US Copyright Office Supports Artists Getting Paid Multiple Times For Same Work, Harming New Artists To Benefit Established Ones

from the shameful dept

We've written a few times about the absolute ridiculousness of the idea of an artist resale right, also known as "droit de suite." The basic concept is as follows: an artist sells a piece of artwork, such as a painting. Then, when the buyer later sells that painting to someone else, a percentage of the price has to be given back to the original artist. So, every time that painting is resold, there's a tax on it that goes back to the original artist. A few countries have done this, and it's basic economic illiteracy that drives this idea forward.

Here's the basic theory behind it (which is wrong, as we'll explain after). When an artist is new, they're not well-known, and people are not willing to pay very high prices for their works. So, people buy them up for very low prices. However, as that artist becomes more well established and successful, the price of their older works increases (sometimes significantly) as well. And the buyers who purchased their original works for very little money, can now resell them to others for very large sums -- and the original artist gets none of that. Thus, by adding an "artist resale royalty," it guarantees that an artist later benefits from the appreciation in price of his or her earlier works.

Now, here's why that theory is complete bunk -- and such resale rights are actually more harm than good for artists. First off, this punishes the early risk-taking buyers who are willing to buy the artwork of no name artists, by making it clear that they are going to have an extra tax (the royalty they need to pay back to the artist) on any future sales of the work. Like any tax, this decreases the amount they're willing to pay initially, as well as the amount of the activity they're willing to engage in. So, at a time when artists need those sales the most -- when they're just starting out -- an artist resale royalty drives down the demand for their works by deliberately making their artwork a worse investment. Furthermore, this depreciating impact carries through on all future purchases as well. It's braindead and harms those artists who need the sales the most.

But, people will ask, what about those "poor" artists who see their early works, which they sold for hundreds, now selling for millions. Isn't that unfair? Well, not really. First, if their early works are selling for millions, you can bet that there's a pretty big market for any new works as well. And, now, when they do create a new work, they can take it to market directly themselves, and get that same huge return. This is a good thing, as it also encourages new works by those artists.

Also, as a point of comparison, I would imagine that no artist would ever accept the idea that if a buyer later resells their artwork for a loss that the artist should then pay the original buyer for the failure of the artwork to appreciate. But if you think a resale royalty makes sense, why wouldn't the same be true if the artwork declines in price?

In the end, implementing an artist resale royalty significantly harms the market for new and struggling artists, making it a worse investment to buy their works. Instead, it diverts significant money in the artworld to already successful artists, and gives those artists fewer reasons to create new artwork, since they're able to profit off of ongoing sales of their years old works. On top of that, it's just generally insulting to the basic concept of ownership, and the fact that when you sell something, you no longer own it.

Still, some of those big name artists have been lobbying hard to change the laws around the globe in favor this very stupid concept. They have a group called the Artists Rights' Society, and hired Bruce Lehman to be their main lobbyist. If you don't recognize the name, Lehman is the guy behind the DMCA, who has long been a massive maximalist in all forms of intellectual property -- and he's not ashamed to admit it, or to attack those who point out that maximalism has downsides. For example, he once threatened to rip out Prof. James Boyle's throat, after Boyle pointed out the dangers of the DMCA, and then said that he would make sure that Boyle was denied tenure.

Unfortunately, Lehman is still a voice that people in the Copyright Office listen to, and last year he was successful in convincing the Copyright Office to revisit the issue of resale royalties. The Copyright Office has now come out with its report on the matter, and despite having rejected the concept in 1992, is now much more supportive of the idea. They do this, even while recognizing the negative impact as described above:
It does appear that most of the direct benefits created by resale royalty schemes inure to artists at the higher end of the income spectrum. “Researchers are virtually unanimous” that the “distribution of payments under an ARR regime is greatly skewed” in favor of a minority of established, blue-chip artists.
But they immediately dismiss this, by noting that this is no different than our existing copyright system for authors and musicians. Of course, rather than recognizing that this is a problem of the current copyright system, the report seems to assume that this means the fact that the system unfairly benefits those at the top at the expense of those at the bottom, that it's a perfectly fine system. The report does an awful lot of "on the one hand/on the other hand" statements, before noting that either the data has been inconclusive, or pointing to more general evidence that places with a resale royalty that haven't seen their markets collapse is somehow evidence that the downsides might not be so bad.

In the end, the report "supports Congress's consideration of such legislation" (meaning that such legislation will show up very soon -- as you can bet it's all ready to go, likely written by Lehman, and sitting in a drawer somewhere in the Capitol). The report does say that there may be other ways to "accomplish these goals" which may be more effective than legislation, but you can bet that line will quickly be ignored by the politicians and lobbyists supporting this plan.

Filed Under: copyright, doit de suite, resale royaltes, us copyright office, visual arts

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  1. identicon
    john r walker, 26 Dec 2013 @ 6:21pm

    attention Mike Masnick
    . The report is no ringing endorsement of Artists resale royalties, at all. The actual report is more of an options brief than a directive.

    While the reports conclusions do find that on available information, adoption of a resale royalty right would not cause substantial harm to the U.S. art market , the report then immediately goes on to state that:

    "...As to the second issue-the likely benefit to U.S. artists – the evidence is less obvious.
    "Accordingly, while the Copyright Office finds no significant legal or policy impediments to adoption of a U.S. resale royalty,and indeed supports consideration of a resale royalty right as one option to address the historic imbalance in the treatment of visual artists, it is less persuaded that such legislation represents the best or only
    "[emphasis mine]

    And under the heading Benefits to Artists the report acknowledges that:

    "........ On the whole, it does appear that “a minority of artists reap the lion’s share of financial rewards,” and that the class of beneficiaries is skewed toward higher-income artists.438 In the 1992 Report, the Office cited
    “evidence that as few as one percent of artists will qualify for the royalty,”439 and opponents point to a subsequent study finding that “only approximately 0.15 percent of U.S. artists have works that have resold for $1,000 or more.”440

    And from the conclusion of the Reports analysis of the legislated ARR option :

    ".....It remains unclear, however, whether these
    benefits would offset the potential countervailing costs cited by opponents, such as enforcement and administrative burdens, among others."

    "As such, the Copyright Office would need greater information – for example, survey information from a significant nucleus of American artists, their heirs, or estates – in order to recommend a statutory resale royalty as the only solution to the burdens faced by visual artists.
    We note, however, that at the time of this report’s publication, at least two resale royalty jurisdictions – the EU and Australia – are in the process of completing updated analyses of the effectiveness of their own resale royalty schemes.449 Congress may wish to forego legislative
    action pending the release of those studies
    , which may fill in some of the information gaps noted here."

    "At the same time, the recent and ongoing evolution of the visual art market may well counsel against a permanent legislative solution. As the market expands, both in popular appeal and in the creation of art forms that are more suitable to production in a meaningful number of copies or multiples, more artists may see benefits under the existing law. Still, Congress could pursue other safeguards, including voluntary initiatives and/or best practices.450 Alternatively, Congress could revisit one or more of the legislative proposals raised in the 1992 Report. We briefly consider some of these options below." (emphasis mine)

    Australia's Art resale royalty scheme has been a complete debacle and is very unlikely to survive the review currently being conducted by the Australian government.

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