It Takes Two to Tango: The Importance of Artist-Gallery Contracts

By Scotti Hill*

tango-108483_1280

Creative Commons.

Of course galleries are venues of intellectual engagement and social activity, but it can be easy to forget that they also act as hubs for commercial exchange. The same mechanisms that govern relationships between blue-chip artists and mega-galleries ought to be in place to protect emerging artists and pop-up galleries as well. Beneath the veneer of originality and artistic merit lie monetarily-driven representation agreements and consignment contracts. The status quo is driven by mutual interest: galleries need artists to create their inventory so their clients have something to buy, and artists need galleries for their infrastructure and access to art buyers. By creating a roadmap that enables both parties to navigate their working relationships, contracts are at once practical and imperative. So, given the importance of a well-drafted and carefully negotiated contract in almost all areas of commerce, why do artists and galleries often fail to formalize the nature of their relationships in contractual form?

On July 19, 2016, Center for Art Law hosted an art law mixer entitled “Good Fences Make Good Contracts” to explore the question of contracts between artists and galleries. As a follow up, this article examines the intricacies of standard representation and consignment agreements, while also delving into the legal basis for such contracts–namely the Uniform Commercial Code Sect. 9-102 and the New York Arts and Cultural Affairs Law §12.01, Artist and Merchant Relationships. To illustrate benefits of having carefully crafted contracts between artists and galleries, some high-profile relationships, such as the representation and the rumored split between Richard Prince and the Gagosian Gallery highlight select  issues that may arise in an artist-gallery relationship.

Introduction to the Standard Artist-Gallery Contract

Screen Shot 2016-08-15 at 1.04.59 PMWhen entering into a commercial relationship, an artist or gallery may choose to draft a standard representation agreement whereby the gallery agrees to work as an agent on the artist’s behalf. The scope of this agency is negotiated by the parties, as some galleries hope to serve as an artist’s exclusive agent in a geographic area (New York City, for example), while others agree to serve as agent for one specific medium or collection the artist produces. Such agreements set provisions for matters like how revenue is shared after a sale, whether the gallery receives commissions on work sold from the artist’s studio, and the duration and scope of consignment. The following items are also commonly included in artist-gallery contracts:

  • Duration of contract including renewal and termination clauses;
  • Commission structure, terms of payment and other accounting procedures;
  • Transportation procedures;
  • Gallery promotion, marketing and copyright;
  • Coverage and provisions of insurance policies.

After establishing representation with a gallery, artists then consign their artwork to them for safekeeping with the expectation the gallery will sell their inventory. By definition, consignment is the act of assigning the property of one party (consigner, be it an artist or a collector) to that of another (consignee, here a gallery), for sale under contract. As part of the larger representation contract, a consignment agreement should list all the works given to a gallery by the consignor, with an authority to sell a specified group of the artist’s work and providing an indexical record of works in the gallery’s possession.

Uniform Commercial Code (UCC) Sect. 9-102, and New York Arts and Cultural Affair Law §12.01, Artist and Merchant Relationships

While the Uniform Commercial Code is the overarching body of laws concerning the sale of goods and commercial transactions federally, each state has adopted its own commercial code. UCC Section 9-102 sets guidelines for parties engaging in commerce regardless of the existence of a written contract. As it relates to the consignment relationship between artist and gallery, the UCC dictates important provisions that have been upheld over time by case law, namely the criteria and value of goods classified under ‘consignment’ and consignor’s rights in the event of bankruptcy. See Jacobs v. Kraken Inv. Ltd., (In re Salander-O’Reilly Galleries, LLC), 506 B.R. 600 (Bankr. S.D.N.Y. 2014)

In addition to the UCC, thirty-one states have adopted statutes to address the specific circumstances governing art transactions. In New York, for example, the New York Arts and Cultural Affairs Law (NYACAL), Article 12, provides a governing structure for interpreting contracts between artists and galleries. On November 6, 2012, New York’s consignment law was updated to include additional protections for artists by imposing stricter measures on galleries and dealers as consignors. The updated NYACAL addresses three fundamental weaknesses in earlier consignment law: requiring dealers and galleries to place sale funds in a protected trust, awarding attorneys fees for successful petitioners and requiring that critical sections of the consignment agreement be memorialized in writing. The 2012 amendment directly addresses the UCC’s problematic rendering of consigned artwork eligible for seizure by creditors, which is perhaps one of the UCC’s most controversial points.

Before the 2012 revision to the law, creditors could legally seize artworks in a consigner’s possession in order to fulfill unpaid debts. Although galleries do not own artworks on consignment, the creditor exists as a third party outside of, and therefore not bound by, the terms of a contract forged between the artist and gallery. The lack of solid legal remedies for consignors is what has propelled many states to revise their laws to deal specifically with the consignment of art, while in New York, the mammoth Salander-O’Reilly Galleries lawsuit became a catalyst for the amendment.

As such, an important provision exists in many amended state laws: that the gallery be rendered trustees to the artist’s property, which necessitates they hold revenue from the sale of an artwork in a special trust–apart from other gallery funds–that will be paid in full to the artist at an agreed upon time. This amendment works to 1) prevent creditors from seizing consigned art because the value of such works is protected in a trust, and 2) protect trust funds from being improperly used by the galleries to fulfill other financial obligations.

Indeed both parties may take advantage of vague contractual terms or actively work against the creation of a contract. Amended laws aim to prevent this by adding specific fiduciary responsibilities for both parties. Ultimately, if the artist-gallery partnership exists in a state without a comprehensive consignment statute, the parties can, and should, provide through contract the provisions missing from state law.

Richard Prince and Gagosian Gallery Split

After more than a decade and a string of highly successful exhibitions together, news broke in June 2016 that Richard Prince and Gagosian Gallery were going their separate ways. Neither the  veracity of the news nor the details of the alleged split are known, but if true may be explained by the mounting costs from legal battles involving the pair in recent years, which implicate and name Larry Gagosian and his gallery as a contributory infringer.  See Graham v. Richard Prince, Gagosian Gallery, Inc., and Lawrence Gagosian, Cariou v. Prince, Gagosian Gallery, Inc. and Lawrence Gagosian, and Dennis Morris v. Richard Prince, Gagosian Gallery, Inc. and Does 1 through 10 inclusive.

As part of his famous appropriation work, Prince takes the copyright-protected work of other creators and repurposes it in new contexts. While critics and collectors have repeatedly lauded this process, photographers whose work has been used without permission have taken a different approach. From 2014-2016, three copyright infringement lawsuits were filed against Prince by photographers Patrick Cariou, Donald Graham and Dennis Morris. In Cariou v. Prince, 714 F.3d 694 (2nd Cir. 2013), the Second Circuit Court of Appeals held that Prince did not infringe the copyright of 25 of the 30 images he appropriated from Patrick Cariou’s collection of photographs under the fair use exception of copyright law. For his use of the remaining five images in the collection, Prince settled out of court. The infringement cases brought by Graham and Morris are ongoing.

As agents working on the artist’s behalf, galleries accompany artists through creative peaks and declines. While much is made about how important contracts are for artists, galleries are wise to incorporate a termination clause in the contract in order to guard themselves from potential problems that may arise in the course of the relationship. A well-drafted termination clause, for example, is helpful in providing a protocol for the  manner in which the parties can terminate their professional relationship; a termination clause affords the party on the receiving end of the “breakup” adequate time to prepare for the transition. This is particularly important in instances where the gallery has crafted an exhibition or otherwise made plans with specific artworks. A typical clause of this kind would require the party initiating the split to give notice of anywhere from one to three months to the other party.

We do not know if Prince had a contract with Gagosian, but at the very least, it is likely the two agreed upon such critical provisions as payment and consignment of inventory. Despite news of the split earlier this summer, Prince is still featured on Gagosian’s website, which may indicate the two have yet to part ways. And even then, the separation may only be temporary.  After all, artist Damien Hirst reunited with the Gagosian Gallery for 2016’s Frieze New York following a three year split.

Conclusion

Although many states have amended their consignment laws, still other states have yet to follow suit. In areas of the nation where art represents a decidedly small segment of the larger economy, less incentive exists to add in the necessary protections that have been greatly appreciated in large art markets. On a practical level, however, artists can protect themselves by being vocal about their desire for a consignment contract. Contracts create a roadmap for the artist-gallery relationship and can offer clarity  if/when any unforeseen grey areas arise in the course of doing business together. When entering into a business relationship with a gallery, artists are wise to seek out feedback from their peers about the gallery’s reputation and its willingness to negotiate mutually beneficial terms at the outset. Various resources exist online, most important of which are copies of the standard representation and consignment agreements that can serve as a starting point for both parties. Ultimately, if an artist is faced with unique circumstances relating to their practice or needs, they may wish to seek legal representation before, and oftentimes during, their formal acceptance of a gallery’s offer of representation.

* * *

nieto_dickens_art_law_mixer_2016_2_web

Photo by Luis Nieto Dickens | @vla_newyork

On July 19, 2016, Center for Art Law (the “Center”) hosted “Good Fences Make Good Neighbors,” a Summer Art Law Mixer made possible with support from the New York Volunteer Lawyers for the Arts. The event focused on contracts between artists and galleries and how attorneys negotiate on behalf of their clients. Moderated by the Founding Director of the Center, Irina Tarsis, the panel featured three speakers, all attorneys specializing in art law. Dean Nicyper, a litigator with Withers Worldwide, and involved with revising the NYACAL law, provided a general overview of the legal considerations of artist-gallery contracts, Amelia Brankov of Frankfurt Kurnit Klein & Selz, spoke about the ways in which artists can advocate on their own behalf in forging contracts with galleries and Katherine Wilson-Milne of Schindler Cohen & Hochman, commented on what considerations galleries have when drafting contracts with artists. Attendees, including practicing attorneys, students and artists, asked questions ranging from the appropriate etiquette of negotiating such contracts to how to best situate oneself to prevent and later reconcile potential legal issues that arise from this union. One main take-away from the evening was that that clear terms of a consignment agreement between artists and dealers make for good symbiotic relations between the two key players in the art market.

Select Sources:

About the author: Scotti Hill is a J.D. Candidate, 2018 from the S.J. Quinney College of Law at the University of Utah. She serves as a summer 2016 legal intern for the Center for Art Law, and works as an art critic and curator. Prior to law school, she received a Master’s Degree in art history and visual studies. She can be reached at scottiaustinhill@gmail.com

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

Copyrights: To Register or Not to Register, That is the Question

By Elizabeth Weber, Esq.*

Copyright protection is a cornerstone of intellectual property law for those who create expressive works. However, a startling number of artists do not register their copyrights with the U.S. Copyright Office for one reason or another, ranging from a lack of knowledge on how to go about registering a copyright or the unwillingness to register because a work is, technically, protected under copyright law the moment it is created. Whatever the underlying reason, those who do not register their copyrights are at a stark disadvantage for one main reason: an unregistered copyright holder, meaning the individual who owns the unregistered copyright, is precluded from suing an individual who infringes upon the work’s copyright in court. In short, only registered copyright holders may bring actions of copyright infringement against alleged infringers.

With this in mind, Center for Art Law believes that providing some basic information on copyrights and copyright law to our readers would prove beneficial. Please note that this article does not, in any way, shape, or form, constitute legal advice. If our readers have any questions about copyright law, we strongly urge them to consult an attorney.

A Bit of Background Information on U.S. Copyright Law

Modern copyright law stems from the United States Constitution. The Constitution granted Congress the power to issue both patent and copyright protection “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” U.S. Const. art. I § 8, cl. 8.

Copyright law aims to achieve two distinct goals: first, to provide authors the exclusive right to benefit from their creative works for a limited duration and, second, to stimulate the creative atmosphere by protecting works from unfettered widespread use. Thus, Congress incentivized the creation of artistic works by imbuing authors with the exclusive right to use and benefit from such works for a set period of time.

What is Copyrightable Subject Matter?

Modern copyright law is codified in Title 17 of the United States Code. 17 U.S.C. § 102 (a) states that “[c]opyright protection subsists . . . in original works of authorship fixed in any tangible medium of expression” and includes categories like literary, pictorial, and audiovisual works. Both published and unpublished works may qualify for copyright protection. Thus, so long as an artistic work is original and fixed in a tangible medium of expression, it may garner federal copyright protection.

The Code specifically precludes ideas, procedures, processes, systems, methods of operation, concepts, principles, or discoveries from garnering copyright protection. 17 U.S.C. § 102 (b). However, the expression of these precluded subject matters may be protected in some limited circumstances.

Why Register A Copyright?

Once a copyright is infringed, the copyright holder may act to stop the infringer from exploiting the infringed copyright. The damages for infringement depend on whether the work was registered with the Copyright Office before any of the exclusive rights were violated. The amount of possible recovery ranges from $0.00, as actual damages may be nominal, to $150,000.00 per willful infringement if the copyright holder elects to seek statutory damages.  More detail about actual and statutory damages will be provided in the Remedies for Infringement: Actual Damages and Profits versus Statutory Damages section below.

A Copyright Basics Circular provided by the U. S. Copyright Office indicates that copyright registration provides the copyright holder with a number of advantages, including establishing a public record of the claimed copyright, which may dissuade potential infringers from unlawfully using the work; allowing the copyright holder to file a copyright infringement claim in court; establishing prima facie evidence of the copyright’s validity and of the facts set forth in the copyright certificate; and, “[i]f registration is made within three months after publication of the work or prior to an infringement of the work, statutory damages and attorney’s fees will be available to the copyright owner in court actions. Otherwise, only an award of actual damages and profits is available to the copyright owner.”

Accordingly, registering a copyrighted work not only allows a copyright holder to sue an alleged infringer, but it also allows the copyright holder to seek statutory damages and attorney’s fees if the copyright holder registered the copyright within a certain time frame as discussed in 17 U.S.C. § 412. This may lead to a substantially higher damages award, which will be discussed in the Remedies for Infringement: Actual Damages and Profits versus Statutory Damages section below.

How to Register a Copyright

An application to register a copyright must contain three essential elements: 1) a completed application form; 2) a nonrefundable filing fee; and 3) a non-returnable deposit, which is a copy of the work being registered and deposited (hence the name) with the U.S. Copyright Office. These forms are available on the U.S. Copyright Office website. For reference, a step-by-step copyright registration guide is available on pages 7-12 of the Circular mentioned above.

Additionally, an applicant does not need a lawyer to register his or her copyright, so the applicant may fill out the requisite paperwork, send in the filing fee, and deposit a copy of the work with the U.S. Copyright Office at his or her own volition.

Copyright Infringement

A valid copyright issued by the U.S. Copyright Office provides the copyright holder with the exclusive right to use, reproduce, prepare derivative works, and perform the work publicly. If a third party infringes upon these rights and the copyright holder registered his or her copyright, the copyright holder may file a copyright infringement suit against the alleged infringer. The copyright holder may sue for injunctive relief, for the court to impound the infringing articles, and/or for damages stemming from the infringement.

Remedies for Infringement: Injunctive Relief and Impounding Infringing Works

If granted by the court, an injunction forces the infringing party to cease the infringing activities. Also, a copyright holder may move for or the court may order sua sponte the impounding of infringing works as the court deems reasonable. Finally, the copyright holder may seek either actual damages and any additional profits from the infringement or statutory damages.

Remedies for Infringement: Actual Damages and Profits versus Statutory Damages

A copyright infringer is liable for either 1) actual damages and profits stemming from the infringement or 2) statutory damages. A registered copyright holder is entitled to recover the actual damages suffered as a result of the infringement along with any additional profits gained from the infringement.

Alternatively, a registered copyright holder may elect, at any time before a final judgment is rendered, to recover statutory damages in lieu of actual damages and profits. Basically, statutory damages are set forth in the statute itself as opposed to being calculated based upon the harm suffered by the victim. In terms of copyright infringement, amounts vary for statutory damages from no less than $750.00 to no more than $30,000.00 per infringement as the court deems just.

Additionally, if the registered copyright owner proves (and the court finds) that the opposing party willfully infringed upon the copyright, the court may increase a statutory damages award to no more than $150,000.00 per infringement. Statutory damages awards are not always big money, though; if a registered copyright holder elects statutory damages and fails to prove willful infringement, the court may reduce the statutory damages award to no less than $200.00 per infringement.

Accordingly, the election of either actual damages and profits or statutory damages should be considered a strategic litigation decision. Registered copyright holders should consult with their attorneys and carefully consider the pros and cons of electing either set of damage awards.

Conclusion

There are certainly benefits derived from registering a copyrighted work. To summarize, in addition to allowing a copyright holder to file an infringement suit against an alleged infringer, registered copyright holders may also seek statutory damages and attorney’s fees depending upon when the holder registers the copyright – potentially leading to significantly higher damages awards.

However, artists should remember that simply because their works may be copied without permission, they need not take action. There is no requirement to enforce one’s copyright and there may be quantifiable benefits in seeing one’s work appear in another’s creative expression. While it is a good idea to consult an attorney with intellectual property questions and to protect one’s exclusive rights, the ultimate decision regarding these rights is open-ended and subject to the copyright holder’s interpretation.

Sources:

*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 the Center for Art Law.

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.