RESALE ROYALTY RIGHTS: DO ARTISTS DESERVE TO BE PAID AGAIN…AND AGAIN?
The United States is considering getting on par with the moral rights nations (like France, the UK, and Australia) by passing a bill that mandates visual artists be paid royalties every time their work is resold.
Just over a month ago, the U.S. Copyright Office proposed resale royalty rights for visual artists in their comprehensive report entitled “Resale Royalties: An Updated Analysis,” which expands upon and revises the Office’s 1992 report: “Droit de Suite: The Artist’s Resale Royalty.” The 2013 Report proposes legal changes to copyright laws that will allow visual artists to receive royalties every time their original work is resold.
This royalty concept is familiar in music. Every time Beyonce’s “Drunk in Love” is played on Spotify or one of her records is sold on iTunes, she gets a royalty for that. (As she should, because she runs this world.)
This concept is also familiar in film and TV. Royalties in these contexts go by the name of ‘residuals,’ and are paid when a film or program is rebroadcast, like a subsequent airing on a cable network, broadcast TV syndication, DVD releases, or Netflix streaming.
This concept is not familiar, however, in fine art (i.e., visual art). You might scratch your head at the notion that an artist (like a sculptor or painter) would get paid again when their bronze statute or oil painting, which no longer physically belongs to them, is sold to a second, third, or fourth buyer.
Upon further thought, the two scenarios seem somewhat reconcilable: Music, books, films, and songs are produced and distributed in multiple copies to consumers. Visual artists typically do not share in the long-term financial success of their works because works of visual art are produced singularly and valued for their scarcity.
A significant roadblock to visual artists’ long-term financial success is the First-Sale Doctrine, which is a limitation that allows the lawful owner of a particular work to freely sell or dispose of the work without permission of the author or other copyright owner. This doctrine allows you, without permission of the authors, to sell your 1L casebooks on Amazon Seller and sell those dusty VHS tapes and CDs at a garage sale (if they’re worth anything). Due to such limitations, the Copyright Office has concluded “certain visual artists may operate at a disadvantage under the copyright law relative to authors of other types of creative works.”
This legislation takes aim at such inconsistencies. No, the First-Sale Doctrine won’t be eliminated or curtailed so as to prevent downstream sales, but there will be an attempt to ensure that visual artists are effectively compensated within the existing marketplace. This report comes after the Copyright Office solicited commentary from stakeholders about the pros and cons of such legislation beginning in the fall of 2012, and held a public roundtable in the spring of 2013.
Some may argue there’s a lack of privity here. The artist may know to whom they sold their work to the first time, but have no relationship with the second buyer. So, why are visual artists still entitled to a royalty payment in that scenario?
The idea runs counter to our American notions of copyright. Unlike many European nations, U.S. Copyright law does not sign onto the droit d’auteur model – which considers a copyright an extension of the author’s personality. The resale right, or droit de suite, derives from a bundle of privileges commonly known as “moral rights.” Where other moral rights provide attribution or protect against mutilation (integrity), the resale right provides artists with an opportunity to benefit from the increased value of their works over time by granting them a percentage of proceeds from the resale of their original works. By this view, a resale royalty recognizes a right for an artist to participate in the increased value of their work that was always inherent in their creation. But should an artist participate in these resales?
France was the first country to implement droit de suite in 1920, after a widely published artist Jean-Louis Forain poignantly portrayed “starving artists.” [footnote 10] Other countries followed suit, and then a few years later, France proposed addition of droit de suite to the Berne Convention at the 1928 revision conference in Rome.
In Australia, a 5% royalty scheme commenced in 2010, and recently, the UK adopted the resale right too. UK copyright law guarantees a nontransferable, non-waivable percentage of the resale price lasting throughout the artist’s life plus 70 years. Currently, Canada and China are also considering implementing a resale royalty right.
Though the idea may seem uncomfortable in the USA, the idea of resale royalty rights is not novel. One American counterpart is the failed California Resale Royalty Act (Cal. Civ. Code § 986), enacted in 1976 which granted artists 5% of the proceeds from the resale of their work of fine art that was valued over $1,000 if the seller lived in California or if the sale occurred in California. The sleepy law for the most part went unenforced.
Then in 2011, a class of artists filed three federal lawsuits against auction houses Chritie’s and Sotheby’s, alleging that the Defendants failed to comply with the Act by withholding royalties when due. The complaints also charged that the auction houses deliberately concealed whether a seller at auction was a resident of California, a fact which would trigger the royalty.
The lawsuits were a risky undertaking, because the District Court for the Central District of California declared the statute violated the Commerce Clause, and was thus unconstitutional. Under the Dormant Commerce Clause, a state may not purport to regulate commerce outside its own boundaries. The Plaintiffs have appealed the case to the U.S. Court of Appeals for the Ninth Circuit, where the issue of preemption has been raised. However, this issue could possibly be resolved through federally-scaled legislation.
Also, in December 2011, Congressman Jerrold Nadler sponsored the Equity for Visual Artists Act, recommending a federal resale royalty. While that legislation stalled in congressional committee debate in the 112th Congress, this new legislation could give the resale royalty concept a second wind.
So, what are the effects of such legislation if successful? To begin, the parameters of the 2013 Report’s recommendations include the following:
- A requirement that the work be registered with the Copyright Office;
- Application only to works of visual art as defined in § 101 of the Copyright Act, with a threshold value within the $1,000 to $5,000 range;
- A royalty rate of 3-5%, which the artist would receive each time a work is sold;
- The term of the right will be the life of the artist, and the right will be inalienable and non-waivable;
- The right will not be retroactive;
- The right will apply to foreign artists;
- Remedies will be limited for intentional violations to greater of three times the royalty amount due or $5,000, plus reasonable costs, including attorney fees;
- Artists will be provided with the right to obtain transactional information about the resale of their works in order to ensure accurate calculation;
Goals of this legislation include preventing the ‘starving artist’ dilemma by safeguarding visual artists from operating at the economic and social disadvantage that they have historically faced. The aim of proponents is to level the playing field amongst other countries that recognize droit de suite, and to put visual artists on par with musicians, authors, poets, actors, filmmakers, by ensuring that they may continuously participate in the increased value of their work.
On the other hand, there is plenty of criticism of the proposed act, bringing to light perceivable drawbacks. Those who oppose such legislation argue such a royalty scheme will soley benefit a handful of already prominent artists at the expense of their less successful counterparts, creating a “Robin Hood in reverse” effect. Opponents point to studies citing “evidence that as few as 1% of artists will qualify for the royalty,” and that “approximately 0.15% of U.S. artists have works resold for $1,000 or more.” However, this effect would be deterred if the royalty rate applied to works with a capped value of $5,000. Thus, the top-selling artists whose paintings go for millions at auction would not reap all the rewards.
Second, a royalty scheme could also hurt artists in the primary market, by reducing the amount that artists will receive for the initial sale of their work. The resale royalty could enable prospective buyers to negotiate prices downwards on the basis that if an artist is paid again upon resale, then the initial buyer should pay them less upfront. This could particularly affect artists in the earlier stages of their career, where every dollar matters.
Third, it is arguable that artists already benefit from resales, even if indirectly. To illustrate, if an artists’ work is sold at a substantial profit at auction, then this may have a flow-on effect to the value of their other work. Such a theory is the reverse of the axiom that raising prices alienates your customers.
Lastly, resale royalty scheme could harm the domestic market. Feasibly, the royalty will increase the price of a work and deter purchasers from buying art in general. Another version of this argument is that it could encourage prospective buyers to forum shop in countries where no royalties exist.
In conclusion, the U.S. Copyright Office’s December 2013 report “Resale Royalties: An Updated Analysis” resurrects the droit de suite scheme as applied to U.S. Copyright Law. The concept is not entirely unique to the American system, as indicated by California’s prior law and other previously proposed legislation like the Equity Visual Artists Act. Yet, in light of the recent overruling in California and concerns over the effectiveness over of 2013 Report’s recommendations, the U.S. might need some strong convincing that a federal resale royalty law has a place within its jurisdiction.
 Main proponents of such legislation include Congressman Jerrold Nadler (D-NY) and Herb Kohl (Senate Committee on the Judiciary).
 The Berne Convention was formally amended at the 1948 Brussels revision conference to include droit de suite under then-Article 14 bis.
 Estate of Robert Graham v. Sotheby’s, Inc., C.D. Cal. No. 2:11-cv-08604-JHN-FFM
 17 U.S.C. § 101
 Compare with the UK, where the term of the right follows the term of copyright [life of author plus seventy years, and is alienable to author’s heirs).
 Follows suit with California’s 1976 Resale Royalty Act.