Artist Resale Royalty Rights – Is a US Droit de Suite in our Future?

By Hanoch Sheps*

Contention, concern and equity – three words that best describe a recent discussion of proposed federal legislation for an artist’s resale royalty right in the United States. If passed, US artists would also benefit from the royalties on sales in other countries with resale royalty rights through reciprocity protocols. Currently the lack of a resale right in the US prevents such participation.

Last week, the International Foundation for Art Research held a panel discussion on the pros and cons of adopting an artists’ right known as the droit de suite which exists in one form or another in Europe and elsewhere. The only US equivalent existed on the state-level in California until the U.S. District Court in Los Angeles recently found it unconstitutional, a decision currently on appeal. [Estate of Robert Graham v. Sotheby’s Inc. C.D. Cal.No. 2:11-cv-08604-JHN-FFM, complaint filed 10/18/11; Sam Francis Foundation v. Christie’s Inc. C.D. Cal.No. 2:11-cv-08605-SVW-PJW, complaint filed 10/18/11].

The controversial right in its basic form is a compensation for secondary art market sales artists. Emerging in early 20-th Century France, some 50-70 countries in the European Union, South America, and Australia have since adopted a resale right. Most recently, the UK adopted a resale right pursuant to the European Union 2006 directive. There, the resale right guarantees a percentage of the resale price which is nontransferable, not waivable, lasting throughout the artist’s life plus 70 years. Amongst other goals, the limits imposed on resale rights prevent parties contracting with unwary or emerging artists from signing away this bundle of rights. In theory, as the value of an artist’s oeuvre appreciates, that artist stands to benefit from appreciation of his or her artworks in the art market.

Here in the US, the notion of a resale right is not novel and dates back to the 1980’s. The previous iteration of the Equity for Visual Artists Act, proposed in 2011, stalled in congressional committee debate. However, targeted studies performed by the U.S. Copyright Office and some new Senate sponsors (Senator Tammy S. Baldwin (D-Wisc.), and Senator Edward J. Markey (D-Mass.)) hope to breathe new life into the legislation. (See here for more Center for Art Law articles on resale rights.)

Speaking at IFAR’s event, The Honorable Jerrold L. Nadler, Congressman (D-N.Y.), Karyn Claggett, Esq., Associate Register of Copyrights and Director of Policy and International Affairs at the U.S. Copyright Office, Philippa Loengard, Esq., Assistant Director and Lecturer in Law, Kernochan Center, Columbia Law School, Sandra Cobden, Esq., General Counsel and head of Dispute Resolution and Legal Public Affairs at Christie’s, and Dr. Theodore Feder, Founder and President of the Artists Rights Society. Congressman Nadler, a sponsor of both the original and revised bill, addressed the need to create a balance between visual artists and authors, writers and musicians who benefit from other rights under US Copyright law. While musicians have a royalty system in associations like ASCAP and BMI, for example, visual artists have no comparable system. In an effort to succeed where prior legislation proposals failed, Congressman Nadler and his co-sponsors have asked the US Copyright Office to report on the impacts of the proposed legislation, the effects of similar laws in other countries on the art market and artists, and the potential efficacy of the right in achieving the goal of visual artist equality. [View the Equity for Visual Artists Act of 2011 here].

One of the immediate changes to the prior legislation is a royalty below the previous proposal of 7% and no cap on sale proceeds to be remitted to a royalty society, with all proceeds going to the artist. Previously, half of the proceeds would have been kept for the use of museums to create new art acquisition funds, but according to feedback from museums, says Nadler, they simply do not want the money. Auction houses will still bear the burden of collecting the royalty, which will likely to be added to already existing seller and buyer premiums. Galleries and dealers are conspicuously left out of the legislation in part because auction houses offer more transparency in the public recording of sales, but perhaps more so because galleries would be an entirely new source of opposition to the legislation.

With the new report to Congress by the Copyright Office due out in the coming weeks, Ms. Claggett responded to criticism the proposal received from different interested parties. The Copyright Office seeks to reconcile the proposal with the laws in other countries, amongst other US government studies, and its report issued for Congress back in 1992. Those compiling the current report ran into expectable obstacles such as the lack of transparency in art market transactions, but also found it difficult to grasp how artists actually struggle. The obvious question of the efficacy of the proposed law seemed to take a lot of foundation from a review of foreign laws. For instance, in the United Kingdom, there was no appreciable evidence that the royalty reduced art prices, or drove away sales from the UK, a main concern of oppositionists. Actually, it appears that the UK art market is growing faster than others in the region. (For the Center for Art Law’s response to a request for comments by the Copyright Office, see link).

Ms. Cobden represented the minority on the panel—part of a small but powerful collective of entities in opposition to the legislation, the auction houses. Christie’s sees itself in an awkward position of opposing the resale right where it otherwise considers itself a staunch supporter of artists. After all, the success of the artists has a positive correlation with the success of the auction house.  Auction houses opposed the previous legislation, the EU directive, and a debate over the right which is currently on the metaphorical back burner in China. Note, both Christie’s and Sotheby’s were also defendants in the CA case decided in 2012 . Christie’s justifies its opposition at least on three grounds:

  1. A royalty hurts the market: Citing statistics compiled by Dr. Clair McAndrews at Art Economics, Ms. Cobden notes that there was a complete recovery of the US market from the 2008 recession, whereas economies that have a royalty scheme saw fractional recoveries.
  2. A royalty would change US Copyright law in a manner that dilutes protection for private property: Christie’s posits that artists are on a level playing field with authors, writers and musicians. A royalty would go beyond what other artists receive as they only profit from the initial sale. Payments on subsequent transactions would seriously encroach on the freedom of alienation of personal property, a central tenet of US Copyright law (encompassed by the “first sale” doctrine). Granting artists a royalty would also make it difficult to distinguish other creator; should the architect get a royalty for the resale of a house he designs, or similarly a jeweler, fashion designer, or furniture maker?
  3. A royalty would not achieve the goal of helping a significant number of artists: Statistics simply do not show that the initiatives will help most artists – reports show that only 3% of UK artists are eligible for the royalty, and the most royalties went to the most successful artists.

“The resale royalty scheme is a broken model,” says Ms. Cobden, but Christie’s does not see in its opposition the inability to collaborate and propose alternatives to the legislation. Rather than a resale right, focus efforts to support artists on promoting sales in the primary market, or perhaps allow artists to get tax incentives for donating art to museums or other institutions.

Congressman Nadler as well as nearly every other panelist speaking at the IFAR Evening were eager to retort and confront Ms. Cobden on both the overall opposition and proposals. Simply put, major artists are likely to get most of the residuals as any performing artist would – “Elvis is going to see more residuals than a nobody,” says Congressman Nadler. But even if the royalty only helps a few artists, their position is that it is far better to help some than none. That major artists benefit in the aggregate does not diminish the value of the right. Also, even though “lesser” artists may see a smaller percent of residuals, we cannot discredit the fact that the artists themselves may see the residuals as critically important, however small they may be.

Dr. Feder spoke passionately to rebut claims that only rich artists benefit from royalties. In fact, he claims, statistics out of the EU show significant numbers of artists that benefit from the resale right. Dr. Feder noted that the same concerns over market losses by US oppositionists were felt  in the UK over the adoption of the royalty scheme there but were ultimately baseless. (SeeUK’s Artist Resale Royalty Law Didn’t Damage the Art Market (Despite All the Claims)”, Huffington Post, 9.14.12)

Wherever one’s allegiances may lie, it will be the members of congressional committees who get the next opportunity to debate the matter. The revised bill is expected to be reintroduced in January.

 *About the Author: Hanoch Sheps, J.D. is a recent graduate of New York Law School. He may be reached at Hanoch.sheps2@gmail.com or 201-696-6881.

Disclaimer: This and all articles are intended as general information, not legal advice, and offer no substitute for seeking representation.

18 thoughts on “Artist Resale Royalty Rights – Is a US Droit de Suite in our Future?

  1. How would this impact the doctrine of first sale? What would happen in the case of orphan works?

    What about repurposed art (e.g. a collage made from cheap pieces found at a thrift store), or art that is in someway collective (e.g a painting in a fancy frame is likely the work of two different artists working in two very different trades — a painter and a framer/carpenter; likewise a music album sold with album art)?

  2. How would this proposal even define art? Does it apply to all the Karim Rashid trashcans floating around? Rashid’s hanukkiah?

    Jewelry? Rugs?

  3. Mr Sheps , I am a Australian professional artist of 30 years standing . I am deeply opposed to any Resale Royalty provision being imposed by law- without my consent, on the sales of my own work.
    The markets for new and second hand art are closely linked. The royalty makes no allowance for costs OR actual losses and therefore is a punitive treatment of the eventual resale of any affected art work.
    From first hand experience, the royalty does divert a percentage of buyers away from buying affected artworks, in the first place and the negative effects of loosing even a handful of first sales far out way the slim chances of eventually receiving a meaningful royalty payment on distant future resales, especially while you are still alive.

    Australia introduced a Art resale royalty scheme in 2010, it has been a debacle, a experiment is unlikely to continue. The following is a link to a article by Nicholas Rothwell that pretty well sums Australia’s experience with Art Resale Royalties : toxic
    http://www.theaustralian.com.au/arts/royalties-scheme-shines-stark-light-on-a-divided-landscape/story-e6frg8n6-1226692983000

    • Dear Mr. Walker,

      Many thanks for your comment. You raise a very interesting question and we agree that the artists who do not wish to have Resale Royalty provision imposed on their works should be able to either opt out of the provision or produce the work and perhaps label it accordingly (per Creative Commons License scheme). The problem arises when the market trades in art works as commodity and uses artist’s name for the price inflation purposes without giving much back to the artist. Currently performing artists have an advantage over the visual artists and the Resale Royalty may serve to remedy the imbalance.

      • Irina
        The UK/EU versions of ARR are compulsory for artists.
        Australia’s version of ARR is not fully compulsory for artists and that is part of the reason why Australia’s scheme( along with every other non European ARR scheme) is not recognised by the EU as a valid “functioning” scheme for “reciprocity” purposes.

        The EU removed ALL non European ARR schemes from its “indicative list of functioning third party schemes” back in 2008. Truth is that world wide there are less EU recognised functioning ARR schemes, than there were when the US copyright office last considered ARR 20 years ago.

        All ARR schemes create market distortions and substitution issues that are harmful to the %99 of artists who either never, or very rarely, ever see even a single resale of more than a $1000. The benefits go to handful of very successful and mostly dead artists, and collection society managements and all of the risks and costs go to those who have next to no chance of ever seeing a royalty payment, ever.

        Speaking as a centrist Australian Liberal, the EU version of ARR is ugly: reactionary and authoritarian to a tee.

      • Irina
        Johanna Cave prior to coming to Australia to “champion” the ARR, had been the CEO of the UKs Design and Artists Collection Society (DACS) for a decade. DACS is one of the two major UK ARR collection societies. The following is from her testimony to our parliamentary standing committee looking into the implementation of our ARR, in Feb 2009:

        “Miss Cave— Certainly. The European directive is accompanied by a document called schedule 2, which is the instrument by which member states offer reciprocal treatment to non-European countries. The resale right is, of course, optional rather than mandatory under the Berne Convention. Whilst all European member states automatically reciprocate under the directive, a non-European country has to appear on schedule 2 in order to benefit from reciprocal treatment. At the time the directive was harmonised, schedule 2 listed 26 non-European countries that would benefit from reciprocal treatment. Last year[2008] the European Commission removed all 26 countries from that list on the basis that there was insufficient evidence to suggest that they operated fully functioning schemes. Therefore, it is our belief that, given the uniqueness of the proposed Australian scheme, it would be an uphill climb to persuade the European Commission to include Australia on this list, given the EU’s recent action in respect of these 26 other countries.”

        http://www.aph.gov.au/parliamentary_business/committees/house_of_representatives_committees?url=ccwea/resaleroyalty/hearings.htm

      • John, again, thank you for sharing this information with us and our readers. I was unaware that the European Commission did not offer reciprocity to the countries with ARR in place and it is a worthy topic for further research and discussion. Very little about the mechanics of reciprocity has been discussed to-date.

      • Irina
        re ” uses artist’s name for the price inflation purposes without giving much back to the artist”
        I like many artists have a back catalog of works that they have held back, works that I did not want to part with. If one of my older works was to resale for many times my current asking prices , I would put one of my own private collection up for auction.
        And healthy resale prices are great promotion for sales/prices of new work by me .

      • Thank you for your comment. In all fairness it is uncertain whether all artists hold back works in anticipation of appreciation and recognition for lucrative sales. Furthermore, not all works by a popular artist tend to solicit similar interest from collectors.

      • I have made and sold my work for a living for more than 30 years.
        The collection society lobbyists for compulsory ARR are ignorant of, and have no sympathy for, market realities.

    • Australia is a constitutional, lawful democracy and the Australian ARR Act (and the administration of it) reflects our Constitutional and legislative requirements . The scheme is administered by a professionally run statutory authority that is required to answer to parliamentary committees (such as Senate estimates committees),publish detailed annual returns and so on. Australia’s ARR law is lawful, and the administration of it is professionally and responsibly run and therefore our ARR scheme is unacceptable to EU ‘standards of governance’.

      For example ; while the UK ARR scheme enacted compulsory collective management of all artists and enacted considerable legal enforcement powers, the UK did not apply any sort of public tender process to the selection of ‘who/what’ Authority would run the compulsory collection management entity, implicitly created by the UK Act. Nor did it stipulate reporting/transparency requirements and complaints processes. Consequently the un-appointed, but quasi official, default ARR collector in the UK is the Design and Artists Collection Society (DACS). DACS is a organization that has not had a annual general meeting in over ten years, has a board that effectively appoints itself and has a complaints process that is entirely in house, totally circular. (This situation also caused about 400+ of the UK’s more eminent artists to quickly, in conjunction with Bridgeman house, form their own alternative collection society for ARR: the Artists Collection Society (ACS).)

      A situation where unsupervised, unrepresentative and un-reponsible entities have mandated tax-like (and punitive) powers, is not good policy.

      Nor did the UK act deal with the issue of what is the situation re artists that are not registered with one of the two (or possibly three) ARR collection agencies now operating in the UK.
      In other words the answer to this question: Is any (or All) of the UK’s collection societies entitled to collect royalties for artists who have not registered with that collection society?
      Is, according to the UK Ministers IP office : “unresolved”.

      We have masses of data, parliamentary questions and answers on notice, hansard of standing committees and more. Feel free to contact us.

  4. Mr Sheps
    This is the link http://arts.gov.au/visual-arts/resale-royalty-scheme/review to all 70 submissions to the Australian governments review of our Resale Royalty scheme. All but a handful of the submissions are damming of the scheme and the harm it has done.
    Quite a few of the submissions are from eminent Australians with absolutely no links to the Auction Houses , for example Professor Jon Altman, Research Professor at the Centre for Aboriginal Economic Policy Research ANU Canberra :http://arts.gov.au/sites/default/files/consultations/Sub%2044%20Jon%20Altman.pdf

    Ben Quilty is one of Australia’s leading younger artists, his submission is scathing :
    http://arts.gov.au/sites/default/files/consultations/Sub%2026%20Ben%20Quilty.pdf

    And our submission http://arts.gov.au/sites/default/files/consultations/Sub%206%20John%20R%20Walker.pdf methodically demolishes the proposition that ARR is anything other than bad policy. And in Australia’s case, for good constitutional and legislative reasons, it is also intrinsically un-viable, without ongoing subsidy by government its operations must soon grind to a halt.

  5. D.K. – You have made some interesting observations. We are preparing a response, and in light of the recent release of the Copyright Office report on this matter, we hope to have a complete answer in due time. Thank you for your enlightened comment.

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