausted had no impact on the previous exhaustion and (ii) the transfer of the image from paper to canvas did not constitute a reproduction of the work, as the image was not duplicated.THE JUDGMENTIn its decision of January, 22, 2015, the EJC states that the exhaustion of the distribution right applies to the physical medium in which the work is embodied (here: the paper poster) and that alterations of the physical medium which result in a new object (here: the replacement of a paper poster by a canvas) constitutes a new reproduction of the work – which requires the authorization of the holder of the reproduction right. The ECJ therefore decides that “the rule of exhaustion of the distribution right… does not apply in a situation where a reproduction of a protected work, after having been marketed in the European Union with the copyright holder’s consent, has undergone an alteration of its medium, such as the transfer of that reproduction from a paper poster onto a canvas, and is placed on the market again in its new form.” (<a href="http://curia.europa.eu/juris/document" target="_blank" rel="noopener">http://curia.europa.eu/juris/document</a>)EFFECT ON THE RESALE OF DOWNLOADED COPIES?The, perhaps, even more interesting aspect of this ECJ judgment is its likely impact on the resale of digital copies of copyrighted works purchased by way of download from the Internet:In the UsedSoft Judgment of July 3, 2012 (see <a href="http://curia.europa.eu/juris/document" target="_blank" rel="noopener">http://curia.europa.eu/juris/document</a>), the ECJ decided that the first sale of an intangible copy of a computer program by way of download from the Internet onto a buyer’s device with the copyright holder’s consent causes exhaustion of the distribution right to such copy. As a consequence, the buyer of such intangible copy can resell such “used” copy to third parties without the copyright holder’s consent. However, this judgment was based on the interpretation of the EU Directive on the protection of computer programs (Directive 2009/24/EC) and not on the Copyright Directive.In the Allposters decision, the ECJ clearly states that “exhaustion of the distribution right applies to the tangible object into which a protected work or its copy is incorporated.” For this purpose, it explicitly relies on (i) the wording of recital 28 of the Copyright Directive, according to which copyright “protection under this Directive includes the exclusive right to control distribution of the work incorporated in a tangible article” and (ii) the agreed statement concerning Articles 6 and 7 of the WIPO Copyright Treaty (1996), according to which “the expressions ‘copies’ and ‘original and copies’ being subject to the right of distribution … refer exclusively to fixed copies that can be put into circulation as tangible objects.” In the Allposters case, the ECJ applies precisely those arguments that it had previously rejected as not being applicable in the UsedSoft case. Considering this argumentation, it would appear to be difficult for the ECJ in future cases to turn around and decide that exhaustion of the distribution right under the Copyright Directive also applies to the first sale of intangible digital copies.Therefore, the underlying arguments of the ECJ in the Allposters case are a strong indication that with regard to literary and artistic works other than software (e.g., music, literature, film, art), the ECJ will likely not apply the rule of exhaustion of the distribution right to the first sale of intangible digital copies of such works by way of download from the Internet (e.g., music, film and e-book files). This would mean that, except for the resale of downloaded software copies, the resale of downloaded copies of such works will continue to require the consent of the copyright holder in each case.WHAT ABOUT ALTERATIONS THAT ARE NOT NEW REPRODUCTIONS?The ECJ did not rule on the impact of subsequent alterations of sold physical copies of a work which did not qualify as new reproductions of that work. As regards alterations of a copyrighted work itself, one has to look at the applicable national copyright law of the EU countries, because the exclusive right of authors to authorize adaptations, arrangements and other alterations of their works is not granted by the EU Copyright Directive, but by Article 12 of the Berne Convention as implemented into national law of those countries which are party to this multilateral copyright treaty (including all EU Member States). This alteration right to the work is not impacted by the exhaustion of the distribution right upon first sale. This means that subsequent alterations of the sold work itself require the copyright holder’s consent (e.g. changing a painting of an artist after purchase). However, depending on the national copyright law of the respective country, the mere alteration of the sold physical medium embodying the work can also be qualified as an alteration of the work itself, if such alteration puts the work into a different context, e.g., if the purchaser of a painting changes its frame to a very different frame containing patterns or images that modifies the context of the work (so decided by the <a href="http://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=a8ab19f97be4bd282ff1d75b1fec4fc4&nr=22538&pos=0&anz=1&Blank=1.pdf" target="_blank" rel="noopener">German Federal Supreme Court in 2002, I ZR 304/99</a>)