Under Chinese Copyright Law, it is widely held that the right of distribution applies only to “tangible” original or copies of a work, and thus there is no Internet distribution, no application of exhaustion doctrine in the network environment. Accordingly, online delivery of digital works is only subject to the right of communication to the public through network. This opinion, which originates from Europe, has already been explicitly rejected by the EU Court of Justice in the Usedsoft case. In fact, this conventional view is supported by neither national statutes (including Chinese Copyright Law) nor international treaties. It is the transfer of ownership in the original or copies that characterizes the right of distribution. This right should not be confused with the right of communication to the public through network. Their differences reside not in tangible or intangible medium where the work concerned is fixed. In essence, the right of distribution requires manifestation of intention on the part of the copyright holder or a person acting under his authorization to transfer the ownership of the copies. As a result, the purchasers of the copies may enjoy the content of the work of authorship for unlimited periods at their own choice of time and place. In contrast, the right of communication concerns itself with communication of the content of the work. The audience is supposed to enjoy the content of the work only when communication occurs. True, the audience may employ technical means to “fix” the work communicated to them. The copies so fixed and owned, however, are outside the copyright holder’s intention. Such fixing act infringes upon the right of reproduction if it is not exempted as “fair use.” Therefore, the intention manifested determines whether a given conduct is online distribution or online communication of works. Accordingly, the exhaustion doctrine should also apply to digital copies delivered through the Internet. Where the copyright holder or a person acting under his authorization sells a digital copy and delivers it to the buyer through the Internet, the right of distribution of the copy should be exhausted. The right holder may not interfere with the resale of the copy by the buyer who makes that copy unusable to him at the time of the resale. This is so even where the buyer sells the copy to a third party and delivers it also through the Internet. Honestly, the exhaustion doctrine traditionally applies to the particular copy sold to the buyer with the copyright holder’s consent. The particular material copy which the buyer obtained cannot transfer over the Internet, and a new material copy must be created for the third party as a result of the online delivery. There is reproduction without authorization. That reproduction, however, is necessary for the new lawful acquirer to use the work which he has purchased and thus should not be considered as infringement of the right of reproduction. The exhaustion doctrine so applied promotes competition and does not make copyright holders’ situation worse. Surely, it is hard for a copyright holder to police whether the buyer actually deprives himself of the digital copy which he claims to have been resold. However, a copyright holder who distributes copies of a work on a material medium such as a DVD, to which the exhaustion doctrine applies definitely, is faced with the same problem. To fix the policing problem, a copyright holder can and does adopt technical measures to protect his own interests from dishonest acts. Furthermore, he can sue the buyer for infringing on the distribution right. To be exempted from infringement，the buyer shall carry the burden of proof that his acts satisfy the conditions for exhaustion, one of which is no access to the copy resold after its online delivery. The burden of proof for the copyright holder to establish infringement remains the same, regardless whether the buyer’s online delivery act should be characterized as distribution or communication to the public through network. Therefore, it is unlikely that recognizing digital exhaustion will lead to increased infringement and added cost for enforcing copyright. Undoubtedly, should digital exhaustion apply, copyright holders would be exposed to competition from markets for “used” digital works and might suffer from economic injuries. But this harm comes from healthy market competition and is perfectly envisioned by the copyright exhaustion doctrine.