California Resale Royalty Act

Last updated

The California Resale Royalty Act (Civil Code section 986), which went into effect on January 1, 1977, entitles artists to a royalty payment upon the resale of their art if the transaction takes place in California or the seller is based in the state. It was the only law of its kind implemented in the United States. On July 6, 2018, the U.S. Court of Appeals for the Ninth Circuit ruled that the California Resale Royalties Act was preempted by the Copyright Act of 1976. [1] Now, only works resold from January 1, 1977, to January 1, 1978, when the Copyright Act became effective, are eligible for the royalty payment.

Contents

Conditions for resale royalty payments

The act does not apply if:

Requirements under the act for qualifying works

When the sale of a work meets the conditions outlined above, a seller must pay the artist 5% of the resale price. If the artist is deceased, the payment goes to the artist's estate or heirs. It is the seller's obligation to locate the artist within 90 days of the sale. If the artist or heirs cannot be located, the seller is to make payment to the California Arts Council, who will hold the collected payments for up to 7 years for the artist. In the event that the Council is unable to locate a particular artist or the artist fails to claim the collected royalties in that time period, the funds collected are distributed to the city of Sacramento's Art in Public Places [3] program. [4]

The artist's right to receive the royalty cannot be waived in full; it can only be modified by written contract providing for a royalty payment in excess of the 5% of resale value that is required by the Act. [4]

History of the resale right

California's Resale Royalty Act was signed into law in 1976. The resale right has its origins in the French law droit de suite, first enacted in 1920, which provided French artists the right to receive a royalty from resales of their work. [5] The droite de suite reflects both the idea that artists have certain moral rights in their works (such as the inalienable right to be associated with their works) and the economic concern that artists often are unable to benefit from the full value of their works, where they have low bargaining power in initial sales or where their works appreciate significantly in value after the first sale. [6] As of 2012, over 60 countries across the world recognize some version of the resale right. [7]

Berne Convention

The Berne Convention for the Protection of Literary and Artistic Works of 1886 included a droite de suite provision in Article 14ter [8] in its 1948 revision. This article provided for a general recognition of a resale right among signatory countries, but included the stipulation that protection provided by such recognition "may be claimed in a country of the Union only if legislation in the country to which the author belongs so permits, and to the extent permitted by the country where this protection is claimed." [8]

United States

Currently, California is the only state that recognizes the resale right. The Copyright Office conducted a study, [9] published in 1992, evaluating the nature of the resale right and the possibility of adopting a federal droite de suite. The Copyright Office concluded in the report that there were not adequate economic or copyright policy justifications to warrant adopting droite de suite at the federal level. The report did indicate that should the EU harmonize its droit de suite laws and extend the resale right to all member states, Congress may at that point revisit the resale right issue. [10]

Legislation was proposed in both the Senate (S.2000) [11] and the House (H.R. 3688) [12] in December 2011 that would provide for a national resale royalty right. The Equity for Visual Artists Act of 2011 (EVAA) would provide for a 7% royalty to be collected from sales of certain works of art where the sale price exceeded $10,000. Half of this payment would go to the artist or successor in copyright, and half would go towards an escrow account to support U.S. non-profit museums. [7] Both pieces of legislation are currently[ when? ] in committee. In conjunction with the consideration of the legislation, in September 2012 Congress published a Notice of Inquiry [13] requesting comments from the public on factual and policy matters relating to a possible federal resale royalty right.

Constitutionality as applied to out-of-state sales

The Resale Royalty Act came under legal scrutiny when, in October 2011, a group of artists and their heirs filed class action suits against auction houses Christie's and Sotheby's, and auction site eBay, for failure of those brokers to pay royalties per the Resale Act. [14] In a decision [15] on May 17, 2012, in the United States District Court for the Central District of California, Judge Jacqueline H. Nguyen dismissed the suits on the grounds that the Resale Royalty Act violated the Commerce Clause of the United States Constitution, and was therefore invalid as law (Estate of Graham, et al, v. Sotheby's Inc.). [16]

The Commerce Clause has been interpreted by the Supreme Court as not only affirmatively granting to Congress the power to regulate commerce among the states, but also, by negative implication, prohibiting the states from unjustifiably discriminating against or burdening the flow of interstate commerce. [16] A state regulation violates the Commerce clause where it "directly controls commerce occurring wholly outside the boundaries of a State." [16]

Judge Nguyen found that where the act regulates any transaction in which the seller resides in California, regardless of the location of the sale, buyer, or artist, the Resale Royalty Act "explicitly regulates applicable sales of fine art occurring wholly outside California." [16] The Court cited the example of a California resident placing a painting by a New York artist for sale with Sotheby's in New York, where at the subsequent auction the painting is bought by a New York resident. [16] In this instance, the California law requires the New York company to withhold the amount of the royalty from the sale price, and either locate and pay the artist in New York or remit payment to the California Arts Council should the artist not be located. Further, the Act permits the New York artist to sue the New York Sotheby's under California law should the auction house fail to collect and remit the applicable royalty to the artist. [16]

In 2015, an eleven-judge en banc panel of the Court of Appeals for the Ninth Circuit affirmed, holding that applying the Act to out-of-state sales made by a California resident was unconstitutional. [17] [18] The court struck the clause "the seller resides in California or" from the Act, declining to rule on whether the Act could otherwise be applied to sales made within California. [17] [18] In 2016, the U.S. Supreme Court declined certiorari, leaving the Ninth Circuit decision in place. [19] [20]

Preemption

In April 2016, another federal judge, Michael W. Fitzgerald, held the entire act to be preempted by section 301 of the Copyright Act of 1976. [21] [22] That ruling was appealed to the Ninth Circuit, with initial briefs filed on March 9, 2017. [23] Oral argument was held on April 10, 2018. [24] On July 6, 2018, the Ninth Circuit nullified the California Resale Royalties Act. [1] [25] Now, only works resold from January 1, 1977 to January 1, 1978, when the Copyright Act became effective, are eligible for the royalty payment. The court ruled that royalty claims made after January 1, 1978 "were expressly pre-empted" by the Copyright Act—which does not recognize an artist's right to resale royalties. [26]

See also

Related Research Articles

Eldred v. Ashcroft, 537 U.S. 186 (2003), was a decision by the Supreme Court of the United States upholding the constitutionality of the 1998 Sonny Bono Copyright Term Extension Act (CTEA). The practical result of this was to prevent a number of works from entering the public domain in 1998 and following years, as would have occurred under the Copyright Act of 1976. Materials which the plaintiffs had worked with and were ready to republish were now unavailable due to copyright restrictions.

The copyright law of the European Union is the copyright law applicable within the European Union. Copyright law is largely harmonized in the Union, although country to country differences exist. The body of law was implemented in the EU through a number of directives, which the member states need to enact into their national law. The main copyright directives are the Copyright Term Directive 2006, the Information Society Directive and the Directive on Copyright in the Digital Single Market. Copyright in the Union is furthermore dependent on international conventions to which the European Union or their member states are part of, such as TRIPS Agreement or the Berne Convention.

A royalty payment is a payment made by one party to another that owns a particular asset, for the right to ongoing use of that asset. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such, but there are also other modes and metrics of compensation. A royalty interest is the right to collect a stream of future royalty payments.

Bauer & Cie. v. O'Donnell, 229 U.S. 1 (1913), was a 1913 United States Supreme Court decision involving whether a purchaser of a patented product bearing a price-fixing notice incurs guilt of patent infringement by reselling the product at a price lower than that which the notice commands. A divided Court (5–4) held that it was not.

The first-sale doctrine is a legal concept that limits the rights of an intellectual property owner to control resale of products embodying its intellectual property. The doctrine enables the distribution chain of copyrighted products, library lending, giving, video rentals and secondary markets for copyrighted works. In trademark law, this same doctrine enables reselling of trademarked products after the trademark holder puts the products on the market. In the case of patented products, the doctrine allows resale of patented products without any control from the patent holder. The first sale doctrine does not apply to patented processes, which are instead governed by the patent exhaustion doctrine.

<span class="mw-page-title-main">Ticket resale</span> Act of reselling tickets for admission to events

Ticket resale is the act of reselling tickets for admission to events. Tickets are bought from licensed sellers and then sold for a price determined by the individual or company in possession of the tickets. Tickets sold through secondary sources may be sold for less or more than their face value depending on demand, which tends to vary as the event date approaches. When the supply of tickets for a given event available through authorized ticket sellers is depleted, the event is considered "sold out," generally increasing the market value for any tickets on offer through secondary sellers. Ticket resale is common in both sporting and musical events.

The droit d'auteur or French authors' rights law, is in the jurisdiction of France a set of exclusive prerogatives available to a creator over his or her intellectual work, as part of the intellectual property area of law. It has been very influential in the development of authors' rights laws in other civil law jurisdictions, and in the development of international authors' rights law such as the Berne Convention. It has its roots in the 16th century, before the legal concept of copyright was developed in the United Kingdom. Based on the "rights of the author" instead of on the right to copy, its philosophy and terminology are different from those used in copyright law in common law jurisdictions. The term droit d’auteur reveals that the interests of the author are at the center of the system, not that of the investor.

<span class="mw-page-title-main">Mark Grotjahn</span> American painter (born 1968)

Mark Grotjahn is an American painter best known for abstract work and bold geometric paintings. Grotjahn lives and works in Los Angeles.

Droit de suite (French for "right to follow") or Artist's Resale Right (ARR) is a right granted to artists or their heirs, in some jurisdictions, to receive a fee on the resale of their works of art. This should be contrasted with policies such as the American first-sale doctrine, where artists do not have the right to control or profit from subsequent sales.

<span class="mw-page-title-main">Resale Rights Directive</span>

Directive 2001/84/EC of the European Parliament and of the Council of 27 September 2001 on the resale right for the benefit of the author of an original work of art is a European Union directive in the field of copyright law, made under the internal market provisions of the Treaty of Rome. It creates a right under European Union law for artists to receive royalties on their works when they are resold. This right, often known by its French name droit de suite, appears in the Berne Convention for the Protection of Literary and Artistic Works and already existed in many, but not all, Member States. As a result, there was a tendency for sellers of works of art to sell them in countries without droit de suite provisions to avoid paying the royalty. This was deemed to be a distortion of the internal market, leading to the Directive.

<i>UMG Recordings, Inc. v. Augusto</i>

Universal Music Group v. Augusto was a federal court case filed by Universal Music Group against Troy Augusto, a man who sold promotional CDs on eBay. UMG claimed that the CDs were their property, and Augusto's sales constituted copyright infringement. On January 4, 2011, the Ninth Circuit sided with Augusto, holding that "UMG's distribution of the promotional CDs under the circumstances effected a sale of the CDs to the recipients. Further sale of those copies was therefore permissible without UMG's authorization."

Under the law of the United Kingdom, a copyright is an intangible property right subsisting in certain qualifying subject matter. Copyright law is governed by the Copyright, Designs and Patents Act 1988, as amended from time to time. As a result of increasing legal integration and harmonisation throughout the European Union a complete picture of the law can only be acquired through recourse to EU jurisprudence, although this is likely to change by the expiration of the Brexit transition period on 31 December 2020, the UK has left the EU on 31 January 2020. On 12 September 2018, the European Parliament approved new copyright rules to help secure the rights of writers and musicians.

ReDigi was an online marketplace for used digital music, eBooks, games, apps, and software. It claims to be the only cloud storage service that verifies whether each digital file uploaded for storage was legally acquired from an eligible source. ReDigi's Cloud and Marketplace only accept lawfully purchased digital media. The service allowed users to buy and sell pre-owned digital content directly from one user to another. As of December 2020, the website is offline.

Artists' Collecting Society (ACS) is a not-for-profit Community Interest Company dedicated to the collection and distribution of Droit de Suite or Artist's Resale Right (ARR) Royalties.

Art and culture law refers to legal aspects of the visual arts, antiquities, cultural heritage, and the art market and encompasses the safeguarding, regulation, and facilitation of artistic creation, utilization, and promotion. Practitioners of art law navigate various legal areas, including intellectual property, contract, constitutional, tort, tax, commercial, immigration law, estates and wills, cultural property law, and international law to protect the interests of their clients.

<i>Capitol Records, LLC v. ReDigi Inc.</i> US District Court case concerning copyright infringement

Capitol Records, LLC v. ReDigi Inc., 934 F. Supp. 2d 640 , is a case from the United States District Court for the Southern District of New York concerning copyright infringement of digital music. In ReDigi, record label Capitol Records claimed copyright infringement against ReDigi, a service that allows resale of digital music tracks originally purchased from the iTunes Store. Capitol Records' motion for a preliminary injunction against ReDigi was denied, and oral arguments were given on October 5, 2012.

Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. 519 (2013), is a United States Supreme Court copyright decision in which the Court held, 6–3, that the first-sale doctrine exhausts copyright of the works lawfully made or purchased abroad.

Goldstein v. California, 412 U.S. 546 (1973), was a United States Supreme Court case in which the high court ruled that California's state statutes criminalizing record piracy did not violate the Copyright Clause of the United States Constitution.

VAGA is an artists collective dedicated to improving mental health and fighting cognitive decline through art therapy. The organisation brings together artists, clinicians and academic psychologists to foster research collaboration and the development of new art therapies. Vaga separated from the Artists Rights Society in 2018 and is now a distinct entity with a separate mission focused on mental health.

<span class="mw-page-title-main">The Artist's Reserved Rights Transfer and Sale Agreement</span>

The Artist's Reserved Rights Transfer and Sale Agreement is an open-source legal contract for the transfer and sale of an individual work of art in any medium, material or immaterial, including digital art. The agreement was conceived by curator, dealer, and publisher of conceptual art Seth Siegelaub, and drafted by lawyer Robert Projansky as a means to "remedy some generally acknowledged inequities in the art world, particularly artists lack of control over their work and participation in its economy after they no longer own it". The agreement specifies the rights, royalties and responsibilities of the collector (purchaser) relative to the original creator.

References

  1. 1 2 Svachula, Amanda (July 11, 2018). "California Tried to Give Artists a Cut. But the Judges Said No". The New York Times. ISSN   0362-4331 . Retrieved May 17, 2021.
  2. 1 2 "California Arts Council". ca.gov. Archived from the original on July 30, 2014. Retrieved March 5, 2019.
  3. ↑ "Sacramento Metropolitan Arts Commission". Archived from the original on September 1, 2012. Retrieved December 28, 2012.
  4. 1 2 "California Civil Code Section 986 – California Attorney Resources – California Laws".
  5. ↑ "The Droite de Suite: Why American Fine Artists Should Have a Right to a Resale Royalty." Loyola of Los Angeles Entertainment Law Review. March 1, 1995. Vol. 15, Page 10.
  6. ↑ "A Right Deferred:Resale Royalties for Visual Artists." Law Student Connection, February 17, 2012.
  7. 1 2 "Resale Royalty Right." Copyright Office, Notice of Inquiry. Federal Register Vol. 77 No. 182, page 58177.
  8. 1 2 "WIPO-Administered Treaties: Berne Convention for the Protection of Literary and Artistic Works". Archived from the original on September 11, 2012. Retrieved December 28, 2012.
  9. ↑ "DROIT DE SUITE: THE ARTIST'S RESALE ROYALTY" (PDF). December 1992.
  10. ↑ "Study, page 149" (PDF).
  11. ↑ Kohl, Herb (December 15, 2011). "S.2000 - 112th Congress (2011-2012): Equity for Visual Artists Act of 2011". www.congress.gov. Retrieved March 5, 2019.
  12. ↑ Nadler, Jerrold (January 6, 2012). "H.R.3688 - 112th Congress (2011-2012): Equity for Visual Artists Act of 2011". www.congress.gov. Retrieved March 5, 2019.
  13. ↑ "Resale Royalty Right" (PDF). Federal Register. 77 (182): 58175. September 19, 2012.
  14. ↑ Cohen, Patricia (November 1, 2011). "Artists File Suit Against Sotheby's, Christie's and eBay". The New York Times. Retrieved March 5, 2019– via NYTimes.com.
  15. ↑ "ORDER GRANTING JOINT MOTION TO DISMISS" (PDF). Archived from the original (PDF) on March 4, 2016.
  16. 1 2 3 4 5 6 "Estate of Graham, et al, v. Sotheby's Inc." (PDF). uscourts.gov. Retrieved March 5, 2019.
  17. 1 2 Kinsella, Eileen (May 6, 2015). "California Court Resale Royalty Unconstitutional". Artnet News. Retrieved August 9, 2017.
  18. 1 2 Sam Francis Foundation, et al. v. Christies, Inc, et al. , no. 12-56067 (9th Cir. May 5, 2015)
  19. ↑ Boucher, Brian (January 12, 2016). "Supreme Court Declines Artist Royalties Appeal". Artnet News. Retrieved August 9, 2017.
  20. ↑ Sam Francis Foundation, et al. v. Christies, Inc., et al. , United States Supreme Court, no. 15-280 (docket). Retrieved August 9, 2017.
  21. ↑ Meier, Henry (April 12, 2016). "Federal Ruling Puts State Artist Royalty Law in Jeopardy". Los Angeles Business Journal. Retrieved August 9, 2017.
  22. ↑ Estate of Robert Graham, et al. v. Sothebys, Inc., no. 11-cv-08604 (C.D.Cal. October 18, 2011)
  23. ↑ Daniels, Melissa (March 9, 2017). "Artists Take Calif. Royalty Law Fight Back To 9th Circ" . Law360. Retrieved August 9, 2017.
  24. ↑ Chuck Close, et al. v. Sothebys, Inc., no. 16-56234, (9th Cir. filed August 29, 2016) docket report, retrieved from PACER, April 10, 2018
  25. ↑ Grany, Daniel (July 13, 2018). "Should Artists Get Royalties if Their Work Is Resold? Europe Says Yes, US Says No". Observer. Archived from the original on July 13, 2018. Retrieved May 17, 2021.
  26. ↑ Kinsella, Eileen (July 9, 2018). "Ending a Seven-Year Dispute, a US Court Rules That Artists Aren't Entitled to Royalties for Artworks Resold at Auction". Artnet News. Archived from the original on July 9, 2018. Retrieved May 17, 2021.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.