The New Copyright Small Claims Bill: A Ray of Hope for Independent Photographers

By Adelaide Dunn*

screen-shot-2016-10-18-at-4-11-35-amThe U.S. Copyright Act’s single regulatory system fails to accommodate the diversity of production methods, output speeds and business models of today’s creative entrepreneurs. In the eyes of independent and freelance artists, one of copyright’s greatest flaws is its requirement that an infringement claim be litigated in a federal court – an endeavor accruing costs that often far surpass the value of the work at issue. Since 2006, the United States Copyright Office has been questioning creators, holding panel discussions and conducting research pertaining to a new model for resolving small claims. The Copyright Alternative in Small-Claims Enforcement Act of 2016 (“CASE Bill”), introduced in July this year, would create a new Copyright Small Claims Board (“Board”) facilitating the resolution of claims valued below $30,000 in actual damages. The aim is to overcome two of the most common criticisms of copyright law: that its systems favor large corporations over independent and freelance creators, and that it is an abstract set of rules that the general public chooses to ignore. The CASE Bill sketches out an ambitious yet promising new system that has the potential to facilitate settlements, dissuade infringing activity (particularly online), and ensure remedies for copyright infringement are available to low-income creators.

The proposed Board is a streamlined, inexpensive, Internet-based dispute resolution system to be administered by the Copyright Office. Three Officers are to act as adjudicators – two having had significant experience representing or presiding over a diversity of copyright interests, and the third having expertise in alternative dispute resolution. Decisions are primarily made on the papers filed with the administration. Hearings or discussions towards settlement can take place over teleconferencing facilities where needed. The system is designed without the need for attorneys, such that rules of procedure are relaxed, discovery is minimal, and costs are only awarded for cases brought in bad faith. All copyright defenses, including fair use, are available. Because of constitutional limitations, participation with the Board is voluntary, and its decisions do not create precedent.

Creative associations such as The Professional Photographers of America (“PPA”) and the Authors’ Guild are seeing their long-term lobbying efforts come to fruition. The type of creator in need of the new system is what the PPA describes as “low value, high volume” – individuals such as designers, illustrators and photographers – who spend time creating many copyrightable works that are individually of low commercial value. The business of photographers is profoundly affected by online copyright infringement, such that photographers are the prime candidates for the new system (and the example used in this article).

The copyright woes of the independent photographer

Photographers differ from “low volume, high value creators” – such as film directors – who channel their creative efforts into one high value work at a time. A photographer may take hundreds of copyrightable photographs in a day, while also conducting the day-to-day administrative tasks of running a small business. It is easy – and habitual – for Internet users to share photographs without permission, often with watermarks and rights information scrubbed from images or metadata. Exacerbating the issue is the common belief that works of creative expression that appear online – particularly images – are free for the taking. According to a survey by the PPA, 70% of professional photographers have had their work infringed over the past three years.

It is unsurprising that photographers have long protested our “one size fits all” copyright system. Although photographers and filmmakers both depend financially on the licensing of copyright in their works, filmmakers are often better placed to pursue infringement claims. With a stable, financed project overseen by numerous stakeholders, a filmmaker and her studio receive comprehensive legal advice. Attorneys maintain the film’s “IP-hygiene”, including ensuring that copyright in the film (as well as in its posters, soundtrack and other components) is registered with the Copyright Office. Though a creator attains copyright automatically on the creation of the work, the Copyright Act requires that a plaintiff possess a registration certificate before bringing suit for infringement. Registering works in a timely way means that the plaintiff can recover attorney fees from the defendant (17 U.S.C. § 505). It also enables the plaintiff to recover statutory damages, which do not require proof of actual damage, and can be significant (up to $150,000 if the infringing activity is found to be willful) (§ 504(c)).

Softer registration requirements

The registration requirement has been criticized for benefiting the deep-pocketed and well advised over the low-income creators that statutory damages and attorney fees are designed to benefit (Ciolli, 1007). A photographer often lacks the time and money to register his works, given that the Copyright Office’s fees average between $35 – $55 per work, and differ for “published” and “unpublished” works – a distinction many photographers see as burdensome and outdated due to the digital sharing ecosystem. The new small claims system bypasses these difficulties and caters to the reality that most creators do not learn of the legal benefits of a registration certificate until a dispute has arisen that necessitates one. To file a claim, a complainant needs only to have submitted an application for a registration, and can still recover statutory damages if successful. The Board can also award actual damages and profits, but because these are complex calculations in copyright disputes, the combination of statutory damages and soft registration rules will be a boon to photographers.

The Copyright Office will need to create a user-friendly digital platform that allows for e-registrations to be made contemporaneously with the filing of claims. Because many photographers will participate pro se, the platform will be critical in communicating instructions and providing downloadable forms and templates to aid the drafting of briefs. But such a system is probably outside of the Copyright Office’s current IT capacities. Register Maria Pallante has testified to the U.S. House of Representatives that the Copyright Office’s resources are inadequate to support the current digital economy, and that allowing the Copyright Office to establish itself as an autonomous body (independent of the Library of Congress) will give it the authority to make IT investments in furtherance of its own modernization goals (Pallante, 7). Whether these recommendations will eventuate remains to be seen.

Lower costs and streamlined proceedings

It is neither time nor cost effective for a photographer to pursue an infringement claim in a federal court. The PPA has surveyed its members and found that – however numerous – most infringements of single photographs cost below $3,000 (PPA). At the same time, the American Intellectual Property Law Association’s 2015 Report of the Economic Survey indicates that the median cost for a claimant to litigate a copyright infringement suit with less than $1 million at stake through appeal is $250,000 (AIPLA). Even mediating that dispute would cost a median of $40,000 (Ibid.). In addition, according to the 2015 Federal Judicial Caseload Statistics, civil trials take approximately twenty-five months to conclude (Administrative Office of the US Courts). The length is due in part to delaying tactics aimed at draining the other side’s resources and inducing an unequal settlement, such as delaying discovery and filing unnecessary pre-trial motions. Wealthy defendants have strong incentives to behave this way towards low-income adversaries, to ensure that lawyers working pro bono or on contingency bases cannot bear the burden of the full trial.

Indeed, while most content creators are private, most content users – and infringers – are corporate (Wild). The photographer Alex Wild, who left the professional photography business due to frustrations with copyright, writes that his signature extreme close-up insect photographs have been used without permission on venues as diverse as billboards, newspaper articles, video game graphics, company logos, board games, pest-control trucks and iPhone cases (Wild). The corporate disregard for copyright is doubly frustrating to photographers who rely on licenses issued to corporations in those exact sectors.

Key procedures of the Board are aimed at leveling the playing field. To prevent unnecessary delays, rules of civil procedure are simplified, and procedural and discovery-related counterclaims are not accommodated for. Discovery is limited to the production of relevant information, documents and written interrogatories, in order to allow the parties to obtain material facts, establish proof of actual damages, and rebut evidence. The Board also substitutes a formal appeal process with narrow administrative review procedures. This would prevent losing parties with substantial resources from re-litigating a dispute in a federal court.

Potential for collaborative approaches to dispute resolution

Perhaps the Board’s most promising function is to facilitate settlements. The abbreviated and inexpensive trial would give the parties an idea of the merits of their cases, leading to productive discussions, overseen by the Officers. The Board’s utilization of mediation techniques – aided by the Officer with expertise in alternative dispute resolution – could lead to a holistic approach to problem solving. This would give artists an outlet for airing their grievances while also bypassing the power struggles of adversarial trials. Resolutions could lead to innovative and therapeutic business arrangements, such as ongoing royalty fees, partnerships and other agreements.

Criticisms

The CASE Bill is not without its detractors. The foremost worry is that the ease of filing claims will open the Board to abuse by copyright trolls. However, the CASE Bill provides that a Copyright Claims Attorney review each claim to ensure that it complies with copyright law (including, presumably, that it establishes a prima facie case of copyright infringement), before the adversary can be served. In aid of pro se claimants, there are then two opportunities to improve a deficient claim. Though the parties must bear their own costs, the Board may award attorney fees and costs up to $5000 to a party adversely affected by a harassing or improper claim, creating a monetary disincentive against meritless or frivolous claims.

A related worry is that large corporations hiring attorneys will have a significant advantage over pro se parties in terms of the quality of pleadings and submissions. Indeed, organizations such as New Media Rights, California Lawyers for the Arts, and Volunteer Lawyers for the Arts will presumably be vital in helping artists file claims. Interestingly, the CASE Bill also permits qualified law students to represent complainants. Law schools might take this opportunity to set up clinics and internship programs, benefiting both the students taking part and parties in need of representation.

Critics also question whether the Officers should be empowered to make fair use determinations, which are notoriously uncertain and complex. However, as Register Pallante has noted, fair use is a critical safeguard of the Copyright Act (Pallante, 29), which is particularly true with regard to the creation of contemporary art. The availability of the defense will also give respondents an incentive to engage with the Board, and ensure that copyright law continues to align with legitimate consumer expectations. The Officers’ expertise in copyright law will help with the streamlining of fair use decisions. They may develop simpler proxies with which to apply fair use concepts such as transformative use, given that small claims do not have the same cultural and economic ramifications as federal fair use cases (such as the Second Circuit’s recent holding that Google Books amounts to fair use: Authors Guild, Inc. v. Google, Inc.).

Further, the Board does not have a mechanism with which to identify anonymous online infringers. However, its issuance of subpoenas might give further burdensome enforcement duties to Internet Service Providers. Notably, the Copyright Royalty Board has the authority to issue subpoenas but has never exercised this (Copyright Office, 124). The Board also cannot grant injunctions. Though some argue that this might render its determinations toothless, a contrary opinion is that copyright owners can gain unfair leverage through threats of injunctions, and awarding licensing fees in the alternative might lead owners and users to bargain more effectively (Pamela Samuelson et al). Indeed, the Supreme Court in Campbell v. Acuff-Rose noted that a system relying on monetary relief rather than restrictions on commercial behavior might better serve the purposes of copyright and facilitate the lawful use of copyright protected works (at 578 n. 10). The Board can, however, require the respondent to cease the infringing conduct, which appears to be a kind of soft injunction. Because of the voluntary nature of the proceedings, this remedy might function like a contractual promise.

Conclusion

The time is ripe for a new dispute resolution system catering to more diverse range of creators. Currently, the CASE Bill has been referred to the Subcommittee on Courts, Intellectual Property, and the Internet, and has not yet passed the House. Whether it will pass before the next Congressional session begins in January is unclear. But as it incorporates years of research and comments from the Copyright Office, scholars and creative associations, it or a similar law’s incorporation into the Copyright Act seems likely. Indeed, it would align the U.S. with other jurisdictions instigating similar systems, such as the United Kingdom, which in 2012 began to allow informal hearings in its Intellectual Property Enterprise Court regarding claims for infringement of copyright, trademark or unregistered design rights (valued below £10,000). For the U.S., the new system has potential to transform copyright law into an everyday business reality, to give a voice to artists who are currently silenced by the federal system, and to lead to more collaborative and innovative solutions to copyright infringement.

 

Sources:

  • Copyright Alternative in Small-Claims Enforcement Act of 2016, H.R. 5757, 114th Cong. (2016).
  • Copyright Act (17 U.S.C.).
  • Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 578 n. 10 (1994).
  • Jeffrey Bils, David’s Sling: How to Give Copyright Owners a Practical Way to Pursue Small Claims, 62 U.C.L.A. L. Rev. 464 (2015).
  • Anthony Ciolli, Lowering the Stakes: Toward a Model of Effective Copyright Dispute Resolution 110 W. Va. L. Rev. 1000 (2007).
  • Her Majesty’s Courts & Tribunal Services (United Kingdom), Guide to the Intellectual Property Enterprise Court and Small Claims Track (July, 2014).
  • Virginia Knapp Dorell, Picturing a Remedy for Small Claims of Copyright Infringement, 65 Admin. L. Rev. 449 (2013).
  • Jessica Litman, Real Copyright Reform, 96 Iowa L. Rev. 1 (2010).
  • David Nimmer, A Modest Proposal to Streamline Fair Use Determinations, 24 Cardozo Arts & Ent. L. J. 11 (2006).
  • Register Maria Pallante, The Register’s Perspective on Copyright Review, Statement Before the Committee on the Judiciary, House of Representatives (April 29, 2015).
  • Joel Reidenberg, The Rule of Intellectual Property Law in the Internet Economy, 44 Hous. L. Rev. 1073 (2008).
  • Pamela Samuelson et al., The Copyright Principles Project: Directions for Reform, 25 Berkeley Tech. L. J. 1175 (2010).
  • United States Copyright Office, Copyright Small Claims – A Report of the Register of Copyrights (September 2013).

 

*About the Author: Adelaide Dunn recently graduated with a Master of Laws in Competition, Innovation and Information Law from the New York University School of Law. Before that, she completed a Bachelor of Arts in Art History and a Bachelor of Laws with Honors from The University of Auckland in New Zealand. Adelaide is particularly interested in the intersections of copyright, moral rights and the visual arts. She is currently doing intellectual property, entertainment and commercial law work as a law clerk for a solo practitioner in New York City. Adelaide can be reached at adelaide1dunn@gmail.com.

Canada: Gaining Ground in Restituting World War II Looted Art

On April 24, 2013, coinciding with Canada’s term as Chair of the International Holocaust Remembrance Alliance (IHRA), the Canadian Department of Heritage issued a press release on their website announcing that the federal government was pledging “funding of almost $200,000 that will enable the Canadian museums to contribute to a key international research effort on the provenance of Holocaust-era works of art.” The announcement stated that the project, headed by the Canadian Art Museum Directors Organization (CAMDO), in partnership with six Canadian museums, aims to “research and develop best-practice guidelines” for Canadian institutions.

Canadian institutions have been quite busy addressing the issues surrounding Nazi-looted art since both the Washington and Vilnius Conferences in 1998 and 2000, respectively. Prior to these international Conferences, the American Art Museum Directors (AAMD) released the Report of the AAMD Task Force on the Spoliation of Art during the Nazi/WWII Era (1933-1945) (Report), which prompted the Art Gallery of Ontario (AGO) to create an Ad Hoc Committee on the “Spoliation of Art in Europe.” The same Report was later integrated into guidelines adopted by CAMDO.

Following the 1998 and 2000 Conferences, the Canadian Museums Association (CMA) and the Canadian Jewish Congress held the Canadian Symposium on Holocaust-era Cultural Property in 2001. The Symposium spurred the creation and adoption of eight recommendations reflecting ‘best practices’ for dealing with works of art, hinged on the involvement of various institutions including the Department of Canadian Heritage.

The Canadian Symposium recommendations take into consideration challenges specific to Canada, such as the size of the museum community, the division of federal and state powers affecting cultural property, the lack of resources and expertise in the area of research and restitution and financial constraints.

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Between 2001 and 2013, there have been several examples of restitution in Canada, including a recent instance in Montreal. In a press release issued on April 23, 2013, only a day before the government’s funding announcement, the Montreal Museum of Fine Arts (MMFA) both received and returned two separate works that were looted during World War II.

First, a painting by Ferdinand Georg Waldmüller entitled Children on Their Way Home from School, recovered by the rightful owner’s descendant Georges Jorisch, and was donated to the MMFA by the “Jorisch family in tribute to Montreal, the city that offered refuge to so many exiles.” Having been hidden in Belgium during the War, Georges Jorisch, the grandson of the painting’s original owner, relocated to Montreal in 1957. Upon his passing, his family donated the work to the MMFA “in gratitude to the city of Montreal for its hospitality in the post-war years.”

Second, a painting by Gerrit van Honthorst entitled The Duet was returned by the MMFA to the heirs of Bruno and Ellen Spiro. The Duet had been taken from the Spiro family in 1938 by the National Socialists and after changing many hands, was “purchased in good faith from an art gallery” in 1969. Christie’s auction house accepted the painting on consignment following its return and auctioned it on June 5, 2013 for the benefit of the descendants of the Spiro family. The painting sold for $3,371,750 (the estimated range was $2-3 million).

Over the last decade, the MMFA has been actively collaborating with claimants, researching provenance and restituting works to their rightful owners. The MMFA reports that it was

the first museum in Canada to return a work to the original owner with the assistance of the Canadian government.

The MMFA is but one of many Canadian institutions committed to the return of looted art. On March 18, 2005, acting on behalf of the estate of the renowned collector and dealer, Dr. Max Stern, Concordia University (along with McGill and the Hebrew University of Jerusalem) exercised their  “right to pursue the lost works” – and thereby committed themselves to international restitution efforts.

Having earned his Ph.D. in art history in 1928, Dr. Stern (1904-1987) inherited his father’s art gallery in 1934 and began expanding the collection from that moment onwards. However, the Nazi takeover shortly thereafter prevented Stern – of Jewish heritage – from working in the art market. It was further reported that in addition to closing his gallery and being forced to sell many of the works in his collection, he consigned his and his mother’s personal collections to another dealer, which were later confiscated by the Gestapo.  Dr. Stern was interned in England as an enemy alien then spent several years at internment camps in Canada. He settled in Montreal in 1941. After World War II Dr. Stern was active in pursuing the return of his lost works.

The Max Stern Art Restitution Project was launched and continued the initiative in 2002, and has been quite successful in fulfilling its mandate. The Project achieved a great victory in 2008 when the Trustees of Stern’s Foundation legally pursued the restitution of one of the confiscated paintings. In that case, the United States First Circuit Court ruled that the forced sale of Stern’s collection (in this case the Mädchen aus den Sabiner Bergen by Franz Xaver Winterhalter) was equivalent to a theft, giving it the legal weight it needed to further pursue its mandate. The Project has reclaimed ten paintings thus far. The work entitled Virgin and Child, attributed to the Master of Flémalle (1375-1444), was returned by a German museum in March 2013. This September, the exhibition, “Auktion 392: Reclaiming the Galerie Stern Dusseldorf” will open at the Cornell Fine Arts Museum in Florida. It is the eighth leg of an exhibition already shown in eight cities including Montreal, New York, London and Jerusalem.

Clarence Epstein, Ph.D., Director of Special Projects and Cultural Affairs at Concordia University, heads the Max Stern Art Restitution Project. He notes that “the Stern Project is intended to be used both as a resource and as an example for those government agencies, educational institutions, museums, collectors and members of the art trade who are committed to resolving the injustices caused by Nazi cultural policies.”

Significantly, Dr. Epstein revealed that the Stern Project team would be of assistance with the CAMDO research team by connecting them with its international networks and “key players in the European Union and the United States.” He also stated that with Canada’s turn as Chair of IHRA and this federally funded project, such commitments will “highlight the deficiencies and opportunities” concerning the way that matters concerning looted art are treated in Canada and to allow for

a better understanding of the related policies of our country’s cultural institutions.

In addition to the efforts currently under way, Concordia University will be announcing the details of an upcoming conference being held on 6-7 November 2013 sponsored by federal government’s Department of Citizenship and Immigration Canada, Christie’s and Sotheby’s. The conference, entitled “Plundered Cultures: Stolen Heritage,” will focus on the treatment of cultural property and heritage in relation to experiences of First Nations peoples, as well as those of the Holocaust era and the Armenian Genocide. The presenters will include an outstanding panel of key international thinkers. Details of the conference will be announced on the Concordia University website in September 2013.

* * *

Together with the federally funded initiatives, Canadian museums and individuals like Stern and his estate are taking positive steps in pursuit of restitution of art looted and displaced during World War II.

Sources: Canadian Heritage Department, “Harper Government Invests in Research on Holocaust-Era Artworks” (24 April 2013), available at http://pch.gc.ca/eng/1368552348582/1368552363192; AGO, Introduction to the Provenance Research Project: Ownership History for European Painting and Sculpture, 1933-45, online: http://www.ago.net/provenance-research-project; Canadian Museums Association & Canadian Jewish Congress, “Canadian Symposium, on Holocaust-era Cultural Property: A Matter ” November 14-16 2001, Ottawa Ontario, online: www.museums.ca/filestorage/holocaustsymposium.pdf; Thomas Bastien, “Press Release: The Montreal Museum of Fine Arts Plays at the Heat of History – A Ceremony Featuring Three Outstanding Artworks: Gift/Restitution/Acquisition Musée Des Beaux-Arts De Montréal (April 23, 2013), online: http://www.mbam.qc.ca/bibliotheque/media/
pressrelease-honthorst-and-waldmuller-mmfa.pdf
; Jake Brennan, “On the Hunt for Stolen Art Treasures” McGill News Alumni Magazine (10/03/2011), online: http://publications.mcgill.ca/mcgillnews/2011/03/10/on-the-hunt-for-stolen-art-treasures/;  Max Stern Art Restitution Project, Concordia University online: http://www.concordia.ca/arts/max-stern/archives.html; Karen Herland, “Concordia’s Restitution Efforts Lead to Landmark Ruling in U.S. Court” Concordia Journal (17 January 2008), online: http://cjournal.concordia.ca/archives/20080117/
concordias_restitution_efforts_lead_to_landmark_ruling_in_us_court.php
; United States Court of Appeals, Vineberg v Bissonnette 08-1136 November 19 2008; Max Stern Estate: 10th Painting Reclaimed” (5 March 2013) Concordia News Stories, online: http://www.concordia.ca/content/concordia/en/news/stories/2013/03/05/
max-stern-estate-10th-painting-reclaimed.html
; Christie’s Auction House, Gerrit Van Honthorst: The Duet (Utrecht 1592-1656), online: http://www.christies.com/lotfinder/paintings/
gerrit-van-honthorst-the-duet-5684650-details.aspx
; Press Release, “17th-Century Dutch Painting Touting Hermitage Museum Provenance to lead Christie’s Old Master Paintings Sale in New York”  Christie’s (3 May 2013), online: http://www.christies.com/about/press-center/releases/
pressrelease.aspx?pressreleaseid=6362
; Telephone interview with Dr Clarence Epstein on 20 August, 2013.

Thousands of Artifacts Recovered in Canadian Home

On January 25, 2013 the Royal Canadian Mounted Police in Halifax Region (RCMP) posted an article on their website seeking help from the public to identify a number of items that were seized from a residential home in Fall River, Nova Scotia.

Also in January, in an interview with Michael Moosberger, Manager at the Archives and Special Collections at Dalhousie University Library and accompanying article, CTV News reported that the items were seized after RCMP Officers had stopped John Mark Tillman, in order to ensure that he was “complying with court-imposed conditions” stemming from a previous unrelated incident. It was this stop that led to the discovery of a rare letter, dating back to 1758, written by the British General James Peter Wolfe (1727-1759). The letter, addressed to Wolfe’s uncle, is dated just days before the siege of Louisbourg and describes plans for this important military offensive.

After discovering the Wolfe letter, police then searched Tillman’s house in Fall River, where, as described by reporter Kayla Hounsell, they discovered over a thousand historically important and valuable items including “rare books, documents, paintings and antiques” which had been stolen from various institutions including “libraries, museums and personal collections.” The estimated value of the stolen items at that time was about $1 million.

In the interview, Moosberger confirmed that Tillman spent much of his time in the Archives of the University (as well as at other institutions), posing as a researcher. He was well known to many, including Moosberger himself.

In March 2013, CBC News reported that another individual had been arrested in the Tillman case. What led police to the second man was a stolen letter written by the first President of the United States, George Washington, dating prior to the American revolution. It was confirmed that this letter, like the one written by General Wolfe, also came from the Archives collection at Dalhousie University.

So far, pursuant to the Canadian Criminal Code RSC 1985, c C-46, Tillman has been charged with numerous counts including possession of stolen property, theft and trafficking in stolen property.

Theft is defined in section 322(1) of the Code and its punishment determined based on whether or not the amount stolen exceeds five thousand dollars pursuant to section 334. If the theft is over five thousand dollars, the penalty is a maximum of ten years imprisonment, while the penalty for theft under five thousand dollars is either a maximum of two years imprisonment based on subparagraph 334(b)(i) or (ii) a summary conviction. The same sanctions apply to those convicted for the section 354 offence, namely, possession of property obtained by a crime based on section 355 of the Code. In the case of trafficking property obtained by crime (sections 355.2 and 355.4), the maximum imprisonment for subject value exceeding five thousand dollars is fourteen years based on paragraph 355.5(a), and a maximum of five years or summary conviction based on subparagraphs 355.5(b)(i) and (ii) respectively, if the value is under five thousand dollars.

Unfortunately, Tillman’s case is not unique. Canada has become infamous for being a “dumping ground” for the international black market of stolen art and cultural heritage.

In 2011, Joshua Knelman, journalist and author of Hot Art: Chasing Thieves and Detectives through the Secret World of Stolen Art wrote an article for the Globe and Mail that highlighted the evolution of the only art theft investigation unit in Canada, located in Quebec. In the article, Knelman estimated that in Quebec alone, the “crimes related to the black market are worth about $20-million annually;” and interestingly, “statistics” were not available for the other provinces. Further, he reported that between the years of 2004-2007, the Quebec unit (comprising of three investigators at the time that the book was written) opened 300 new cases.

Art theft is not what most of us fantasize it to be, à la Thomas Crown Affair, as per an interview with Knelman. Rather, there is dense criminal activity related to art theft including organized crime groups – such as the Hells Angels biker gang – using art as a “criminal currency” and for the purpose of money laundering.

Knelman noted that the largest art theft in Canadian history remains the 1972 museum heist in Montreal at the La Musée Des Beaux Arts. That incident saw the disappearance of eighteen paintings, taken by three masked individuals. That taking resulted in a roughly $2 million loss; seventeen of the paintings remain missing. One of the stolen works entitled Landscape with Cottages, was painted by Rembrandt Harmensz Van Rijn (1606-1669), and valued at one million at the time of the theft. It estimated to be worth over twenty times that amount today.

In the past few years, there have been several high profile art thefts across the country including the taking of three works from an art gallery in Toronto’s Yorkville neighborhood in 2012, painted by the Group of Seven artists Frank Johnston (1888-1949) and Arthur Lismer (1885-1969) and Montreal artist Sylvia Lefkovitz (1924-1987). This incident follows a 2011 theft of eleven paintings from a Toronto area gallery (five of them painted by Group of Seven artists).

* * *

In April 2013, CBC News confirmed that Tillman was denied bail and would have to remain in jail until his trial. Further, they reported that the total number of recovered artifacts had reached about 3,000 and that Tillman had already been charged with forty offences. The Crown Prosecutor in the case mentioned that it would be “likely that additional charges will be laid in the future” based on ongoing investigations.

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Canadian Criminal Code RSC 1985, c C-46; Dan Phelan, “1972: Art heist at the Montreal Museum of Fine Arts” CBC Digital Archives (4 September 1972), http://www.cbc.ca/archives/categories/arts-entertainment/visual-arts/visual-arts-general/art-heist-at-the-montreal-museum-of-fine-arts.html; Police Seek Public Help in Identifying Stolen Items, Halifax Regional Municipality, N.S. (25 January 2013) Royal Canadian Mounted Police, http://www.rcmp-grc.gc.ca/ns/news-nouvelles/releases-communiques/13-01-25-112503-eng.htm; Kayla Hounsell & Rick Grant “Police Recover Artifacts Stolen from N.S. archives, Province House” CTV News (22 January, 2013), http://atlantic.ctvnews.ca/police-recover-artifacts-stolen-from-n-s-archives-province-house-1.1125074; “Stolen George Washington Letter Leads to Halifax Arrest” CBC News (4 March 2013), http://www.cbc.ca/news/canada/nova-scotia/story/2013/03/04/ns-stolen-artifacts-second-arrest.html; Joshua Knelman, “Police Cracking Down on a Hotbed of Hot Art in Quebec” Globe and Mail (20 September 2011), http://www.theglobeandmail.com/news/national/police-cracking-down-on-a-hotbed-of-hot-art-in-quebec/article594976/?page=all; Anna Maria Tremonti, “The World of Stolen Art” (23 September 2011) CBC The Current,  http://www.cbc.ca/thecurrent/episode/2011/09/23/the-world-of-stolen-art/; Jacques Gallant, “Group of Seven Paintings Stolen from Yorkville Art Gallery” Toronto Star (31 August 2012) http://www.thestar.com/news/gta/2012/08/31/group_of_seven_paintings_stolen_from_yorkville_art_gallery.html; “Man Denied Bail in Stolen Artifacts Case” CBC News (11 April 2013) http://www.cbc.ca/news/canada/nova-scotia/story/2013/04/11/ns-tillman-denied-bail.html; Greg Quill, “Canada Dumping Ground for Stolen Art” Toronto Star (26 March 2010), http://www.thestar.com/entertainment/2010/03/26/canada_dumping_ground_for_stolen_art.html; McMichael Canadian Art Collection, The Collection – The Group of Seven http://www.mcmichael.com/collection/seven/; Galit Rodan, “Group of Seven Paintings Nabbed in Toronto Art Gallery Heist” Toronto Star (11 July 2011) http://www.thestar.com/news/crime/2011/07/11/group_of_seven_paintings_nabbed_in_toronto_art_gallery_heist.html;  Douglas & McIntyre “Joshua Knelman” http://www.dmpibooks.com/author/joshua-knelman; Sylvia Lefkovitz http://sylvialefkovitz.com/index.php.

The Contentious World of Art Appraisal: Michelangelo, Van der Schardt and the Canadian Cultural Property Export Review Board*

The Canadian government offers a tax incentive to encourage the donation of art from private collections to public institutions, a practice that is similarly followed in the United Kingdom and the United States. On one hand, the public receives access to artwork that they might otherwise never see, and on the other hand the individuals or corporations receive a tax break for donating the works. The Canadian Cultural Property Export Review Board, in its role as an independent administrative tribunal among other functions, upholds a mandate to certify the cultural property for income tax purposes. The Board determines the fair market value of art to be donated by either the sales comparison approach or the cost approach, both of which are outlined on the Board’s website.

The purpose of the tax certification process is to “encourage[ ] the transfer of cultural property from private hands to the public domain.” In order to qualify for the tax certification, the Board must determine whether the work is of  “outstanding significance, due to its close association with Canadian history, its close association with national life, its aesthetic qualities, its value in the study of the arts, or its value in the study of the sciences; and the object is of such national importance that its loss to Canada would significantly diminish the national heritage.”

The incentivesgranted to successful applicants include “exemption from capital gains tax on the certified cultural property; and non-refundable tax credits for the full fair market values of the certified cultural property.”

How is cultural property actually appraised? The story below raises issues of provenance, the qualification of experts and the contentious nature of the appraisal of art.

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On January 26, 2013, David Baines of the Vancouver Sunreported that eighteen sculptures (the “Collection”) donated to the Museum of Vancouver – terracotta studies of body parts – which had previously been attributed to Michelangelo (1475-1564) and Benvenuto Cellini (1500-1571) by art historians, were in actuality made by Dutch sculptor Johann Gregor Van der Schardt (1530-1591) in the late sixteenth or seventeenth century. The sculptures had been put up for auction by the Museum of Vancouver at Sotheby’s in January, Lot 354, and were featured as a part of Old Masters Week.

Measuring between 7.7 and 21 centimeters, Sotheby’s catalogue described the sculptures as “studies after anatomical elements seen in famous monuments sculpted by Michelangelo Buonarotti. The practice of making copies … was central to the education and stylistic development of artists of the Renaissance; these artists also learned by copying their immediate predecessors and contemporaries, particularly the works of great masters.”

Sotheby’s website reveals that they were most likely acquired by Paul von Praun (an important art collector) in the late 1500s directly from the estate of Van der Schardt. After changing several hands they were then sold to J. Wolff from Montreal by Christie’s London in 1938. Wolff’s twin sons, Paul and Peter LeBrooy, inherited the terracotta sculptures in the 1950s, nine pieces each.
As CBC News reports, while in possession of the LeBrooy brothers, the sculptures remained virtually unstudied for years, until some art historians began suggesting that they might be the works of Michelangelo himself. Sometime after, the brothers contacted experts in hopes of having the sculptures attributed to Michelangelo. Later and for years, the works were promoted and toured internationally as Michelangelo’s studies. Paul LeBrooy even authored a book on the topic titled Michelangelo Models: Formerly in the Paul von Praun Collection (1972).

The ensuing controversy making headlines in Canada is centered on the appraised value of the collection. That is, the donation of the sculptures by Corporate House (a financial group) to the Museum of Vancouver, once valued at about $31 million, had also resulted in the issuance of $31 million in tax receipts for the company by the Review Board. It was clearly a shock when Sotheby’s appraised the works at a fraction of that amount, valuing nine sculptures from the Collection at $200,000-300,000. 

Apparently, as revealed in a radio interview with CBC reporter Jason Proctor, the sculptures had endured a riveting history. The pieces had been put up for sale numerous times since the 1960s, receiving offers ranging from several to about $40 million; they were never sold. As per Proctor, the brothers became estranged over the sculptures and divided the collection into two. Corporate House then offered $18 million for Paul’s nine sculptures on the condition that they were attributable to Michelangelo and that they could be appraised for that value in 1996. However, the attribution to Michelangelo could not be made conclusively, and consequently Corporate House acquired Paul’s set of sculptures in 1998 for an undisclosed amount, on the basis that the sculptures were important, unattributed works of the Renaissance era. Shortly following Peter’s death in 2003, Corporate House purchased the remainder of the nine sculptures, whereupon in 2006 they donated the entire collection to the Museum of Vancouver in return for a tax break.

According to Proctor, when Corporate House approached the Review Board regarding the donation to the Museum of Vancouver, they had contacted every expert eligible to verify the attribution to Michelangelo, but learned that it was not “tenable.” Interestingly, Proctor managed to track down two scholars who had been hired by Corporate House, neither of whom had attributed the works to Michelangelo. One of the scholars even concluded that the sculptures were most likely the works of Van der Shardt but he was specifically asked to forgo writing a report about it.

Proctor reveals that the Review Board rejected the initial valuation made by Corporate House for $55 million and later accepted a second valuation based on independent appraisals, in the total fair market value (as defined by the Board) of $31 million for all eighteen figures. Although the appraisals are not made public, the Vancouver Sun reports that Nancy Noble (CEO, Museum of Vancouver) suspects that the sculptures may have been attributed to Michelangelo given the “enormous valuations.”

Several years after the transfer, in 2012, when the Museum of Vancouver decided that the statues were not a part of their collection mandate and decided to flip them on the market, they approached Sotheby’s. The auction house issued a valuation of $200,000-$300,000 for a portion of the collection, and attributed the studies to Van der Shardt.

The question now is: what happens when tax certificates are issued by the Review Board based on appraisals that are disproportionate to subsequent ‘corrected’ valuations when new information is brought to light? Luckily for Canadians, and less so for Corporate House, based on paragraph 32(5)(b) of the Cultural Property Export and Import Act, the Review Board has the power to “redetermine” the fair market value “at any time,” which would then prompt the Canadian Revenue Agency to re-evaluate tax returns from Corporate House, clearly anticipating situations like this one. 

The tax certification application process is an intensiveone. However, as Proctor mused in his interview, if he was able to track down the experts that Corporate House used – one of whom had attributed the works to Van der Schardt earlier on – then should the Review Board have done the same? Currently, the Review Board’s policy on monetary appraisal is that “[r]ecipient institutions/public authorities are responsible for selecting reliable evaluators for donations and should be prepared to stand by the work of the appraisers they have engaged,” further, the onus for providing certificates of authenticity also rests with the applicant. 

Sotheby’s Lot 354 from the January sale in New York remains unsold.

*Sources: Department of Canadian Heritage; “Important Old Master Painting and Sculptures: Lot 354” Sotheby’s; “Blockbuster Donation of ‘Michelangelo’ Sculptures Turns into a Multi-Million-Dollar Bust” The Vancouver Sun, January 26, 2013; “‘Michelangelo Models’ Cost Canada Millions in Tax Credits” CBC News, February 20, 2013; “Why Did ‘Michelangelo Models’ Cost Canadians Millions of Dollars in Tax Credits?” CBC News The Current, February 19, 2013; Michelangelo www.michelangelo.com; The J. Paul Getty Museum www.getty.edu/museum; The Museum of Vancouver www.museumofvancouver.ca; Amazon www.amazon.ca.

**The author wishes to thank Jason Proctor and the Department of Canadian Heritage for their assistance in providing additional information, and Dr. Laura Petican for her assistance in editing and feedback on the article.