Legal Journal

Under the Draft Amendment to Law on Intellectual and Artistic Works, Resale of Computer Programs Is Being Re-Regulated In Respect of Exhaustion of Rights Principle

While resale of computer programs is assessed in the light of the exhaustion of rights principle under Copyright Law, it is discussed with the concept of "parallel trade" under Commercial Law. In today's world, almost every commodity/service carries a trademark or comprises an artistic work; thus, it is necessary to reconcile the principle of free trade with the rights of the author granted by Copyright Law.  In fact, the long debated principle that “the right holder cannot intervene the work or its copies after the first sale of the original of a work or copies thereof”, is an inseparable part of the concept of "free trade". Any rights to be given to the author of a work will be an obstacle to free trade. Thus, this principle is addressed and discussed in all commerce related directives and studies on intellectual property rights.

Such discussions have two dimensions: first one is; accepting the exhaustion of rights on a territorial basis, in other words, if a work or its copies are distributed/sold in a country with the permission of the right holder, the rights of the author of such work shall be deemed to be exhausted only in that country; the second one is; applying this principle on a global basis and thus, if a work or its copies are distributed/sold anywhere in the world, the rights of the author of such work shall be deemed to be exhausted. In this respect, international regulations have kept this issue at the discretion of each country’s local legislators.

Concerning the computer programs, exhaustion of distribution rights principle was first described in Article 4-c of the Directive on the Legal Protection of Computer Programs No. 91/250. According to the definition under the said Directive; "The first sale in the Community of a copy of a program by the rightholder or with his consent, shall exhaust the distribution right within the Community of that copy, with the exception of the right to control further rental of the program or a copy thereof”.  It is clear from the Article that the exhaustion of rights principle is adopted on a territorial basis within the European Union. The same principle has been preserved in Article 4 (2) of the new Directive on the Legal Protection of Computer Programs No. 2009/24/EC, which overrides the Directive No. 91/250.

Regarding the exhaustion of rights principle, Article 23 of Law on Intellectual and Artistic Works (“the Law”) is amended as follows: "The resale or distribution of copies of computer programs and databases, after their sales by way of transfer of ownership or distribution on the domestic or international market with the permission of the right holder, does not violate the distribution right thereof. For the other types of works, the resale or distribution of physical forms of original works or their copies on the domestic market after their sales by way of transfer of ownership or distribution on the domestic market with the permission of the right holder, does not violate the distribution right thereof. The rights of renting and lending are reserved for the application of this paragraph."

With this amendment made in the Law, exhaustion of rights principle on the global basis is accepted for computer programs. According to the amendment, if a work or its copies are distributed/ sold anywhere in the world, the rights of the author on that copy of the work shall be deemed to be exhausted and the right holder cannot be able to intervene in resale of copies of a computer program. One can argue that this change will prevent corporations, especially those developing and distributing programs on a global scale, from "abusing their dominant position".

There is, however, an important issue that is being confused regarding the exhaustion of rights.  As can be seen from the expression of the Directive, the exhaustion of rights principle is a concept related to "distribution of computer programs", meaning the sale and resale of such programs. It underlines that the right holder will not be able to intervene in the re sale of the copies that the author has already allowed to submit to the market once. Having said that, transfer of a user license to a third person is another issue. A third party transfer of a used computer program must comply with the Law, Articles 48-52. In other words, a "user" of a computer program, may only transfer his license rights on the program if "right to transfer" exists in its contract. This issue is clearly regulated in Article 49 of the Law. In addition, this approach of the Law is also in line with the Article 30 of the preamble of the Directive on Harmonisation of Certain Aspects of Copyright and Related Rights in the Information Society No. 2001/29/AT, which stipulates the licensing through contract. Nevertheless, a recent ruling of a court that "the users could transfer their licenses to third parties without the need of consent" has created confusion on the subject as well as a clear contradiction with Article 49 of the Law. However, as we have noted above, the exhaustion of rights is a concept related to "the distribution process and the inability to intervene in the other distribution chain after the sale of the first copy". It must be understood in this way.

This policy and regulation are not related with the "invalidity" of statements under the computer program license agreements that imply the exact opposite or with the transfer of license agreements. It is understood that this issue will continue to be discussed.