Exhaustion, Non-exhaustion and Implied Licence

Abstract

This article explores how exhaustion and non-exhaustion of certain rights can be more coherently explained using the common law doctrine of implied licence. Exhaustion, as the name suggests, only focuses on the effect of the first sale or other transfer of ownership of the original or the copy of the work on the copyright owner, namely the consumption of the distribution right. Although the consumption is distinctly for the benefit of the transferee of the original or the copy, the provisions in the directives on exhaustion do not reveal the effect of exhaustion on these transferees, nor the policy justifications that drive such consumption. These provisions only provide simplistically that the distribution of goods exhausts, but the provision of services does not. This leads to certain misconceptions that exhaustion cannot occur if the copy of the work is not in a tangible medium and that for all provision of services authorisation is required. The doctrine of implied licence can help address these concerns. Instead of regarding exhaustion as a statutory phenomenon, reframing it as a licence implied by statute changes the focus from the right lost by the copyright owner to the permission gained by the transferee. Further, the doctrine of implied licence is sensitive to the justifications that drive the implication of the licence, addressing the question as to why exhaustion must occur. Therefore, a framework called the Implied Licence Framework for Exhaustion is proposed here, which not only offers a better explanation for exhaustion and non-exhaustion, but also dispels the misconceptions.