Resale Royalty: To Act Or Not To Act; US Copyright Office Issues Notice re Public Hearing

April 1, 2013

By Irina Tarsis

On March 29, 2013, the United States Copyright Office published a Federal Notice 78 FR 19326 announcing the upcoming Public Hearing or a Public Roundtable (the “Hearing”) regarding the merits of implementing a Federal Resale Royalty Act in the United States. The Public Roundtable on resale royalty issues is a logical next step after the Copyright Office reviewed submissions for and against implementing such and act in the United States, all were due on November 5, 2012.* For a summary of the  Copyright Office’s steps toward the review, read US Copyright Office to Review Artist Resale Royalty.

In total, 59 comments from individuals and organizations were submitted to the Copyright Office, including comments from Center for Art Law*, California Lawyers for the Arts, Sotheby’s and Christie’s, Societa’ Italiana Degli Autori Editori (SIAE) and the Irish Visual Artists Rights Organization (IVARO). The Federal Notice summarizes what these comments contain and posits questions for discussion, including Constitutional concerns and potential effects of a federal law on the art market.

The Hearing will take place on April 23, 2013 in Washington, DC. Those interested in presenting their viewpoints should register by April 12 online.  The program will include four panels:

Panel I: Changing Legal Landscape, Portability of the Art Market, 1:00 p.m. – 2:00 p.m.
Panel II: Incentive to Create New Works, Visual Artists and Sales, 2:00 p.m. – 3:00 p.m.
Panel III: First Sale/ Free Alienability of Property, Constitutional Issues, 3:00 p.m. – 4:00 p.m.
Panel IV: Equity for Visual Artists Act of 2011 (EVAA), 4:00 p.m. – 5:00 p.m.

Following are a few excerpts from the Federal Notice:

• At the request of Congress, the Copyright Office is reviewing: (1) how the current copyright legal system affects and supports visual artists; and (2) how a federal resale royalty right for visual artists would affect current and future practices of groups or individuals involved in the creation, licensing, sale, exhibition, dissemination, and preservation of works of visual art.
• The Office received twenty-five comments that either cited to the Equality for Visual Artists Act (the ‘‘EVAA’’) or commented directly on the proposed legislation. The Office is interested in hearing more about what provisions should or should not appear in any resale royalty legislation” and such provisions of the EVAA as (1) Transaction Types which would be covered by the EVAA (2) Collector of Royalties, (3) minimal sale value to trigger the EVAA, (4) Collection and Distribution of Royalties, and others.
• Some commenters expressed concern that if the United States adopts a resale royalty right, a substantial portion of the U.S. art market will shift to markets where no resale royalty exists currently. Conversely, some commenters cited figures showing that the German, United Kingdom, and French markets actually grew after the EU Directive was implemented, while in the United States and Switzerland, where there is no resale right, the markets declined. What factors, other than implementation of a resale royalty right, affect the portability of the art market? Some commenters suggested that a resale royalty is incompatible with the first sale doctrine set forth in 17 U.S.C. 109. These commenters argued that a resale royalty provides an ongoing property right each time an artwork is sold (subsequent to its initial sale), prevents buyers from acquiring unencumbered title to a work of art, and adds a layer of complexity to secondary transactions. Other commenters argued that a resale royalty does not conflict with the ability to freely transfer property because the royalty simply would require payment when a subsequent sale has been made and does not otherwise restrict the transfer or sale of a particular work of art. In light of these comments, the Office has the following questions: To what extent, if any, are the first sale doctrine and a resale royalty right incompatible? Would a resale royalty have a detrimental effect on the initial sale of the artwork?
• Many commenters suggested that visual artists are at a great disadvantage in relation to creators of other copyrighted works because visual artists are not paid for the subsequent resale of their original works and do not enjoy a benefit proportional to the success of their work. Thus, these commenters cautioned that without a resale royalty, visual artists are excluded from the most significant profits that their works may generate following its creation.

While the Copyright Office is preparing for the Hearing and presenting its findings to the Congress, Chuck Close and other artists and artist estates are appealing a related decision which held a state resale royalty act unconstitutional. The 9th Circuit Court of Appeals will review Judge Nguyen’s decision that “because Resale Royalty Act applied to artwork sold both in California and by a California resident outside the state, it violated the U.S. Constitution’s Commerce Clause.”

*To read Center for Art Law’s comment in favor of a Federal Resale Royalty Act, visit the US Copyright Site.

Source: U.S. Copyright Office;  U.S. Copyright Office Round Table Request; 78 FR 19326; ArtInfo.