RESALE ROYALTIES: STRIKING A BALANCE OR UPSETTING COPYRIGHT TRADITION?

Robert Rauschenberg
Rauschenberg with painting featuring John F. Kennedy

“I’ve been working my ass off just for you to make that profit,” he screamed, upon closing of the Robert C. Scull auction in 1973. The words flowed from the soul of artist Robert Rauschenberg, inspired by the frustration of watching his early work, Thaw, sell for nearly 100 times its first sale value. Rauschenberg originally sold Thaw to collector, Robert Scull in 1959 for $900 while he was still an up and coming artist. Little did he know that several years later he would witness the  same work sell for an astounding $85,000, reaping no benefit from the works’ astronomical appreciation in value.[1]

Although a despondent tale, the story prefaces the experience of a majority of artists who will never benefit from the success of their work. Despite Rauschenberg’s loss, his story sparked a wave of debate regarding artists’ rights and initiated the conversation of what legislation was needed to protect the interests of artists while maintaining a fair and equitable balance with existing law.

Although over 70 countries have openly adopted the resale royalty scheme, the U.S. has resisted such legislation. However, New York recently became the second U.S. state, joining California, to enact a resale royalty plan. Although it appears that the U.S. is merely catching up to the liberal copyright views of the rest of the world, the recent New York legislation has sparked additional skepticism and an influx of debate on the matter of resale royalties. The question still remains, does a resale royalty plan appropriately address the concern for artists’ rights, or does it further complicate and diminish the long-standing tradition of the copyright first sale doctrine?

THE EARLY EMERGENCE OF DROIT DE SUITE

Although the concept of droit de suite is in constant conflict and debate in the U.S., it has been a long embraced concept around the world, recognized as a compromise between the traditional confines of Copyright Law and the protection of artists and their economic interests in their work.

The controversial artists’ right emerged in early 20th century France. Now, it is widely adopted and implemented by 70 countries spanning from Europe, to South America, to Australia, and most recently to the UK, pursuant to the European Union 2006 directive.[2] These territories recognize a resale royalty right guaranteeing artists a percentage of the work’s resale value. The right is not transferable or waive-able, and it lasts the typical copyright lifespan of the artist’s life plus 70 years. The law recognizes that artwork often appreciates in value and that artists are naturally entitled to benefit from the appreciation value of their artwork when resold.[3]

California maintained a liberal attitude and open mind towards the adoption of the droit de suite concept. In 1976 it enacted the California Resale Royalty Act, codified in California Civil Code §986, affording artists a 5% resale royalty on works exceeding the value of $1,000.[4] Not only does the law apply to living artists, but also to those that died in the preceding 20 years of resale, granting the estate of the artist the rightful entitlement to resale royalties. Regardless of its 38 years of enactment, the California Resale Royalty Act consistently fights off oppositions, including a 2012 District Court holding considering the Act a violation of Constitutional Rights. The court held that the Act violated the Commerce Clause by imposing unfounded restrictions on sales occurring outside the confines of California state lines. The case is currently pending appeal, but has placed serious doubts on the suitability of the law.[5]

Despite the advanced California legislation, the rest of the U.S. has remained resistant towards the adoption of a resale royalty system. Although there exist serious efforts to pass legislation, these labors are consistently stalled by congressional committee debate, including the 2011 Equity for Visual Artists Act. However, New York recently proposed the American Royalties, Too (ART) Act of 2014, acknowledging that visual artists are disadvantaged in comparison to other varieties of authors that are able to benefit from royalty systems such as the ASCAP and BMI.[6] Offering more robust provisions than the California Act, the ART Act proposes a modified 5% royalty, with a $35,000 cap on works sold for $5,000 or more. The Act applies to auction houses that have sold at least $1 million in visual art sales in the previous year, allows artist to recoup royalties from any of the 70 countries participating in like royalty schemes, and requires the Copyright Office to deliver a study following the 5th year of enactment to determine the effect on the art market.[7]

While the ART Act seems to draw a thread between the holes in prior legislation, it has still received a slew of opposition, grounded in the same reasoning as the opposition of the California Act and the Equity for Visual Artists Act.

THE CRITICISMS

Although the proposed legislation is thought to protect artists who often fail to reap the economic benefits of their artwork, many continue to criticize the proposed law for reasons set forth years ago. In 1992, The Copyright Office issued an examination of the historical development of droit de suite. It surveyed a small number of nations that recognized the legislation and opposed the incorporation of the law in the U.S. for two primary reasons. First, the Copyright Office feared that the enactment of the law would conflict with free alienability of property, more specifically, the copyright first sale doctrine. Second, it emphasized the lack of empirical evidence that could demonstrate the positive impact of the resale royalty right on the visual arts market.[8]

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BRITTANY ELIAS
Email: [email protected]
Phone: (310) 551 – 0600
Brittany is a 2L at Loyola Law School, Los Angeles with a focus on Entertainment and Intellectual Property Law. At KHS, she works as both a Law Clerk and Marketing Director.
Brittany wrote this article originally for The Dotted Line Reporter where she works as Managing Writer.

The first rationale from the 1992 Copyright Office response still remains true in present day. Resale royalty schemes run counter to the first sale doctrine, originally codified in 1908, now established in §109 of the Copyright Act. The resale doctrine was reasoned on the principle of promoting wide dissemination of copyrighted works to the public, allowing secondary markets to bloom.[9] As such, critics of the resale royalty scheme argue that the legislation is grounded on a policy of artists’ rights, ignoring the potential detrimental effects on the secondary art market, and the willingness of fine art owners to resell works.[10]

Likewise, there is still unsettled debate on whether the resale royalty has a positive effect on the art market. Although the UK had a recent boom in art sales, it is undetermined whether this recent success is owed in part to the adoption of resale royalties or whether the market has naturally progressed in comparison to other markets.[11] Similarly, the evidence in California is inconclusive and there is no empirical evidence to determine whether the resale royalty scheme has any positive effect on the art market.

WHERE DO WE GO FROM HERE?

It seems that without a compelling compilation of empirical evidence to support a positive effect on the fine arts market, resale royalty legislation will continue to face opposition within the U.S. Although the system serves a valiant purpose, it is understandable why traditional copyright scholars struggle with its adoption. The entire concept of the law defies established copyright tradition of the first sale doctrine to purport a good faith argument for artist entitlements. However, at what point must we realize that policy considerations are necessary to make right of past wrongs?

Artists and art appreciators alike acknowledge that artists rarely witness the success of their works. Vincent Van Gogh and Johannes Vermeer are only two examples of the many artists who died before having the opportunity to experience the fame and success that carries their legacies throughout history. Perhaps the Copyright Office should shift away from its commitment to tradition and honor the now widely accepted acknowledgement of a need to grant artists extended rights in their work.

To read the original article on The Dotted Line Reporter, click here.


 

[1] M. Elizabeth Petty, Rauschenberg, Royalties, and Artist’s Rights: Potential Droit De Suite Legislation In The United States, 977- 78, available at http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1693&context=wmborj.

[2] Hanoch Sheps, Artist Resale Royalty Rights – Is a US Droit de Suite in Our Future?, available at http://itsartlaw.com/tag/resale-royalty-rights/.

[3] Id.

[4] California Civil Code, Section 986.

[5] Jillian Steinhauer, Congressmen Propose National Resale Royalty Act for Artists, (2014), available at, http://hyperallergic.com/111496/congressmen-propose-national-resale-royalty-act-for-artists/.

[6] Sheps.

[7] Jillian Steinhauer.

[8] U.S. Copyright Office, Droit de Suite: The Artist’s Resale Royalty (1992).

[9] The Internet Association, Federal Resale Royalty Right Notice of Inquiry, Copyright Office Docket No. 2012 – 10 (2012).

[10] Id.

[11] Carol Steinberg and Orina Tarsis, Notice of Inquiry on Resale Royalty Right, available at copyright.gov/docs/resaleroyalty/comments/77fr58175/Center_for_Art_Law.pdf