US Copyright Office Seeking Comments On Resale Royalties For Visual Artists

from the royalties:-the-taking-that-keeps-on-giving dept

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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Comments on “US Copyright Office Seeking Comments On Resale Royalties For Visual Artists”

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Anonymous Coward says:

Re: Re:

Exactly. This resale rights madness has been introduced in Australia, supposedly to benefit Aboriginal artists in remote areas. The artists were receiving poor prices because they were remote and someone had to go out to visit them to buy artwork. There were plenty of things that the artists could have done about this situation, but they did not. Resale rights were introduced and the result has been a disaster for the unfortunate artists. They are now getting even worse prices, on the basis that they are going to get paid more later on when the resales happen. Guess how well that scheme is working – namely not. Plus the artists have lost a bunch of customers because customers do not want to deal with the bureaucratic complexities if the resale rights scheme. Reduced demand leads to lower prices. Resale rights is an anti-pattern.

RonKaminsky says:

Re: Re: Re:

John R. Walker, a noted Australian artist (with whom I correspond), frequently blogs about how resale royalties do not help the majority of artists. See here, here, here, here, and here.

It’s also bullshit to put the EU’s implementation of resale royalties on a pedestal — when Australia was researching the actual state of enforcement of this in the various European countries, it found that very few European countries enforce consistently (the UK being an exception). So it seems stupid to rush into “harmonizing” with a policy which, even on its home grounds, isn’t exactly on a strong standing.

abc gum says:

Re: One time?

I can just imagine KopyRight Kops across the nation swooping down in black helicopters, pouncing upon the unsuspecting grannies conducting their garage sales.

This is going to be Epic !! – I can totally see this becoming the new reality tv show replacing Cops and Campus PD at the top of the hit parade.

I’ll make popcorn, byob

Richard (profile) says:

Re: Re: Fine - if..

Moot in any case since the type of people that tend to own the kind of works that would fall under this are expert tax dodgers (and they will view this as a tax).

Expect each newly purchased work to be bought by a holding company – which will never sell it. Instead the ownership of the company will be transferred – without any liability to this charge.

abc gum says:

Re: Re: Re: Fine - if..

Heh – That’s a really good dodge.

I see this producing yet another two tiered system, High Art / Low Art. The rich affluent have their High Art holding companies and do not pay this tax whereas those who are not rich affluent types either can not afford any art or they are forced to pay this tax upon their Velvet Elvis and Dogs Playing Poker artworks.

ken (profile) says:

Sense of Entitlement

The self entitlement mentality of artists is astounding. Who else believes they should be paid perpetually for work they do? Its insane and does not promote creativity. It allows artists to create one thing then live on their laurels for life.

We hear artists say copyright is there to guarantee them an income. Sorry sister but no one is guaranteed an income. You get paid when you find willing buyers. Money is earned by convincing people your work is valuable and is worthy of them paying you for it. Anything apart from that is dishonest and corrupt.

Anonymous Coward says:

What a mess

I think this will highlight what a mess copyrights are in. As it is, some artists are paid repeatedly for use of their work under licensing / syndication. Most are not.

Artwork has become an investment. In quite a few portfolios, there is a folder documenting fine artworks as a form of financial diversification. They are betting on some of the works increasing in value. That is what the entire fine art market is built on. What happens to that?

Who would be in charge of collecting these royalties? What if an artwork was bought in the U.S. and sold in the U.K.? Would their be seperate royalty collection societies? How can artworks region coded to each market? Would some artworks be purchased or licensed (allowing multiple copies)? Is their a first sale doctrine for original artwork that allows a backup copy?

I agree that it feels kinda like a rip-off when someone collects a seemingly worthless piece of art and then 10 years later, it’s worth tens or hundreds of thousands of dollars with none of it going towards the original artist – who can be quite deserving or in need of some extra cash just for humanitarian reasons alone.

But my idea of copyrights remains that it should be reserved for new works and not to reward generations or owners who do little but buy the stuff. Art patrons are taking a gamble, like buying a lottery ticket, that a particular piece will upgrade in value (or match their sofa). They fuel the fine art market.

Mickey mouse and Barbie are not art unless altered.

Anonymous Coward says:

“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.”

They talk about the financial benefit to the artist as if it materializes out of thin air as a result of the law. Rather, it’s exactly equal to the financial detriment to the rest of society. Why don’t those morons realize they are only redistributing wealth? I don’t recall redistribution of wealth being a purpose of copyright.

drew (profile) says:

bringing it into line with europe

Hmm, I remember arguing with one commenter about the meaning of “limited” in copyright a few months ago. They argued that there would be no further expansion of copyright and the last one was just to bring the US into line with the rest of the world.
Oh look, here’s that same argument again, expanding individual rights against the public interest.
Glad that I was proved wrong so quickly…

… oh no, wait.

Michael says:

Funny how artists from centuries-past still manage to sell reprints of their work, yet contemporary artists can’t figure out how to do the same.

Many artists are work-for-hire, so if they create an original work in order to fulfill an obligation, the employer owns the rights to reprint and distribute. The artist is paid once for his/her service and their contract has been fulfilled. If the Copyright Office perceives ‘inequality’, it is definitely caused by the fat cats at the top exploiting the talent and reaping the rewards, not the consumer who simply consumes and dispenses with the product.

If they want to make it fair, truly, they should revoke the work-for-hire clause and allow the artists to take a percentage of the corporate profit. That’s the real solution, not to dig into the consumers’ pocket just because X and Y company are too stingy to share their earnings.

Anonymous Coward says:

Think of the starving artist...and the government!

In California (and probably other states)the state gets to collect sales tax on a car every time it is registered to a new owner.
So every time someone buys a used car from a private owner, they lie about how much they paid for it.

Collecting sales tax (or a share of the profit) over and over again on the same item is what the government does best.
If the art piece is tracked via some type of collection society then the various governments will be able to collect a brand new sales tax and perhaps a luxury tax as well. Over,and Over, and over.Forever!

I see the same thing happening with Visual Art owners…so let the lies begin (“you’re not gonna believe it! I just bought this awesome Renoir for only 3 bucks”)…and may the best one win!

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