Exhaustion of rights and digital content

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Where physical goods are concerned, there have long been limits on the extent to which the owner of the intellectual property (IP) rights in a product can use those rights to control how and where that product is distributed.

Should the same principle apply to digital ‘goods’, and if so how? Courts have recently been grappling with this with important consequences for the development of digital distribution models and cloud computing.

This principle is a feature of IP law in many territories, including the EU where it is known as ‘exhaustion of rights’, and the US where the ‘first sale doctrine’ comes into play. Once the article in question has been put onto the market with the rights owner’s consent — the ‘first sale‘ — the right to control distribution is generally exhausted and the buyer can sell on without the rights owner’s consent. But there are limits on how far the principle applies, and two important ones have been examined by the courts recently…

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