US Copyright Office Seeking Comments On Resale Royalties For Visual Artists

Well, it looks as if all of Bruce Lehman's lobbying has possibly paid off. Lehman, the author of the DMCA and the lobbyist for the Artists Rights Society, began floating the idea of a resale royalty for visual artists, following in the footsteps of other countries who have allowed visual artists to collect royalties on any reselling of their art — basically meaning they get paid again every time anyone resells their artwork. The US Copyright Office is now accepting comments on the proposed Resale Royalty Right.

The Copyright Office has published a Federal Register notice requesting written comments on how current copyright law affects and supports visual artists and how a federal resale royalty right for visual artists would affect current and future practices of groups or individuals involved in the creation, licensing, sale, exhibition, dissemination, and preservation of works of visual art. Specifically, the Office seeks comments on the means by which visual artists exploit their works under existing law as well as the issues and obstacles that may be encountered when considering a federal resale royalty right in the United States.

The full summary goes into further detail

The royalty originated in France in the 1920s and is in general practice throughout Europe, but is not part of current United States copyright law. Under the Copyright Act (the “Act”), 17 U.S.C. 101 et seq., visual artists, like other authors, are provided a bundle of exclusive rights, including rights to reproduce, distribute and create adaptations of their works. These rights, however, do not affect the disposition of the original work of authorship. Instead, the first sale doctrine, codified in 17 U.S.C. § 109, generally permits the lawful owner of a copyrighted work “to sell or otherwise dispose of the possession of that copy” and to “display that copy publicly . . .” without the authorization of the creator.

The Copyright Office recognizes the right of the first sale before pointing out the seeming disparity between other artists (musicians, authors, filmmakers) who earn money with every copy sold and visual artists, who only earn money on the first sale. 

A question is whether the system is as advantageous for certain artists of visual works. For some artwork, where the primary financial benefit may be through the sale of the original work rather than multiple copies, the creator may receive less financial benefit from the work than do subsequent collectors or other downstream entities that are able to take advantage of the increase in the value of the artwork over time.

The official summary goes so far as to refer to this difference as a “perceived inequity,” which is exactly what it is: perceived. Rewarding the original artist on future sales of his or her art, once it has been sold by the artist to another individual, turns these royalties into an analog of the capital gains tax. (Of course, the capital gains tax isn't collected when someone loses money, but this royalty plan would collect on losing “bets” as well.) Those who work in the visual arts field might feel like they've been given the short end of the royalty stick, what with other artists collecting royalties on every copy sold, but their art generally comes with a higher entry fee. 

If you look at this in reverse, musicians don't receive a cut of the sales price on any rarities in their catalog or get a cut of used sales. Neither do authors or filmmakers. And it's not as if visual artists can't sell prints or commission reproductions to increase the income of each piece of art produced. Then there's the fact that as an artist's work increases in value, his or her new work should also increase in value, allowing them to make more money per piece sold.

Compare that to authors or recording artists. As they get more famous, they might be able to demand bigger advances or sell more copies of their albums, but it does nothing to increase the price of an album or book. U2 might be the biggest band in the world, but each copy still sells for $10-20. Visual artists might sell early pieces for less than $100 but should they become famous, the price per piece might edge up into the “millionaire” tax bracket. The other downside to implementing a resale royalty on visual art is that it disproportionately harms new artists. By raising the price and difficulty level of reselling a piece, investors will likely purchase fewer unknown works and concentrate instead on proven, incumbent commodities. 

The key word in this discussion is “perception.” It seems unfair because no artist can expect sell a few hundred sculptures or paintings while authors and recording artists sell thousands of individual units. But attempting to level a playing field composed of apples and oranges by putting the artist between purchasers and their right of first sale isn't going to “fix” anything. This will just add another layer of IP-related bureaucracy to an already severely convoluted system. 

Then there's this: California passed a resale royalty law in 1977 affecting any artwork sold in California or sold anywhere in the world by a California owner. To say that it was anything approaching a “qualified success” would be stretching the definition of that term to the breaking point:

Enforcement of California's law has been spotty over the last 35 years, according to an opinion issued on May 17 by Judge Jacqueline Nguyen, a judge on the 9th Circuit Court of Appeals who was sitting by designation in U.S. District Court in Los Angeles. Even though artists all over the country qualify for resale royalties, only about 400 painters and sculptors have received a total of $328,000 in resale royalties since the Resale Royalties Act took effect. A 1986 survey of Bay Area artists found that dealers frequently refused to comply with the law when artists asked about the identity of new owners or resale prices. For the big auction houses, Sotheby's and Christie's, California's law wasn't a big deal.

As could be expected, dealers simply routed around this legal speedbump. When a group of artists filed a class action suit against the auction houses, the entire law was tossed out as unconstitutional.

The judge agreed with lawyers for the auction houses (Skadden, Arps, Slate, Meagher & Flom for Christie's; Morrison & Foerster and Weil, Gotshal & Manges for Sotheby's) that California's law violates the Commerce Clause of the U.S. Constitution because it's an attempt by one state to control commerce outside of its borders. “Under its clear terms, the (Resale Royalties Act) regulates transactions occurring anywhere in the United States, so long as the seller resides in California. Even the artist — the intended beneficiary of the CRRA — does not have to be a citizen of, or reside in, California,” Nguyen wrote. “For these reasons, the court finds that the (law) has the 'practical effect' of controlling commerce 'occurring wholly outside the boundaries' of California even though it may have some 'effects within the state.' Therefore, the (law) violates the Commerce Clause.”

One has to wonder whether the recent rejection of the only resale royalty law in the US has anything to do with the sudden push for a nationwide act. Certainly states won't be able to enact their own versions without running afoul of the Commerce Clause. Placing the entire nation under the same royalty legislation would remove this constitutional roadblock, and with a majority of European countries operating under a droit de suite directive, it would also trim down “venue shifting” options for those wishing to avoid paying the royalties. It also should be noted that Congress has declined to add resale royalties every time it has reconsidered the copyright statute.

A quick postscript: The Senators behind this bill (Herb Kohl [WI] and Jerrold Nadler [NY]) are trying to “fast track” the legislation, opening it up for comments for only 45 days, rather than the usual 90. As the bill is worded now, the resale royalty would only apply to auction houses and not private sales through dealers. 

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