U.S. Museums May Serve As Safe Havens to protect ISIS-Looted Antiquities from Destruction

 

by Elizabeth Weber, Esq.

Screen Shot 2016-02-04 at 10.52.54 PM

Source: AAMD Website.

Following the destruction and looting of culturally significant works in war-torn areas, the Association of Art Museum Directors (AAMD) issued a number of protocols to safeguard these artifacts by granting them safe haven in AAMD member museums. The protocols, titled AAMD Protocols for Safe Havens for Works of Cultural Significance from Countries in Crisis, state that works may be brought into the United States, Canada or Mexico from countries affected by terrorism, armed conflict, or natural disaster, so long as depositors comply with applicable laws in both the country of origin and the country of deposit. The protocol is uniform among AAMD member museums, which include the Metropolitan Museum of Art, the Smithsonian American Art Museum, the National Gallery of Canada, and the Museo Nacional de Arte in Mexico City, among others. As the provisions contemplate, a hypothetical depositor must request safe haven for the cultural object with an AAMD member museum and be granted that request before sending the artifact to the museum for safekeeping until it is determined that it is safe for the artifact to be returned to its country of origin.

Admittedly, it may be difficult to pinpoint exactly who will request safe haven for cultural objects in war-torn countries. The AAMD acknowledges this uncertainty and points to four potential examples of depositors in the protocol: museums in the affected area that hold works; government entities of or within affected areas; U.S. government authorities that seized works upon entry into the United States; or private individuals, companies, or organizations who own or come into possession of works, whether in the affected area or after its removal from the area. Additionally, the protocol urges member museums to consult legal counsel before accepting any requests for safe haven objects to ensure legality of the process and to diligently inventory and document the safe haven process once the museum accepts an item.

AAMD President Johnnetta Cole, Director of the Smithsonian Institution’s National Museum of African Art, specifically named the current conflict in Syria and other affected areas as locations where the loss and intentional damage of culturally significant works are deplorable, which may have played a large part in the AAMD’s safe haven initiative. The recent destruction of UNESCO World Heritage Site Palmyra, Syria and the looting of cultural works by ISIS may have also played a part in the AAMD’s decision to safeguard cultural artifacts. Indeed, the regularity of ISIS/ISIL-looted antiquities being sold on the black market to fund terror operations reached a point where the FBI felt it necessary to issue a report on the subject.

An FBI-published ISIL and Antiquities Trafficking article warns U.S. dealers and art collectors that ISIS-looted artifacts may reach the art market stateside. According to the report, the FBI received credible intel that individuals in the U.S. had been offered potentially looted cultural property from Syria and Iraq – the sale of which may fund terror operations and subject the purchaser of looted cultural artifacts to prosecution under U.S. law. Bonnie Magness-Gardiner, manager of the FBI’s Art Theft Program, indicated that buyers interested in Syrian and Iraqi pieces should “[c]heck and verify provenance, importation, and other documents” to ensure the objects from these countries are legitimate, not looted.

In light of the AAMD’s Safe Haven initiative, individuals in war-torn countries who have access to culturally significant artifacts may undermine looting by sending these works to AAMD member museums for safekeeping. However, stakes for those involved in preserving cultural works from ISIS looting on-site are tragically high – Palmyra’s former Chief of Antiquities, Khaled al-Asaad, refused to share information about relocated artifacts and was executed by ISIS militants as a result.

Under the Safe Haven protocol, the safe haven term extends until the works can be safely returned to their country of origin, and all works provided safe haven will be treated as loans by the receiving museum. The AAMD also established a secure Safe Haven database to identify works given safe haven as part of the AAMD Object Registry. No objects have been uploaded onto the Safe Haven registry to date.

* * *

From the Editors: The subject of looted antiquities, either stolen from known private and public collections or improperly excavated from the ground, on the ISIS controlled territory and exported through illicit channels has generated almost as much attention as the plight of the refugees from the war zones in the Middle East. In recognition of this important subject, last week there were at least three events in New York City alone, examining the results of destruction and illicit trade of antiquities.

January 26, 2016 – The Destruction of World Heritage Sites as It Concerns Cultural Property and International Laws.

Moderated by Peter Herdrich, a co-founder of the Antiquities Coalition and the founding Partner of  the Heritas Group, the panel included Colonel Matthew Bogdanos, Esq., New York County District Attorney’s Office;  Megan E. Noh, Esq., Associate General Counsel, Bonhams; Steven D. Feldman, Esq., Murphy & McGonigle; Brenton Easter, Special Agent, Homeland Security Department’s Immigration and Customs Enforcement Agency.

Panelists discussed how the ongoing illegal traffic in looted antiquities is fueling the sectarian and other conflicts. Beautiful remnants of the past, improperly excavated and exported in violation of domestic law to financially benefit militants and looters, are poised to enter private art collections. Protection of cultural property is a perennial problem, exacerbated by the current political events on the territories of Syria and Iraq under the Islamic State (ISIS) control.

With irreparable harm inflicted by looting and demolition, panelists discussed the current events in ISIS-controlled territories and present possible scenarios for handling legal matters concerning cultural valuables that are bound for the American art market. The presenters focused on various channels of distribution available in the source countries, as well as suggested best practices on handling looted property (always ask for provenance information, credible documents from exhibitions and insurance, and cooperate with authorities).

January 27, 2016 – Special Guided Tour of “The Missing: Rebuilding the Past,” led by Dr. Erin Thompson (John Jay College, NYC)

The Exhibit entitled “The Missing: Rebuilding the Past” showcases the efforts of artists and scholars to resist the destruction of the past through creative and innovative reactions, protests, and reconstructions. In a variety of media – photography, drawing, video, 3D printing – it explores the destruction of art at many historical moments, from ancient Greece and World War II to the ISIS’ destruction of cultural property.

January 28, 2016 — Limited release of “The Destruction of Memory,” a documentary based on the eponymous book by Robert Bevan.

The film, directed by Tim Slade, reminds the audience that destruction of landmark buildings, their contents, their staff and visitors is a heartbreaking but a perennial occurrence in zones of armed conflict. Thus, “[o]ver the past century, cultural destruction – the purposeful destruction of buildings, books and art in order to erase collective memory and identity – has wrought catastrophic results on every continent. The effectiveness of what happened to the Armenians and their culture triggered the fate of the Jews and the Poles, and so it flowed.” The film includes commentary on destruction of historical monuments in the ISIS-controlled territory as well as the stance the International Court of Justice has taken in regards to crimes against cultural heritage. For  information about the film: http://destructionofmemoryfilm.com/

About the Author: Elizabeth Weber is a lawyer living in Brooklyn, NY.  She graduated from the University of Florida Levin College of Law, where she received her certificate in Intellectual Property Law and served as an active member of the Art Law Society and the Journal of Technology Law and Policy. She is the Spring 2016 Postgraduate Fellow with Center for Art Law.

Sources:

Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Any views or opinions made in the linked article are the authors alone. Readers are not meant to act or rely on the information in this article without attorney consultation.

WYWH: Knoedler Trial Uncut (Week 1)

Screen Shot 2016-02-01 at 9.53.51 AM.png

Dealer Stock Books: Knoedler & Co. Getty Research Institute.

After the “public closing” (words used by Melissa De Medeiros, a former Knoedler employee in her testimony on January 27) of the venerable Knoedler Gallery (the “Gallery”) in November 2011, rumors spread that the Gallery was implicated in selling forgeries of the top Abstract Expressionist masters – Mark Rothko (1903-1970), Jackson Pollock (1912-1956), Richard Diebenkorn (1922-1993), Clyfford Still (1904-1980), Willem de Kooning (1904-1997) and other important post-War American artists.

As the tale of how the Gallery accepted on consignment and purchased some of the fake artworks, signed and dated as if they were created in the late 1940s – late 1950s unfurled close to a dozen lawsuits alleging fraud and other causes of action were brought against the Gallery, its penultimate director and its owners. The art market and professionals in related fields prepared to witness a public trial and a look into the Knoedler dealings with its clients, advisors and colleagues. In 2012, the Getty Research Institute, which collects for preservation and study archives of art dealers and galleries, among other materials, acquired a pre-1971 portion of the Knoedler archive. The rest of the documents were retained by the parent company. The magical cut off date has nothing to do with the 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property. Apparently, it was selected due to the fact that it was in 1971 that the Gallery, in existence for more than 100 years, was acquired by the legendary entrepreneur Armand Hammer (his grandson was the owner of the gallery in 2011).

By the end of 2015, less than a handful of the claims and complaints brought against Knoedler et al. were settled for undisclosed sums of money and under confidential terms.However, two cases De Sole v. Knoedler Gallery and Howard v. Freedman, et al., were scheduled for trial in January 2016. The latter case, involving a fake Willem de Kooning, was filed by collector John Howard in 2012 and settled on December 2, 2015.

On January 25, 2015, the trial in the case brought by Dominico and Eleanor De Sole began. The spectators following the De Sole trial as it has proceeded during the first week could witness first hand the jury selection process (which took about 5 hours), the heavy volumes of exhibits and testimonies prepared for both sides, the fake Rothko that seduced the De Soles in 2004, the demeanor of hostile and friendly witnesses, including the aforementioned Ms. De Medeiros, Dr. Thaw, Dana Cramer and Jim Kelly, Judge Gardephe’s style in instructing the jury, the legal teams and the mannerisms of the parties in the courtroom: Mr. and Mrs. De Sole (as the plaintiffs) and Ann Freedman (as the only defendant in attendance).

Summary of the Facts: The De Soles purchased a work attributed to Mark Rothko from Knoedler in 2004. It was their second Rothko acquisition, but their first Rothko painting on canvas, the other work in their collection was a Rothko on paper. During a visit to the Knoedler gallery, when the De Soles wished to see works by Shawn Scully, they were shown a different work attributed to Rothko which was presented by Knoedler through its employees as a recently rediscovered masterwork. While the De Soles initially only planned on spending one million dollars they ended up purchasing the alleged Rothko for a “discounted price” of $8.4 million. The De Soles ultimately purchased the work for $8.4 million with the assistance of their art advisors and another dealer James Kelly (who testified in the case on January 28).

Soon after the work was purchased, it was exhibited in Switzerland, and later shipped to the De Soles home in Hilton Head, South Carolina where it hung for seven years until 2011. Knoedler and Kelly both supplied the De Soles with a letter indicating that the work was authentic. As Kelly later explained in testimony, he was not in the habit of checking the provenance of the works sold by reputable dealers. Instead, his role in advising De Sole’s on the Knoedler purchase was to established the fair market value of the piece.

In 2008, the De Soles asked Knoedler to provide an updated appraisal for the work, which the Gallery promptly did. In 2009, Knoedler notified all of its clients, including the De Soles that Ann Freedman resigned and a new director was appointed to head the Gallery. In 2011, Mrs. De Sole learned of another collector’s concerns regarding a Pollock purchased from Knoedler by a hedge fund manager Pierre Lagrange. Lagrange’s lawsuit was settled on October 4, 2012. Within the statutory period of two (2) years after discovery of fraud, the De Soles brought their case. Among the allegations, the De Soles accused defendants of fraud, fraudulent concealment, wire and mail fraud, racketeering, aiding and abetting fraud, conspiracy to commit fraud, breach of warranty, and unilateral and mutual mistake. In their complaint, the De Soles sought a judgment of $25 million dollars which includes treble damages under the Racketeering Influenced and Corrupt Organizations Act (“RICO”).

The De Soles alleged each instance of fraud between 1994 through October of 2009 was not an isolated event but rather an interconnected scheme because there was a common goal, similar methods used, similar participants and similar victims. By doing so, the De Soles availed themselves of RICO causes of action and the statutory benefits that are associated with RICO such as treble damages and attorney’s fees. Specifically the De Soles alleged in their complaint that Knoedler was involved in a scheme to use its “name reputation, and access to collectors to sell forged works into the marketplace.” The complaint goes on to note that the works were being purchased for “suspiciously low” prices.

On January 23, a Friday afternoon before the trial was scheduled to begin, Judge Gardephe conducted a hearing in limine to review and rule on the admissibility of certain witnesses and types of evidence as potentially unduly prejudicial to the parties. Court’s rulings included.

Attorneys representing the Plaintiffs are partners with Clarick Gueron Reisbaum LLP. Knoedler’s legal team comes from Fulbright & Jaworski L.L.P. Ann Freedman’s council is with Boies, Schiller & Flexner, LLP.

Select highlights from Week 1 of the De Sole v. Knoedler, et al.

Day 1 — Jury selection and opening statement for the De Soles. The voir dire was an example of human spectacle where people from disparate walks of life were all gathered in the same place at random to perform their civic duty. They included parents with holiday reservations, medical employees, blue collar workers, high school teachers and college professors, students and retirees, people of different faiths and ranging interest in the matter at hand — rich people fighting over money and discussing abstract expressionism. Desire of those to get out of the jury duty would later be experienced by those with the transparent desire to be absolved of responsibility as demonstrated by some expert witnesses and parties to the case.

Day 2 — Opening Statements for Ann Freedman and Knoedler Gallery/8-31 Holdings. Both defendants’ opening statements emphasized the idea that the entire art world was tricked.  Freedman’s opening painted abstract expressionists as disorganized heavy drinkers, who were “messy, unpredictable,” and dysfunctional. The idea that Pollock traded some of his works for groceries was repeated on a number of occasions. Attorneys also emphasized the difficult burden for Plaintiffs to prove fraud, analogized to mountaineering. Knoedler’s attorney addressed the jury in a way that suggested that the trial was frivolous and that he would not waste the jury’s time any more than he had to.

Attorney for Freedman suggested that Knoedler and Freedman were victims of Glafira Rosales, just as much as the collectors who bought the forgeries and suggested that Rosales should be among the defendants in the case, and Freedman should not be held liable for Rosales’s crime.

Screen Shot 2016-02-02 at 1.13.41 AM.png

WSJ journal coverage by Thomas MacMillan and Elizabeth Williams. WSJ.com

Day 3 —  Witness testimonies from Jaime Andrade, Melissa De Medeiros, and Dominico De Sole. Much coverage in the news already characterized the at times entertaining and at times frustrated testimony and the cross examination of Mr. De Sole. See for example: The Art Newspaper coverage in Laura Gilbert’s “Top US collector takes the stand in Knoedler trial” (Jan. 28, 2016) and Artnet news coverage in Eileen Kinsella’s “Sparks Fly at Knoedler Trial as Defrauded Buyer of Fake Rothko Painting Takes Stand” (Jan. 27, 2016).

The testimonies given by Mr. Andrade and Ms. De Medeiros have received less attention so far. Unlike Mr. Andrade, a non-native English speaker who introduced Rosales to Freedman, Ms. De Medeiros spent a considerable time on the stand, carefully and almost begrudgingly responding to the questions posed by the Plaintiff’s attorney. The reticence was understandable, in light of the fact that Ms. De Medeiros has a long history working for the Gallery, where she held different research and exhibition positions between 1984 and 2014.

Day 4 — Witness testimonies from Eugene Victor Thaw, James Kelly, Sharon Flescher. Parade of witnesses for Plaintiffs continued with the testimony from Eugene Victor Thaw, author of the catalogue raisonné of Jackson Pollock; James Kelly, art dealer and advisor to the De Soles; and Dr. Sharon Flescher, the executive director and Editor in Chief at theInternational Foundation for Art Research (IFAR).

Among other questions posed, witness were asked to explain art history and art market terms such as  “catalogue raisonné”, ‘provenance,’ ‘connoisseurship,” “warranty of authenticity”, “secondary market,” as well as comment on the Knoedler’s reputation before the Rosales scandal. Most art historians and critics who took the stand emphatically and categorically indicated that they did not give opinions about authenticity because “it was not their job.” Even those who have spent much time reviewing body of works by Pollock and Rothko indicated that it was not their position to give opinions on authenticity.  

Some of the entertaining and memorable Q/A included:

Q: “You wrote this document?” A: “I typed it.”

Q: “You now understand this painting is a fake?: A: “No, I do not.”

Q: “You are a lawyer?” A. “No. I sell handbags for the last 25 years. Successfully I might add and [they are] real.”

A: “He knew he was wrong from my letter. [it was] implicit. I was not willing to publish it myself. … If you want my true testimony, by not publishing I gave a negative opinion.”

A: “CB … who “blessed it” !!!! (as if)…[JC] apparently saw it “Inspected it” and gave his ok (as if he would do so).

Q: “Do you typically describe 2 paintings as a ‘collection’?: A: I would not…”

A: [Having listened to a deposition being read to refresh recollection one witnesses stated that it “Sounds alright … does not say anything”. [Followed by laughter in the courtroom]

Day 5 — Witness testimonies from Earl A. Powell, Bonnie Clearwater, Irving Sandler, Dana Cramer and Eleanor De Sole. Two of these witnesses, Earl A. Powell, director of the National Gallery, and Bonnie Clearwater, former head of the Mark Rothko Foundation, were not present and their pre-trial depositions were read into the court record. Witnesses who did take the stand on the last day of the first week included Professor Irving Sandler, one of the foremost authorities on abstract expressionism; Dana Cranmer, a conservator and Mrs. De Sole.

Professor Sandler, an art historian and formerly a member of the Rothko Foundation Board who indicated that he was not “one of the foremost” but “THE foremost authority on Abstract Expressionism would frequent galleries for a number of reasons including gossip. He mentioned that at one point Knoedler was on his gallery track because it was one of the most important galleries in New York, for two reasons: 1. its history and 2. the caliber of art it sold. When at Knoedler, Prof. Sandler testified that he had no reasons to doubt authenticity of art shown because of the Gallery and Ann Freedman context.

Looking forward: As the second week is already on its way, how important is this Knoedler trial? Only the time will tell but the case has attracted a considerable amount of attention in the news and lively attendance in the courtroom. Those observing the first week, not including the jury members, were art dealers, court illustrators, journalists (many journalists), art attorneys, including some working on other Knoedler cases, law students and friends of the parties to the case. Given that this Knoedler trial may become the playbook for other pending Knoedler cases as well as a seminal case for art and wire fraud precedent the upcoming week promises to be just as entertaining.

Select Sources:

Disclaimer: Reading “Wish You Were Here” articles in no substitute to attending art law events, trials and programs. This and all http://www.itsartlaw.com articles are for educational purposes only. It is not meant to provide legal advice. Readers should not construe or rely on any comment or statement in this article as legal advice. Instead, readers should seek an attorney.

The Cost of Donating Artwork: Can Artists Afford to Donate Their Own Artwork?

 

By Emma Kleiner*

Screen Shot 2016-02-01 at 2.00.08 PM

Sample press release about a gift (2011 The Philadelphia Museum of Art).

At the Tucson Medical Center in Tucson, Arizona, the Healing Art Program’s mission is to fill the hospital with art that lifts the spirits of the patients and creates a serene environment. Lauren Rabb, the Curator of the Healing Art Program, manages that task, which includes arranging works from the hospital’s private collection and searching for new donations. It may seem curious, then, that when Rabb began her work at the Hospital she would not consider asking an artist to donate his or her own work. To professionals in the art world this hesitance makes sense: unlike art collectors, who are incentivized to donate artwork because they may deduct the fair market value of the work from their taxable income, artists may only deduct the value of their supplies – which likely amounts to the negligible cost of paper, brushes, and paint. In an interview for Center for Art Law, Lauren Rabb, who once also owned a gallery and worked as a museum curator, stated: “Everyone in the art world has come into contact with this [tax provision].”

Under § 170 of the Internal Revenue Code of 1986 and § 1.170-1(c)(1) of the Code of Federal Regulations, when a taxpayer makes a charitable contribution of tangible property, including artwork, he or she may deduct the fair market value of that tangible property from his or her taxable income. The law is designed to provide an incentive to collectors to donate artworks to nonprofit educational institutions such as museums and libraries. However, as a result of the passage of the Tax Reform Act of 1969, “creators,” such as artists, writers, and choreographers, are excluded from this tax provision. Instead, creators may only deduct the cost of their supplies from their taxable income. Thus, while collectors may be motivated to donate artwork due to the favorable tax benefits, artists are asked to give away their artwork essentially for free.

The origin for the disparate treatment of artists and non-artists dates back to the 1960s, when Congress was galvanized to close a perceived loophole after public officials and politicians capitalized on their status as creators of their own papers and manuscripts. Presidents Truman through Johnson reaped very favorable tax benefits when donating their presidential papers. Supporters of the Tax Reform Act of 1969 derided the ability for public officials and politicians to deduct the fair market value of their papers – papers that arguably belonged to the public in the first place. The timing of this reform put President Nixon’s donation of a portion of his vice presidential papers in 1969 at risk. President Nixon’s Vice Presidential papers were valued for tax purposes at $576,000, which appeared to be a very favorable appraisal to many observers, even exceeding Nixon’s gross income for 1970. To take advantage of the pre-1969 tax break though, Nixon backdated the deed transferring title of his papers. That deduction helped to reduce his taxable income to zero – in fact, the $792 he paid in taxes in 1970 was a result only of the alternative tax minimum. In passing the Tax Reform Act of 1969, Congress was concerned that if they failed to close this loophole, other creators would take advantage of the tax provision allowing for a deduction of fair market value of their works. Notably, these examples relate to documents and written materials rather than works of visual art.

The effect of the revision of the Internal Revenue Code in 1969 was immediate: donations of works, including artwork, manuscripts, and other scholarly collections, by their creators came to a halt. For example, in the three years prior to 1969 the Museum of Modern Art in New York received 321 donations from artists, but in the three years after 1969 the Museum received only 28 donations from artists. Strikingly, the Library of Congress, which customarily received around 15 donations from authors per year, received one donation in the four years after 1969. The National Archives, within just days of the passage of the Tax Reform Act of 1969, noted a visible decline in gifts of papers made to the government.  

This trend was particularly significant for museums and libraries, which depend on the public to a large extent to grow their collections. Museums, which must rely on their endowment and funds to support their staff and the costs of running a museum, need donations to grow their collections. It is estimated by the Performing Arts Alliance that 80% of objects in U.S. museums arrive as donations. Furthermore, the connection between donations and tax benefits is clear. In Artful Ownership, author and attorney Aaron Milrad wrote, “Historically, most museums and public institutions have received their finest works through donations[,] . . . [and] the donations are made, at least in part, for the tax benefits available to the donor.” Today, because of the insignificant tax break for donating artwork, artists often sell work that they would otherwise consider donating to a cultural institution or nonprofit, and the public is thus denied the benefit of that art.

Although the possibility for valuation abuse that spurred support for the Tax Reform Act of 1969 will always exist, there are many reasons to believe that deceptive or exaggerated valuations are not likely to occur and that Congress could safely adopt a measure restoring the law to its pre-1969 condition. The Senate currently has such a bill in front of it: the Artist-Museum Partnership Act (“the Act”). The Act, proposed by Senator  of Vermont, would give artists the ability to deduct the fair market value of their works while providing additional safeguards to prevent any abuse of the tax provision.

The Act has been introduced in the Senate seven times since 2000, most recently on April 14, 2015, but it has not gained much traction or become law. To reduce the ability for creators to take advantage of a tax provision allowing for the deduction of their donated works at fair market value, a qualified appraiser must determine the fair market value of the tangible property. Moreover, the tangible property must be created no less than 18 months prior to the contribution, which stops an artist from creating and donating a piece of tangible property in quick succession simply to gain a tax advantage. Finally, the Art Advisory Panel at IRS, which was established in 1968 to help IRS review the fair market value of works of art, should also help to curb any appraisals of art that raise red flags. Given these safeguards, such “phantom abuses” should not prevent the United States from supporting creators in their artistic work.

 

Screen Shot 2016-02-01 at 2.04.47 PM.png

Note credit line of the controversial Rauschenberg work that includes a stuffed bold eagle. MoMA.

Amending the IRC by passing the Act or comparable legislation would be one step towards rectifying the unfairness with which artists and other creators have been treated for the past decades and undoing the harm to museums, libraries, and other institutions that have limited acquisition funds. It would serve the fundamental goal of generating public access to the arts and helping museums grow their collections. In advocating for passage of the Artist-Museum Partnership Act, Senator Leahy stated: “We have a lot of contemporary artists in this country who have this artwork, and ultimately the public wins. The public gets to see artwork they might not have seen otherwise, unless they were visiting somebody who’s a private collector.”

 

At present, by disallowing the deduction of the fair market value of artwork when donated by its creator, the Internal Revenue Code creates a schism between taxpayers where there should be none. It is only fair that collectors and creators, who are identical taxpayers and donate the same types of works, receive the same tax benefit of a donation.

Note: For this interview, author interviewed Lauren Rabb, Curator of the Healing Art Program at Tucson Medical Center in Tucson, Arizona. More information about the Program is available on their website: http://www.tmcaz.com/healing-art-program.

Sources:

*About the Author: Emma Kleiner is a student at Stanford Law School. She can be reached at ekleiner@stanford.edu.

Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Readers should not construe or rely on any comment or statement in this article as legal advice. Instead, readers should seek an attorney.

15 Years Later: Marking a Milestone for the Holocaust Claims Restitution Practicum

By Irina Tarsis, Esq.*

Cardozo Practicum Feb 2000 NYLJ_illustration

Source: NYLJ (2000).

2015 marked the fifteenth Anniversary of the Holocaust Claims Restitution Practicum (HCRP, the Practicum) at Benjamin N. Cardozo School of Law (Cardozo). The program was inaugurated in the spring of 2000, less than two years after the 1998 Washington Conference on Holocaust Era Assets, which brought together representatives from over 40 nations to address the issue of stolen and hidden property suffered by the Nazi victims. Founded by a Ph.D. in art history and archeology and a lawyer, Lucille A. Roussin (a Cardozo alumna), the Practicum graduated over 100 students who lent their time and efforts to helping victims and families of Holocaust survivors address asset restitution issues. The HCRP is a unique program. It is dedicated to offering students immediate experience working with specialized agencies and legal practitioners on investigation and recovery of property stolen from Holocaust victims.

Formerly an associate with Herrick, Feinstein LLP, Roussin is a solo practitioner and an educator. She has also testified as an expert witness in a number of Nazi-era looted art cases. When she served as a member of the U.S. Presidential Advisory Commission on Holocaust Assets, Roussin envisioned offering legal training to law students through law firms and various nonprofit and government organizations, which would create a personalized experience working on the Holocaust-related issues.

At the time, supporters of the visionary proposal recognized that it could only be implemented in the United States, and more specifically New York, because the jurisdiction offers a unique forum for bringing property claims decades after an injustice was perpetrated. One of the most powerful New York procedural tools available to the victims of Nazi-era looting is the favorable statute of limitations rule that allows claims for restitution to be brought only after the current possessor refuses to return the property to the rightful owner, the so called “demand and refusal” rule, as set forth in the 1991 Guggenheim v. Lubell case. Elsewhere, and in most of the countries where lootings took place, legal title vested after a certain period of time lapsed regardless of the physical inability to locate the property by the victims or their heirs.

By design, the HCRP is made up of two components — a weekly seminar in a course entitled “Remedies for Wartime Confiscation” open to qualified upper class students, and a field placement with an entity (a large to small law firm, solo practitioner’s office, nonprofit organization or a governmental agency involved in restitution claims). In the classroom, students learn about the socio-economic situation and legal history dating back to the years prior to World War II and the imminent looting and restitution that followed.  Over the years, the Practicum has hosted guest lectures delivered by restitution experts, such as Professor Richard Weisberg, a member of the Cardozo faculty who serves on the Presidential Commission for the Preservation of America’s Heritage Abroad; Professor Eric Freedman, the European Advisor and visiting professor for the Program in Holocaust and Human Rights Studies; and attorneys from the Herrick, Feinstein LLC art law department. Students are evaluated on class participation, feedback from the practicum supervisors, and a final paper.

A prerequisite for the students to be enrolled in the course and qualify for the practicum is passing the International Law course. While knowledge of foreign languages and art history is not mandatory, they are highly preferred. Students seeking admission to the Practicum are interviewed both by Professor Roussin and the would-be-employers.

Each year, students are provided with the opportunity to work on unique and diverse case files. When asked which case seems to resonate with the Practicum alumni, Roussin cites the famous U.S. v. Portrait of Wally, a case that involved a painting by Egon Schiele on international loan to the Museum of Modern Art in New York. That case was subject to 12 years of litigation, which resulted in a multi-million dollar settlement in favor of the heirs of the original pre-war owner of the painting. However, just as the claims by the Holocaust victims are diverse, the work performed by the Practicum students is not limited to cases involving art and cultural property. Over the years, work placement for the Practicum students has ranged from complicated class action lawsuits involving banking and railroad industries, to matters pertaining to securing pensions for the elderly and restitution of real property.

One student who enrolled in the inaugural session of the Practicum wrote a letter to the then Dean of Cardozo, Paul Verkuil, expressing that his most important experience at Cardozo was earned through the HCRP, both because the subject matter was “extraordinarily interesting and relevant”, and because the practical experience was “invaluable” and “unparalleled.” That student was placed with a practitioner working on a case involving the French National Railway’s involvement in transporting Jews to concentration and death camps. Others have gone to work with New York based organizations and firms, such as the Holocaust Claims Processing Office in the New York State Department of Financial Services; Claims Conference; New York Legal Assistance Group; Herrick, Feinstein, LLP; Squire, Sanders & Dempsey; Law Offices of Mel Urbach; as well as the Washington D.C. based Holocaust Art Restitution Project and Byrn, Goldenberg & Hamilton; practitioners in Florida; and even organizations beyond the U.S. borders. Indeed, in 2005, three students worked with a member of the Knesset (the Israeli Parliament) on the first Global Report on Restitution of Jewish Property in the State of Israel. Many alumni fondly remember the Practicum as a highlight of their law school experiences.

Another alumna who worked with the New York State Banking Department as part of her experience in the Practicum remembers poring “over auction records and exhibition catalogues in the hopes of finding stolen art.” The stories about “people signing bills of “sale” for their art while Nazi soldiers held guns to their heads, apartments being raided and paintings torn from the walls, etc.” filled her with compassion for the victims and inspired her to “increase [her] own efforts to always be kind and tolerant towards others.”

Given the extent of the property disputes and human rights violations that continue to occur in the world, a restitution practicum may be expected to continue with new cases and reparations efforts. For now there is no lack of Nazi-era related claims being reported, such as the recent stories of the Rosenberg and Gutmann families who lost property during the Holocaust, as well as reports and studies of the art found in the Gurlitt Art Trove (a.k.a. the Schwabing Art Trove) in Germany.

When asked how long the Practicum may remain relevant and in existence, Professor Roussin hedged her response, stating that “[t]he program cannot last indefinitely.” No other law school offers such a practicum, which may, to some degree, be explained by the fact that there is only one Lucille Roussin, and New York is the logical jurisdiction to offer a training program for the Holocaust restitution cases. One of the best aspects of the practicum is that through the lectures and readings, students are able to appreciate that restitution is not only about litigating cases in courts but “it is equally a matter of gaining the political and financial support of key influencers.”

Despite the attention restitution has received through programs like HCRP, the problem of doing right by those displaced and dispossessed of their valuables as a result of an armed conflict or a genocide has not been eradicated. At least one HCRP student had worked on the first restitution case brought before a U.S. Court involving cultural property taken during the Armenian Genocide (1915-1917). W. Prelacy of the Armenian Apostolic Church v. J. Paul Getty Museum was ultimately settled this September, whereby the title to the contested illuminated Bible pages passed to the claimants while pages would remain on a permanent loan with the Getty Museum. Perhaps in time the Practicum will grow to include more restitution questions related political and social unrest in South America, Asia, the Middle East, and elsewhere in the world that affected lives and livelihood of other victims. By then the HRCP will have established a precedent of helping people restitute their valuables and getting some measure of justice through well-established legal channels.

*Reprinted with permission from: Entertainment, Arts and Sports Law Journal, Fall/Winter 2015, Vol. 26, No. 3, published by the New York State Bar Association, One Elk Street, Albany, NY 12207.

About the Author: Irina Tarsis, (NY Bar Member since 2012) is the Founder and Director of Center for Art Law.

Art Price Indices: Op Ed

Note from the editors: The subject of art investment and art as an alternative asset is of great interest to the regulators creators and collectors. Center for Art Law has published writing on related subjects before and we are delighted to be bringing an opinion on the subject of art indices from a seasoned art dealer and educator, Carole Pinto.

For additional readings on the subject of art markets, visit http://www.hec.edu/Knowledge/Strategy-Management/Micro-economics/The-Art-Market-Understanding-Changes-in-Prices

* * * 

By Carole Pinto*

The boom in prices of artwork sold at auction since the financial meltdown of 2008 has led to the proliferation of articles written by people who attempt to apply the tools used to interpret the financial markets to the art market.  Much of the data provided by art dealers, advisers, consultants and fund managers, among others, is often used as a means to promote their inventory, while more objective data, such as the Mei Moses Indices and the Art Market Research, do not comprise a broad enough base to reflect significant and data driven movements (meaning in the art market).

A multitude of private equity art funds, including Philip Hoffman Fine Art Fund, The Collectors Fund and the Art Fund Association and a myriad of art advisory firms as well as advisors in the personal banking departments of financial institutions such as Bank of America, Citibank, Deutsche Bank, HSBC, JP Morgan Chase and Goldman Sachs regularly consult with high net worth clients on the advantages of including artwork in the long-term portion of their portfolio, underlining the positive aspects, but often disregarding risk of erosion of asset value over time.  The pleasure of admiring a work of great beauty combined with a potential appreciation in value over a fairly lengthy period of time has to be weighed against the illiquidity of the art market, the possibility of not recuperating the purchase price due to the high cost of getting in and out of the market (commissions of auction houses, for buyers and sellers, on average 25%), the impact that fashion and trends have on the value of a work of art, currency fluctuations and factors such as the geopolitical climate and world economic conditions.

What is the purpose of art market indices? The benefits? What analytical financial data is currently available to the public? One must keep in mind that less than 50% of all artwork sold worldwide is done so publicly, so any market data that is available is drastically skewed because it is based on publicly shared data.  To begin with, it is important to realize that the art market is not one big market, but a series of smaller markets representing over $66 billion in recorded sales annually, according to the most recent Bloomberg Business Report.  It is the largest unregulated market in the world. Contrary to the heavy regulation and transparency of the financial markets, the art market has almost no regulatory oversight. Art assets acquired by funds are not subject to the same level of investor protection measures as securities and other financial instruments. Aside from anti-fraud provisions, auction regulations, cultural property laws, and general consumer protection and contract law, there is little regulation and the art market can be used for money laundering and tax avoidance purposes.

The difficulty of regulating the market lies not only in the resistance of dealers to imposed rules, but also in the fact that works of art are not fungible, and that their value is impossible to calculate against any independent measure at any given point in time.  Two works by the same artist, executed in the same year, with the same subject matter, with comparable dimensions, in the same condition can command vastly different prices due to the quality of the work which unfortunately is not quantifiable.  

There are also major differences between collecting and investing in art one is a passion and the other profit.  Typically, investors in the stock market are advised to diversify their portfolio in order to mitigate risk, since some stocks prices rise while others tend to underperform.  Even though many art collectors have eclectic tastes, their approach is not to buy a basket of artwork a few Impressionist paintings, some old Masters, Chinese porcelain, etc.–but to concentrate on a few artists or types of art that appeal to them.  

The increase in sheer wealth of the top .01% of the worlds population in India, China, Russia, and North and South America has created a bifurcation in the market, resulting in a widening spread between blue chipartwork by well-known artists and the rest of the market. Many of these active players investin art in the same way they invest in other hard assets such as precious stones and metals, as well as real estate, reducing their exposure to currency and political or economic risk. Exponential growth in the market means a lot more players in the field, with a greater risk for mistakes where provenance, ownership and authenticity are concerned. In addition, there are more middlemen in the market today, leading to a diffusion of responsibility when it comes to authentication of a work of art.

In light of the aforementioned caveats, there are a number of specific factors that have to be taken into careful consideration when contemplating art as an investment vehicle:

Artwork traditionally has to be held for a minimum of 10 to 15 years before realizing potential profits. The notion of flipping art for a quick profit is highly risky and is reserved for a select group of savvy dealers. Additional costs associated with buying art include storage, transportation and insurance, appraisal for tax purposes, and buyer and seller premiums.

The lack of liquidity in the art market makes it difficult to unload a work of art for quick cash. One must keep in mind the high cost of entry and exit from the auction market, with a commission of 25% for both buyer and seller, means a work of art has to increase by at least 50% before profits can be realized. Fashion and trends cause tremendous fluctuations in the valuation of works of art. What was considered hotten years ago might have fallen out of fashion, and collectors have to sometimes wait years before the item they want to sell becomes popular once again. It is difficult to assess the value of a work of art at any point in time given the impossibility of obtaining sales data from an important segment of the market, private dealers. This lack of data (price information is available for less than half of all artwork sold) combined with a lack of transparency of the market impacts the validity of any market data analysis.  

There are a few tools that have been made available to the public that try to analyze trends in the art market. Art indices provide a limited tool, and as such it is important to understand what data they include and what they leave out. Art indices are informal records of prices for a select group of works sold at auction, and are not subject to any kind of external scrutiny or regulation.  As an exercise demonstrating this, one only has to subscribe to any number of companies that compile data obtained from the public market, and carefully read the information pertaining to what the numbers actually reflect.  

Art indices also fail to include works that do not sell at auction, which reflects a number of art works that could exceed 50% of those presented at auction. Indices tend to track only the most successful art sales, and do not take into account artwork that is not considered valuable enoughto be resold.

Screen Shot 2015-11-16 at 11.14.59 AMThe Mei Moses Family of Fine Arts Indices, named after two New York University professors, Jianping Mei and Michael Moses, has high name recognition, a long history and a broad base that covers over 30,000 repeat sales. They publish a World All Art Index as well as seven indices representing different categories of collecting. The information is updated annually, though Mei Moses recently indicated that a semi-annual update for the World Wide Art Index will soon be made available according to online information. Quarterly tracking estimates for these indices based on this year’s results are also available. It is noteworthy that the Mei Moses indices do not take into account transaction costs (shipping, insurance, sales tax, buyer/seller premiums), and they only reflect the prices of artwork that has turned around twice in the marketplace.  The source of information is data from Sothebys and Christies, but does not include online sales.  Furthermore, access to the Mei Moses indices is subscription based, costing anywhere from $100 to $250 year.

Another source, Art Market Research, which has existed since 1985, publishes 500 indices covering a variety of categories including vintage wine, Old Masters, jewelry, etc. Some of the data is published in the Wall Street Journal, the Financial Times, BusinessWeek and the Economist, but a complete listing is available to online subscribers. Here too, sale prices that result from online purchases are not made available, meaning the data are less representative of the broader market than prior to online transactions. The existence of online sites limits the information available to collectors in their quest for asset valuations, and combined with a growing number of private sales (both by dealers and auction houses playing the role of dealers) means price comparison is becoming more difficult and less meaningful for understanding market trends.

Artnet indices, again only available to subscribers, cover Contemporary, Impressionist and Modern art. Subscribers can also access artist-specific indices or indices devoted to a subset of an artists work. Citadel Art Price Index includes the results from seven auction houses, but given the multitude of smaller auction houses around the world, the results appear to reflect a very limited dataset.

Sites such as Art Price and Art Net rarely indicate whether a work of art was offered privately before coming to auction and therefore is not fresh to the market, which puts downward pressure on the price. They do not indicate whether or not a dealer is cornering the market, therefore pushing prices up. It is imperative to know key players in the market in order to understand why certain prices are obtained for specific artworks. Price guarantees made by auction houses to sellers are also not indicated, nor are factors such as the geopolitical climate or world economic conditions, all of which have an impact on the art market.

Historically auction houses and other private entities have maintained indices for internal use, which are not available to the public at large. For example, in the mid 1970s, Sothebys auction house attempted to create such an internal index, which was used as a marketing tool to entice clients to purchase art sold there. Then as now, data available was limited to public sales and sales conducted by Sothebys in private transactions.

An integral part of data missing from the indices is how important the aesthetic quality, the intrinsic beauty of a work, is to its valuation. Financial and statistical tools overlook art history–the period in the artists life during which a work was created, the social, political and artistic movements that influenced its creation, or factors impacting the artists personal life–all of which contribute to the artistic creation and works reception in the marketplace. Those choosing a brand name artist without reference to the quality of the work and advice from dealers and experts in the field are exposing themselves to additional risks.   

In the opinion of this author, art should be purchased for the purpose of pleasing the eye, as food for the soul. The great art collector Paul Mellon once described collecting art as an investment in pleasure, a treasure for the eye.” Those who believe that price charts and tabulated data alone can serve as a fireproof guideline for investors could benefit from considering art for both its financial and cultural capital.

About the Author: Carole Pinto is a private dealer and art advisor who teaches a course on the Art Market at Hunter College. She is a regular contributor to the Fine Art Connoisseur magazine. Her work experience includes curatorial work at the Metropolitan Museum of Art and Brooklyn Museums, art investment at Sothebys, Corporate Finance at Salomon Brothers and consulting at the New York State Council on the Arts.

Case Review: Galin v. Kunitake Hamada (2015), or Legal Storm over “Ice Storm”

By Elizabeth Weber, Esq.*
Screen Shot 2015-11-12 at 12.10.59 PM
In early September 2015, a former Tennessee news anchor who invested in Andrew Wyeth’s Ice Storm [the Painting] sued a Japanese art dealer in the Southern District of New York over the proceeds from the Painting’s May 2015 sale at Christie’s. The investor, Reed Galin, purchased a one-third interest in Ice Storm from his childhood friend and college roommate, now-disgraced art dealer David Ramus, in the late 1980’s.

The controversy over Ice Storm began in 1989 when Ramus bought the painting from Christie’s for $319,000 to be financed via an extended payment plan. Under the terms of the plan, Ramus would have to pay Christie’s one-third of the final bid price plus the buyer’s premium by June 23, 1989, another one-third of the final bid price by July 24, 1989, and the remaining one-third by August 23, 1989. About one month later, Galin entered into a written agreement to purchase an interest in Ice Storm from Ramus for just over $106,000. According to the complaint, Ramus “agreed that neither the Painting, nor any interest in it, would be sold or transferred to anyone, without [Galin’s] prior knowledge and consent.” Complaint at 5, Galin v. Hamada, No. 1:15-cv-06992 (S.D.N.Y. 2015). Soon thereafter, Ramus sold another one-third interest in Ice Storm to Don Sentell. Galin had prior knowledge of and consented to the one-third interest sale to Sentell.

Unbeknownst to Galin, Ramus had already sold 100% interest in Ice Storm to the Coe Kerr gallery in New York City later in 1989 in exchange for another painting, Children in the Wood, by Frank Weston Benson. However, Ramus continued to assure Galin that he was actively searching for an Ice Storm buyer throughout the early 1990’s, blaming the years of stagnation on the slow art market.

In a separate proceeding, Ramus was indicted and tried by the U.S. Attorney in the U.S. District Court for the Northern District of Georgia for fraud and conversion arising out of his fraudulent art dealings with a number of individuals, Galin being one of them. The Georgia case culminated in Ramus’s conviction and sentencing to a federal prison in 1996. United States v. David S. Ramus, No. 1:95-CR-199-01 (N.D. Ga. 1996). As it turns out, Ramus had sold a number of paintings in his possession without the knowledge of the piece’s owners, nor did Ramus pay the owners for the sale of their property.  Because Ramus sold Ice Storm without Galin’s knowledge nor did Galin receive any proceeds of the sale, Galin was officially designated a victim of Ramus’s crimes by the U.S. Attorney. Although Ramus’s property interest in Ice Storm was extinguished through bankruptcy proceedings and the other co-owner, Sentell, extinguished his rights as a Settling Creditor, Galin acted as a non-Settling Creditor in the 1990s proceedings. (Note: A non-Settling Creditor does not settle the outstanding debts at issue in a bankruptcy proceeding.) Accordingly, by acting as a non-Settling Creditor, Galin did not waive his rights to pursue a property interest in Ice Storm piece. Unlike other pieces that Ramus fraudulently converted, Ice Storm was never recovered by the authorities.

When Ice Storm appeared on consignment through Christies the identity of the consignor was left out. In his complaint, Galin indicates that he searched for Ice Storm for years, contacting art dealers in an attempt to locate the piece. Finally, in May 2015, Galin learned that the painting was being offered for auction at Christie’s by Tokyo-based art dealer Kunitake Hamada. Hamada purchased Ice Storm in December 2013 from K.K. Shinoda Bijutsu in Tokyo. See Memorandum of Law in Support of Defendant’s Motion to Dismiss, Galin v. Hamada, No. 1:15-cv-06992 (S.D.N.Y. 2015). 

Galin contacted Christie’s, which then reviewed Galin’s claims. As a result, Galin, Christie’s, and Hamada all agreed to allow Christie’s to sell Ice Storm and instead focus any assertion of rights on the proceeds from the sale only, and not the actual painting. The parties agreed to allow the sale of Ice Storm to proceed to preserve the painting’s market value, and determine competing claims later. The business decision aligned with the theory that by withdrawing a piece from sale, followed by litigation over it may damage the value of the work. Ice Storm sold for $820,000 (plus $169,000 as the buyer’s premium.) The net proceeds from the sale total $803,600 after deductions.Currently, the proceeds from the sale are being held by Christie’s pending the outcome of this litigation to be disbursed pursuant to a court order.

This action is before the U.S. District Court for the Southern District of New York because the Southern District has subject matter jurisdiction over all the parties through diversity because the plaintiff is not domiciled in the same state as any of the defendants and the amount in controversy exceeds $75,000. Further, the complaint alleges that the court retains in rem jurisdiction over Ice Storm because Hamada claims an interest in the piece, which is currently located in New York state. In the complaint, Galin asserts his right to an equitable lien on the sale proceeds of Ice Storm. Galin further seeks the imposition of a constructive trust on the proceeds of the sale. A constructive trust is an equitable remedy used by courts to prevent unjust enrichment and, in this case, would result in Hamada paying the proceeds of the sale to Galin.

Hamada subsequently moved to dismiss Galin’s claim for failure to state a claim upon which relief may be granted.  See Motion to Dismiss and Memorandum of Law in Support of Defendant’s Motion to Dismiss, Galin v. Hamada, No. 1:15-cv-06992 (S.D.N.Y. 2015).  In the motion, Hamada asserts that “a dealer in Ramus’s position can pass good title to a third-party with respect to goods entrusted by a seller in Galin’s position, even if the dealer acts with larcenous intent toward the seller.”  Memorandum of Law in Support of Defendant’s Motion to Dismiss at 1, Galin v. Hamada, No. 1:15-cv-06992 (S.D.N.Y. 2015).  Accordingly, argues Hamada, because Galin entrusted Ice Storm to Ramus, Ramus could pass good title to the Coe Kerr Gallery despite of Ramus’s unlawful conduct, and Galin has no claim against Hamada for the proceeds of Ice Storm’s sale.

Attorney for plaintiff is Richard A. Altman. Attorneys with Cahill Partners LLP are representing the defendant.

Sources:

  • Galin v. Hamada, No. 1:15-cv-06992 (S.D.N.Y. 2015).
  • In re David S. Ramus, No. A94-77777 (Bankr. N.D. Ga. 1997).
  • United States v. David S. Ramus, No. 1:95-CR-199-01 (N.D. Ga. 1996).

About the Author: Elizabeth Weber is a lawyer living in Brooklyn, NY.  She graduated from the University of Florida Levin College of Law, where she received her certificate in Intellectual Property Law and served as an active member of the Art Law Society and the Journal of Technology Law and Policy.

Seeing Double: Nearly Identical Photograph Sparks Copyright Controversy

By Loren Pani*

Imagine the following scenario: You go on vacation with a group and take a gorgeous photo of some natural object. Mere seconds later, someone, standing almost exactly where you were standing, takes a photo of the same natural object. Years later you submit the photo for a contest, win the contest, then promptly find out that someone has claimed that you might be infringing their copyright. If this sounds far-fetched, it shouldn’t because it happened to a British student in 2006 who took a photo of an iceberg in the Patagonia ice fields. This begs the question:

IMG_20151021_081928

Center for Art Law, Oct. 21, 2015.

IMG_20151021_081918

Center for Art Law, Oct. 21, 2015.

 

Can you have a successful claim for copyright infringement if the photo is not copied, but is nearly identical?

 

Almost from the time that photographs were considered copyrightable subject matter they were challenged in court. In Burrow-Giles Lithographic Co. v. Sarony, the defendants argued that photographs were neither writings (as specified in Article 1, Section 8 of the United States Constitution) nor works of authorship since they involved a mechanical process. The Court upheld the copyrightability of photographs and concluded that they were both writings and works of authorship. For purposes of the Copyright Act, anyone deemed an “author” of a photograph is able to sue for infringement under Section 501. “Whether a particular photograph has been infringed will, of course, be determined by the ordinary substantial similarity test, tempered by the fact that a photographer may not obtain exclusive rights over the object depicted—ruling out any claim of infringement when another photographer reshoots the same object or scene without copying plaintiff’s originality over the mood evoked by the photograph or a scenes a faire.” The court in Leigh v. Warner Bros., Inc. noted that there is a relatively narrow scope of protection for photographers who takes images of natural objects and scenes. Often, photographers make the claim that they are responsible for the “mood” of a particular photograph, which includes lighting, shading, timing, angle, etc. For example, in the case of Sahuc v. Tucker, plaintiff claimed that defendant infringed upon plaintiff’s copyright. The photographs at issue involved the famous St. Louis Cathedral in New Orleans shrouded in mist and taken from the same angle. The court noted that although plaintiff made a valid effort to show that the two photos were identical, slight variations of the photographs lead to the conclusion that they were not substantially similar.

Screen Shot 2015-10-30 at 10.54.30 AM

Photograph by Marisol Ortiz Elfeldt, Nov. 6, 2006.

Photograph by Sarah Scurr, Nov. 6, 2006.

Photograph by Sarah Scurr, Nov. 6, 2006.

In the case of the photographs of the iceberg, it is clear that both of the photographers captured a different image and that the British student did not make a photocopy or reproduction of the other’s photograph. Furthermore, since it is a natural object, neither would be able to claim copyright on the iceberg itself. Therefore, a claim for copyright infringement would fail even though the images were nearly identical. To give protection to the photograph would open up a Pandora’s box of issues and would invite baseless lawsuits into court from people who claimed that someone else infringed their copyright. Even worse, it would force governments to make certain natural and man-made objects off-limits to photographs as some countries have done with their national treasures. Going forward, as long as a photographer doesn’t go to pains to recreate the “mood” of a particular scene, there should be no issues of copyright infringement. It is only in those rare circumstances that photographers have a viable copyright infringement claim.

Selected Sources:

About the Author: Loren Pani, a volunteer with Center for Art Law, recently graduated from Brooklyn Law School and is now working for the firm of Alter, Kendrick & Baron, LLP as a music copyright attorney (pending admission to the New York Bar).

Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Any views or opinions made in the linked article are the authors alone. Readers are not meant to act or rely on the information in this article without attorney consultation.

WYWH: Looted in “Fakes, Forgeries and Looted and Stolen Art” (NYC)

By Rebecca Krishnan-Ayer *

“In many ways, cultural heritage defines what it means to be human.  It is a tangible reminder of the beauty and accomplishment of the ancient civilizations, our common origins, and our shared history and identity.  It inspires a sense of belonging and is a source of pride.  Culture has the exceptional potential to be used as a tool for expression and peaceful cooperation, as it reminds us of the contributions and experiences of humanity.” –Sheba Crocker, U.S. Department of State

In June 2015, New York University’s School of Professional Studies hosted the 2nd annual Art Crime and Cultural Heritage Symposium entitled “Fakes, Forgeries and Looted and Stolen Art.” A major theme for the symposium was the increasingly grave threat facing the world’s invaluable international cultural heritage–particularly in Iraq, Syria, and Libya–through systematic destruction by extremist groups such as the Islamic State of Iraq and the Levant (ISIL/ISIS). The topic has gained considerable traction in the media within the last year since the demolition has spiraled into an unprecedented and alarming scale. Leading the discussion on ISIS cultural heritage destruction at the NYU symposium was Amr Al Azm, Associate Professor of Middle East History and Anthropology at Shawnee State University, and former Director of the Scientific and Conservation Laboratories in the General Department of Antiquities and Museums in Syria. Dr. Al Azm delivered a passionate message to conference attendees condemning the “industrial-scale” damage inflicted by ISIS in places like Mosul, Nimrud and Aleppo. He described opportunistic and systematic looting on the part of ISIS and an intensification of an already thriving trade in illicit looting of antiquities and pillaging of archaeological and Shi’ite religious sites. According to Al Azm, “2015 heralded a much more sinister manifestation of ISIS’ control and exploitation of cultural heritage.”

What incentivizes ISIS to embark on such extensive and relentless paths of deliberate, punitive cultural heritage destruction? Al Azm noted that such drastic measures enhance political power, demonstrating impunity and impotence of the western world. With 70% of Syria’s cultural heritage outside of state control and surmised to have been destroyed or damaged since the conflict arose, organizations such as the United Nations Educational, Scientific and Cultural Organization  (UNESCO) and Safeguarding the Heritage of Syria Initiative (SOSHI) have been left to grapple with a challenging international repatriation effort in heavy-armed conflict and civil war zones. Al Azm called for an extension of the moratorium on trade of objects in these countries and urged conference attendees to escalate and prioritize the fight against international racketeering, terrorism, and wanton annihilation of cultural heritage in the Middle East.

Fellow panelist Edouard Planche, Programme Specialist of the Cultural Heritage Protection Treaties Section at UNESCO, offered insight into the specific steps being taken by his organization to thwart ISIS’ vast cultural cleansing efforts. Planche described a “cultural genocide” that he and UNESCO Director-General, Irina Bokova, are actively working against through legal framework and legislation, treaties, and UNESCO conventions. The 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export, and Transfer of Ownership of Cultural Property centers on three pillars: first, preventative measures; second, restitution provisions; and third, an international cooperation framework.

According to Planche, it is paramount that the art market joins and upholds the provisions of the 1995 UNESCO UNIDROIT Convention. Under UNIDROIT, devised in consort with The 1970 Convention, “states commit to a uniform treatment for restitution of stolen or illegally exported cultural objects and allow restitution claims to be processed directly through national courts…the UNIDROIT Convention covers all stolen cultural objects, not just inventoried and declared ones, and stipulates that all cultural property must be returned.”

Considerable efforts have been made among members of the international community to address and prevent further destruction. After ISIS released videos depicting militants destroying priceless artifacts in the ancient site at Nimrud and the World Heritage site of Hatra, UNESCO announced the launch of their #Unite4Heritage campaign in March. The social media campaign was launched on the heels of a smaller protest effort organized by Baghdad University students. Bokova issued a statement summarizing the global message that #Unite4Heritage aims to disseminate:

We must respond [to these atrocities], by showing that exchange and dialogue between cultures is the driving force for all. We must respond by showing that diversity has always been and remains today a strength for all societies. We must respond by standing up against forces of fragmentation, by refusing to be divided into ‘us’ and ‘them.’ We must respond by claiming our cultural heritage as the commonwealth of all humanity.

Discussions and dialogues shared at the NYU symposium similarly affirmed the need for a definitive response, for action—for something beyond mere passive denunciation on the part of members of the art, cultural heritage, and art law communities. 

* * *

Other programs on the subject that have take place in the recent month include the September 24, 2015 program at the Asia Society, entitled “Culture Under Threat: The Security, Economic and Cultural Impact of Antiquities Trafficking and Terrorist Financing” and the September 29, 2015 “Heritage in Peril” program held at the Metropolitan Museum of Art.

Sources:

About the Author: Rebecca Krishnan-Ayer is a first year law student at the George Washington University Law School and member of the GW Art Law and Entertainment Society. She holds a B.A. in Art History and French Literature from Johns Hopkins University.

Summertime and the Art Buyin’ is Easy: Asking Questions about Art Transactions

 

Screen shot 2015-08-06 at 11.49.43 AMBy Daniel S. Kokhba, Esq.*

In the art market, a work of art is often carefully scrutinized and questioned by collectors and their agents concerning its style and substance. The art sale, however, may receive far less careful review. Given the prevalence of fraud, conflict of interest and lack of transparency in such transactions, one should adopt the habit of asking hard and direct questions before committing to a deal – particularly concerning price and associated fees.

While a buyer often intuitively knows to ask for the price of a work of art or service, the basis for the asking price, and a discount, the inquiry should not end there.

In the event that the  price of a work  is especially low relative to market, a buyer should ask the seller why. In some cases it may well be that the market commands a reduced price (e.g., unsold inventory, comparable sales). On the other hand, a buyer should be aware that  bargain basement prices often serve as red flags for lack of authority (or title) to sell, the possibility of  forgery or other fraud.  See Davis v. Carroll, 937 F.Supp.2d 390 (S.D.N.Y. 2013).

Screen shot 2015-08-06 at 11.52.19 AMA buyer should also consider and ask (i) who, aside from seller, stands to gain financially in connection with a sale and (ii) whether the sale price is being split with anyone else. The identity and financial interests of undisclosed third parties will help a buyer better understand all of the parties involved in the transaction . Fee splitting and/or sharing arrangements commonly inflate the price of a work of art.

A buyer should also ask about any costs closely or peripherally associated with the transaction.  Novice and sophisticated collectors alike often overlook and fail to consider storage, insurance, shipping, framing, appraisal, and other associated expenses. If the buyer intends to resell the work, brokerage fees and income tax may be added to the list of expenses. Such expenses will invariably add to the total cost of the transaction and accordingly are considerations that a buyer should be cognizant of in order to get a fuller picture of the transaction.

Awareness of these possible costs will lead to asking questions that will shed more light on, inter alia, the inner workings of the transaction, which are often not advertised at the time of sale. The answers will typically invite further inquiries, providing the buyer with pertinent information.. It happens far too often that referral fees, multiple party fees, and other foreseeable and associated costs and expenses are disclosed only after the deal has been made.  Dodging a shady deal rather than trying to get out of one after the fact  will avoid the possibility of dispute, litigation and further expenses.Taking on an assertive role as a buyer and conducting the appropriate level of independent research should be the approach taken in any transaction involving artwork.

*About the Author: Daniel S. Kokhba, Esq. is a Partner at Kantor, Davidoff, Mandelker, Twomey, Gallanty & Kesten P.C. and focuses his practice in the areas of art law and business law.  He may be reached at Kokhba@kantordavidoff.com or 212-682-8383

Disclaimer:This article is intended as general information, not legal advice, and is no substitute for seeking representation.

UK Copyright Amendment Provokes Controversy in the Art and Design World

By Christopher Visentin*

Screen Shot 2015-07-16 at 9.59.46 AMThe British government has recently moved to repeal section 52 of the Copyright, Designs and Patents Act 1988 (the “CDPA”). Removing this section would increase the copyright duration for artistic designs—as opposed to traditional artistic works—from 25 years from the year the designs were first marketed, to the more common term of life of the author plus 70 years. In a report published February 18, 2015, the British government detailed provisions for implementing the change, set to take place April 6, 2020, and also published responses to comments made by those affected by the law. It seems, however, that the new arrangement has stirred up some controversy in the process.

As in the United States, the United Kingdom has long grappled with what copyright protection—if any—should be available for functional, yet arguably artistic, designs (see Brandir International, Inc. v. Cascade Pacific Lumber Co. for a famous U.S. treatment of a similar issue, involving the design of ribbon bike racks). Such artistic designs can be hard to define, but certain iconic mass-produced pieces, such as Arne Jacobsen’s “Egg Chair,” or Robin Day’s “Polypropylene Chair,” serve as examples of the types of works implicated in this change.

Egg (1958)

Arne Jacobsen, “Egg Chair” (1958).

In such cases, there is a tension between rewarding an individual the full copyright protection for his or her work, and the public’s desire to access functional designs and articles. S. 52 of the CDPA offered a solution in the U.K. by limiting copyright protection for artistic designs to 25 years.

  1. 52 effectively carved out an exception for artistic designs. Instead of the standard ‘life of the author plus 70 years’ term of copyright protection, mass-produced artistic designs would receive a shorter term of protection. More specifically, designs “derived from…artistic work[s]” that have been made by “industrial process” and subsequently marketed to the public would enjoy protection of only 25 years from the date the design was first manufactured.
  2. 52 thus separates designs derived from artistic works from both pure ‘artistic works’ and pure utilitarian designs. Under this scheme, the CDPA seems to conceptualize the work in question as an intermediate work between utilitarian design and art, deserving of likewise intermediate copyright protection.

Admittedly, some might find that the fine lines s. 52 draws over-simplify the breadth of creation in the art world. Take, for example, works like Ingo Maurer’s “Bulb,” a playful design of a lightbulb within a lightbulb, created in 1966 and part of the Museum of Modern Art’s collection. With s. 52 in place, Maurer’s design would perhaps only enjoy 25 years of copyright protection because of its functional design, and because it has been industrially manufactured and marketed. The functional elements would thus render the piece no longer protectable by copyright. Conversely, one might argue that Maurer should enjoy the full copyright term of his life plus 70 years for his creative expression. This distinction between types of artistic expression might seem unfair to some in the art world and beyond.

One argument against the repeal is that a limited copyright term would encourage artist-designers to create new designs, while also ensuring that the more practical, utilitarian benefits conferred by the designs would not be kept from the broader public for too long. After 25 years, others could lawfully create copies or other articles based on the previously protected design. Furthermore, the economic advantage that mass-produced artistic designs have over other artistic works may be great enough to justify limiting the benefits of an exclusive right of ownership to only 25 years. Presumably, the limited copyright period would balance the public interest in new, improved designs with the designers’ interest in profiting off of their mass-produced work.

Now, however, this exception for artistic design is set to disappear come April 6, 2020. With the repeal of s. 52, designers of artistic works would enjoy the same length of copyright protection as other artists, writers, and musicians. The British government moved to repeal s. 52, claiming  “to update and clarify UK legislation in line with EU law.” The change is an effort to adhere to an interpretation of the EU Design Directive (71/98/EC), promulgated by the European Court of Justice. By repealing s. 52, the British government’s protection will no longer provide a shorter term of protection than other member states for industrially manufactured artistic designs.

Extending the duration of copyright from 25 years to 70 years further distinguishes artistic designs from those designs that are not “artistic works,” and thus can only enjoy protection according to the UK Registered Designs Act 1949 (the “RDA”). Under s. 52, artistic designs that were industrially produced only enjoyed the same amount of protection as other designs governed by the RDA, which had separate registration requirements.

The extension of copyright protection provides additional incentive to artistic designers to create and mass produce new designs. Baroness Neville-Rolfe, Minister for Intellectual Property, says that the repeal is “an important step, to bring about the fair treatment of all types of artistic works and to reward those that innovate and inspire.” She further states, “[t]he innovative work of designers will have the appropriate copyright protection, whilst ensuring that UK-based businesses can adapt and thrive.”

Others affected by the change, by some reports, are less than enthusiastic. Repealing s. 52 would require manufacturing companies to pay licensing fees to rights holders long after the previous 25-year period in order to produce replicas. The change would also require permission and possible licensing fees to reproduce the images of designs in books and other publications, as well as restrict what new designers could do if they wanted to build off of an existing, protected design.

One of the most controversial aspects of the reform is that it will have retroactive effect. This means that some artistic designs whose 25-year copyright protection term has expired will once again be covered under the more expansive 70-year term, assuming it did not already expire. Those that have lawfully reproduced or otherwise used designs after the old 25-year term of copyright expired may not have to pay for their prior reproductions, but they will have to pay licensing fees for future use.

This retroactive effect may prove to be a particular burden on museums. Like many others, museums that have displayed and sold replicas of artistic designs whose 25 years of copyright have since expired may now have to pay licensing fees to continue to do so. These extra fees would introduce much higher costs to museums and could end up being entirely prohibitive.The impact of the statement for the repeal of s. 52 in the government report includes one museum’s estimate of a loss over £850,000 a year.

Beyond the licensing costs, however, museums and publishers will have to survey their collections, including an inventory of books and photographs published therein to ensure that the photographs and publications do not contain any newly protected copyright works. Even images depicting a protected work may end up infringing on the newly revived copyright. Needless to say, the cost of reassessing collections and catalogues will add to the burden.

Some argue that another side effect of the change may occur within the design industry itself. As Ivan Macquisten of the Antique Gazette notes, “some of the leading intellectual property specialists in the country have argued that [repealing s. 52] will have a chilling effect on new design, because young designers must ensure that they do not fall foul of the law when inspired by earlier designers.” Inspired designers seeking to build off of prior work will either need to secure permission from the original designer, or take care that any work that they do will not infringe on the extended copyright of the prior work.

Ultimately, there is a chance that this bolstered protection may slow down the output of new designs, as well as threaten the manufacture of current designs that are adaptations (or ‘derivative works’) of works that will regain or have extended copyright. Of course, the counter argument would be that any chilling effect the extended copyright may have might be mitigated by the increased protection due to the same designers when they create an original work.

Despite protests and appeals to lawmakers by members of the intellectual property community—including efforts by Professor Lionel Bently of Cambridge, joined by faculty members of the University of Oxford, King’s College, London, and Edinburgh University, to name a few—the House of Lords has approved the reform. Originally, the government sought a three-year transition period, but due to feedback from commenters, the three years has been increased to the current five-year period—ending April of 2020—in order to give those affected by the change more time to prepare. It seems that designers, museums, publishers, and onlookers alike will have to sit down and wait until then to determine the true outcome of the change.

Robin Day, “Polypropylene Chair.”

Robin Day’s “Polypropylene Chair” (1963).

Sources:

About the Author: Christopher Visentin is a rising third-year law student at Boston University, where he concentrates his studies on intellectual property law, art law, and law and literature. He is also pursuing a master’s degree in English literature at Boston University.

Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Any views or opinions made in the linked article are the authors alone. Readers are not meant to act or rely on the information in this article without attorney consultation.