It’s Not That Easy: Artist Resale Royalty Rights and The ART Act

July 1, 2019

By Laurel Wickersham Salisbury.

The discussion of droit de suite, or resale royalty rights for visual artists, across the globe continues to be of interest while European authorities debate the mechanics of the right and the United States Congress considers new legislation. In France and Italy, respectively, a court decision^[1] and new industry guidelines inform the collection of the royalty payment. Meanwhile in the U.S., the discussion over implementation of the resale royalty right through federal legislation continues. If it is true that “[c]reativity is an American value,”^[2] why hasn’t the U.S. established a federal resale royalty law following the example set by dozens of nations? Efforts to pass such legislation give recognition to the fact that the right could bring some fairness to the secondary art market for visual artists.

Overview of Current Law in Europe

Currently, more than 70 countries, including the UK and EU countries, provide for resale royalties to visual artists.^[3] In the EU, member countries were required to implement legislation establishing the right by January 1, 2006 in accordance with directive 2001/84/EC.^[4]

In France, where droit de suite has been recognized since 1920,^[5] the percentage due to the artist or the artist’s heirs from any resale is calculated on a sliding scale based on value of the artwork. Duration of the right is life of an artist plus 70 years. Currently, 4% is levied on resales of artworks valued up to €50,000; this rate decreases to 0.25% for artworks over €500,000.^[6] The mechanics of droit de suite have changed in the century since the introduction of the right. At first, a collector selling a work of art was solely liable for paying the royalty to the artist and the obligation only applied to secondary market sales of artworks sold at auction. In 2007, the right was extended to secondary market private sales by art dealers.

In 2018, the Cour de cassation determined that while one of the parties engaged in the transaction is obligated to pay the royalty, the duty may be delegated to the buyer.^[7] The case arose in 2009 when Christie’s France, through its general conditions of sale, requested that buyers pay the royalty. Syndicat National des Antiquaires (“SNA”) sued the auction house on the basis that holding the buyer liable for the payment would create unfair competition. Private dealers were – and still are – concerned that they cannot similarly place liability for the payment on buyers because it would “hinder the negotiating process,” and thus “disrupt competition”^[8] between dealers and auction houses for secondary market artwork sales. The French Supreme Court held that while “[t]he auction house is ultimately responsible for paying the levy to the collecting agency,” it has the “right to ask for the money from the buyer — so long as the conditions of sale include such a clause.”^[9] Thus, even though the royalty payment was conceived as a mechanism to share the profits between a seller and the artist, sellers in France may now be relieved of liability for the payment as more costs are shifted onto buyers. Therefore, the French high court’s decision was seen as a win for auction houses.

In the UK, the Artist’s Resale Right was introduced as an amendment to the country’s copyright law in 2006 in accordance with the EU directive.^[10] There, the right extends to secondary market sales “with the involvement of art market professionals” for artworks sold above €1,000; the rate is calculated on the EU’s sliding scale.^[11] The right was implemented in two phases: first, in 2006, it was applied only to resales of artworks by living artists, but in 2012, the right was extended to artists who died within 70 years of the date of the resale. UK law holds buyer and seller jointly liable for payment. The UK government has also made commitments to “preserve the status quo” on matters of copyright and artist resale royalties post-Brexit.^[12]

In Italy in early 2019, following six years of negotiations, the Società Italiana degli Autori ed Editori (“SIAE”) published new guidelines concerning artists resale royalty rights.^[13] When Italy adopted the right in 2006, it chose to apply collection of the royalty to all artwork sales by galleries, including the primary market sales. This measure was met with criticism from the industry: artists received what was intended to be resale royalties even when the work was first sold, and this requirement “hindered the competitiveness of Italian galleries internationally.”^[14] Following an out-of-court agreement with a group of Italian and international art galleries, SIAE’s new guidelines, published in February 2019, state that Italian galleries do not have to pay the royalty payment when selling a work of art on the primary market. The guidelines state: “The resale right applies only in cases where the transaction, subsequent to the first transfer made directly by the author of the work, takes place through an art market professional (for more than €3,000).”^[15] As part of the new guidelines, primary market galleries selling an artist’s work on consignment are now also required to have written consignment agreements in place. Art lawyer Silvia Stabile stated in an interview given to the Art Newspaper that this requirement “provides authors with a standard level of protection and ensures that they will continue to share in the economic success of their original artwork in any subsequent sales.”^[16]

Italian art lawyer Massimo Sterpi added, “[t]he guidelines are far [from] simple and provide some relief if a number of formalities and conditions are met. If there will be any relief, it will be then in a very restricted number of cases. This will be not a panacea to the Italian art market, whose greatest problems remain too high VAT, arbitrary restriction to export, and uncertain tax treatment of capital gains made when reselling art.”^[17] While the guidelines may not propel the Italian market to the top of the global art market, it is interesting to see the developments in this sphere that maintain a focus on ensuring artists receive fair payment for their work.

What about the United States?

The United States is one of the countries that do not recognize resale royalty rights. Partially a result of the differences in economic theories of the U.S. and European countries, artist resale royalty rights have never gained widespread acceptance in the U.S., despite various efforts in Massachusetts, California, and New York in the twentieth and early twenty-first century.

Implementation of the resale right was championed in the late 1960s when artists “began to consider alternatives to time-honored art world practices.”^[18] In 1973, prominent art collector Robert Scull famously sold a Robert Rauschenberg ‘combine’ artwork, Thaw, at auction for $85,000, at almost ninety five times more than his original purchase price. Scull purchased the combine from dealer Leo Castelli about fifteen years earlier for only $900. After the sale, Rauschenberg confronted Scull, exclaiming on the unfairness of Scull reaping profits from Rauschenberg’s hard work and artistic genius while the artist himself saw none of that money. As a result, the idea of resale royalties gained a prominent new advocate and was placed in the spotlight in the U.S. However, the justifications provided for the right did not prove to be compelling for the country’s capitalist mindset. The notion of artists sharing in the profits of secondary market sales has been deemed of little importance, and the idea that “the resale right weakens the market” and places an undue burden on other art-market players has so far won out.^[19]

Over the years, different U.S. lawmakers championed federal efforts to establish the right in the U.S. on numerous occasions. In 1978, the Visual Artists’ Residual Rights Act was introduced by Representative Henry Waxman, which would have established a royalty payment.^[20] In 1986 and 1987, a royalty payment was introduced by Senator Edward Kennedy as a part of the Visual Artists Rights Act (“VARA”), but this provision was removed from the version of VARA that was eventually enacted in 1990.^[21] More recently, House Representative Jerrold Nadler has introduced to Congress a bill proposing varying forms of the right four times since 2011.^[22] Additionally, in 1992 and 2013, the U.S. Copyright Office issued reports contemplating the practical benefits and burdens as well as the legality of such a right. Agreeing that the nature of the visual arts and the market position visual artists at a “material disadvantage” in comparison to other artists, Maria Pallante, the Register of Copyrights and Director of the U.S. Copyright Office, declared the Office’s support for congressional consideration of the right — with some recommendations.^[23]

While the State of California instituted legislation to establish the right in 1977 under the California Resale Royalty Act (“CRRA”), it was more limited in scope than European laws and inconsistently enforced.^[24] Then, in 2018, the Ninth Circuit Court of Appeals virtually eradicated the law on the basis that it was preempted by federal law under the 1976 Copyright Act.^[25] Specifically, under the first sale doctrine (17 U.S.C. § 109(a)), a copyright owner has exclusive control over distribution of an artwork until he places it in the stream of commerce by selling it. Finding that the CRRA fundamentally reshaped the contours of federal copyright law’s existing distribution right, the Ninth Circuit held that the California law was preempted under 17 U.S.C. § 301(a). The CRRA is now only applicable to the sales of a small number of artworks sold between January 1, 1977 and January 1, 1978.^[26]

The California decision suggests that in order to establish droit de suite in the U.S., it must be through federal legislation.^[27] This determination makes sense, not only in light of preemption of laws, but also from a practical standpoint. A royalty scheme that applies only to sales taking place in, or by sellers from, one state is not particularly feasible in our national economy.

The fact that a vast number of countries that desire to treat visual artists in the same manner as other artists have already adopted resale royalty rights provides two primary rationales for why a resale royalty right may be a beneficial amendment to current U.S. law.^[28] Specifically, visual artists would enjoy similar rights as, for example, musical artists. Furthermore, the lack of resale royalty rights in the U.S. also means that American artists do not benefit from the right abroad.^[29] The Berne Convention for the Protection of Literary and Artistic Works was amended in 1971 to establish a resale royalty right for visual artists under Article 14ter.^[30] While implementation of such a law was not mandatory for all signatories, it did establish the concept of reciprocity. That is, only an artist whose home country recognizes the right may benefit from it in other countries.^[31] It works like this: because a French artist whose work is sold at a U.S. auction house is not entitled to a resale royalty payment for that sale, an American artist whose work is sold at a French auction house, based on reciprocity (or lack thereof), is not entitled to a resale royalty payment for that sale. The result is that the U.S. art market is at a disadvantage in the global context, especially with regards to public image. First, foreign artists from countries that do recognize the right are disincentivized from selling their work in the U.S. Second, American artists are unable to benefit from the continued or increased value of their work in contrast to their European peers. The practical effect of this commercial disadvantage to American artists may be small, because a secondary sale of artwork is generally not decided by the artist – after all, the U.S. maintains the largest auction market, at 35% of the global market by value in 2017^[32] – but, for the sake of equity, further discussion is still necessary.

On the matter of the right’s effect on a given country’s art market, it may be argued that there is a negative correlation between the value of a country’s auction market and recognition of the resale right. This claim is based on the fact that the two countries with the largest market share are the U.S. and China, both of which do not recognize the right, while countries that do recognize the right have smaller market shares. However, the UK does maintain the third largest auction market globally.^[33] Furthermore, the U.S. is a large, integral, and established player within the art world; it is unlikely that establishing royalty rights would actually hinder the market to any appreciable degree.^[34] Additionally, as the right is increasingly established around the world, any effect that it has on the market will become even less noticeable. It is also worth noting that opposition to the right comes in part from large auction houses, but these companies already comply with similar resale royalty laws in other countries in which they do business, including in the UK, notably “home to the two major auction houses,” where the secondary art market remains strong.^[35] On principles of fairness, it is vitally important that the U.S. seriously consider implementing droit de suite.

American Royalties Too Act of 2018

The latest efforts to establish resale royalty rights in the U.S. have been made through the proposal of the American Royalties Too (ART) Act.^[36] The Act has been introduced to Congress a number of times during the last decade, but has yet to be signed into law. Most recently, it was introduced in 2018 with “bipartisan, bicameral” support.^[37] It is sponsored by Senator Orrin Hatch (R-UT) and Senator Patrick Leahy (D-VT) in the Senate, and Representative Jerry Nadler (D-NY-10) and Representative Doug Collins (R-GA-9) in the House.

The Act seeks to amend Title 17 of the United States Code to establish a resale royalty payment. If amended, § 106B, entitled “Collection of a resale royalty for visual art,”^[38] would provide a “small measure of equity” for artists.^[39] The right would apply to works of art sold at auction, if the auction house conducts at least $1 million in sales annually. The amount of the payment to the artist is 5% of the purchase price of the artwork, but it is capped at $35,000. Works of art selling for less than $5,000 are exempt from the royalty payment. The payment is due within 90 days of the resale by the auction house to a “visual artists’ copyright collecting society,” which must be newly established; the collecting society would then disseminate the payment to the artist, or the artist’s successor as copyright owner. The Act also provides for upwards adjustment of the maximum payment in accordance with federal cost-of-living adjustments under the IRC, and it establishes that joint authors of an artwork are entitled to equal shares of the payment.^[40]

While the royalty payment scheme proposed in the U.S. is not the same as those established by its foreign peers, it would be an important step for U.S. law. Significantly, reciprocity would be established in accordance with the Berne Convention and American artists would therefore then be able to benefit from the right when their works are sold in any country recognizing droit de suite.

Making a Case (again) for U.S. Resale Royalty Rights 

For better or worse, the current art market is robust. From the 2017 Sotheby’s sale of Jean-Michel Basquiat’s skull painting, Untitled (1982) for the artist’s personal record of $110.4 million to the 2019 Christie’s sale of Jeff Koons’ Rabbit for $91 million, which set a new record for a work of art sold at auction by a living artist, artworks are achieving incredible prices on the secondary market. Global art sales reached $67.4 billion in 2018; $29.1 billion of those sales took place at auction.^[41] As a champion for the arts, one cannot really complain about this global support. For those that hold art dear, there is a belief that art is fundamental to society and culture and a recognition that our society should support the arts. The fact of the matter is that while support for artists may come in many forms – critical or institutional recognition, for example – an ever-important form of support is acquisition.

It is nothing new to note that artists are often not financially stable. But this fact feels more than a little at odds with the backdrop of today’s art world, which is driven by money, and exorbitant amounts of it at that. As it stands, however, the people who benefit most from this grand market are mega-dealers, mega-collectors, and the ‘market darlings.’ Only a select few artists see long-lasting support for their work in monetary form. Such artists’ prices are often increased on the primary market to mimic secondary market prices. However, the value of the artist’s work would suffer if demand for their work later cools; therefore, the artist’s dealer must be strategic and modest in price adjustments on the primary market. This interplay means that even if an artist’s work is achieving ceiling-shattering prices at auction, they are likely not going to immediately see the money from that increase in value.

None of this is to say that dealers and collectors should not also benefit from increased market prices of an artist’s work. The former for their time and efforts in growing the artist’s market and the latter for their assumption of the risk when they bought into an emerging artist’s career. The discussion of resale royalties simply gives recognition to the idea that sharing the proceeds could be the solution to creating a fair market.

The primary justifications for establishing the right are first what Professor Merryman calls the “La Boheme” or ‘starving artist’ theory, and second, the ‘increased value’ theory.^[42] The La Boheme theory is based on the notion that artists are generally unable to make a decent living from selling their art. Therefore, profit-sharing from secondary-market sales may help to balance the inequalities of wealth in the art market. The second theory is founded on the recognition that an artwork only increases in value as a result of an artist’s continued efforts and production in order to grow their market, and they should thus be compensated for this work.

However, for every argument there is a counter. As to the La Boheme theory, it is pointed out that, in fact, contemporary artists are gaining recognition at unparalleled levels while they are still living, and thus, because their primary market prices can increase in response to high secondary market prices, it is not necessary that profit sharing be established in order for contemporary artists to make a living. Furthermore, for those artists that do not see market success the resale royalty payment would be so negligible that it would not even make a difference to them. With respect to the increased value theory, those in opposition to it argue that the increased value of an artist’s market is not entirely due to the artist’s hard work; in fact, it is also due in part to the work of the artist’s dealer and early supporters, critics, and collectors of the artist’s work. Seen this way, the establishment of an artist’s resale royalty right perhaps becomes less of an obvious conclusion.

A third theoretical justification for the right is the idea that other types of artists – authors, screenwriters, musicians, etc. – receive royalties for subsequent sales of their work, so visual artists should not be treated any differently. However, against this theory, likening artwork to other commodities, it has been posited that artworks should not be treated any differently than other goods in the market for which no royalties are paid upon subsequent sale.^[43]

Despite these counterarguments, it is of utmost importance to remember the reasons for which resale royalties exist. Only a few artists do receive astonishing revenues from artwork sales. Artists’ creations are the centerpiece of the art market, and while dealers, critics, and collectors play important roles, artists shape the art world. However, art is not just a market commodity, and like authors, playwrights, and musicians, it makes sense to treat visual artists as “creators.” Additionally, as Maxwell Anderson points out, there are “lingering inequities born of racism” and sexism in the art market.^[44] Resale royalties at least allow the families of historically disadvantaged or overlooked artists to be “appropriately recompensed.”^[45]

Beyond the monetary value, art has cultural and social power and would not exist without artists who dedicate their lives to creation. For decades, Europe and other countries have accounted for the realities of the art market and the fundamental contributions of the artist. The resale royalties established in those 70 some countries around the world help to reward the artist for the fruits of his or her labor (and talent) in a way that reduces the wealth inequities of the current model. The modest royalty payment proposed by the ART Act would help ensure an artist is “fairly” compensated; whether it will pass muster in Congress is another question.

Reviewed by Jana Farmer, Partner at Wilson Elser.

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[1] Société Christie’s France v. Syndicat National des Antiquaires, Ass. Plén., 9 nov. 2018, Arrêt no. 639, no. 17-16.335.

[2] Nadler, et al.,  Press Release: “Nadler, Hatch, Leahy & Collins Introduce Bipartisan, Bicameral American Royalties Too Act,” (Sept. 25, 2018). See also, Hanoch Sheps, Artist Resale Royalty Rights – Is a US Droite de Suite in our Future?, Center for Art Law (Dec. 2, 2013).

[3] Nadler, et al., Press Release (Sept. 25, 2018), supra note 2.

[4] Directive 2001/84/EC of the European Parliament and of the Council of 27 September 2001 on the resale right for the benefit of the author of an original work of art, 2001 O.J. (L 272).

[5] Maxwell L. Anderson, Why American artists should benefit from the resale of their works, The Art Newspaper (Jan. 4, 2019).

[6] Gareth Harris, Christie’s France wins the artist resale royalties battle, The Art Newspaper, (Dec. 31, 2018).

[7] Christie’s v. SNA, supra note 1.

[8] Id.

[9] Gareth Harris, Christie’s France wins the artist resale royalty battle, The Art Newspaper (Dec. 31, 2018).

[10] Artist’s Resale Right: In Detail, DACS, (last accessed June 26, 2019).  

[11] Id.

[12] Jessica Bancroft, Copyright Uncovered, Brexit update: What will happen to copyright and Artist’s Resale Right?, DACS (Dec. 12, 2018).

[13] Anna Brady, Italian galleries no longer have to pay artist royalties on primary market sales, The Art Newspaper (May 8, 2019).

[14] Id.

[15] Id.

[16] Id.

[17] Interview with Massimo Sterpi by Laurel Salisbury, Intellectual Property Partner, Gianni, Origoni, Grippo, Cappelli & Partners (June 17, 2019).

[18] Carl R. Baldwin, Art and Money: The Artist’s Royalty Problem, Art in Am., 20–23 (Mar.-Apr. 1974). (Reprinted in John Henry Merryman, Albert E. Elsen, and Stephen K. Urice, Law, Ethics and the Visual Arts, 597, 598 (5th ed., 2007).)

[19] John Henry Merryman, Albert E. Elsen, and Stephen K. Urice, Law, Ethics and the Visual Arts, 606 (5th ed., 2007). 

[20] Resale Royalties: An Updated Analysis, Office of the Register of Copyrights, 6–7 (Dec. 2013).

[21] Id.

[22] Nicholas O’Donnell, Au Revoir, Droit de Suite—9th Circuit Narrows California Resale Royalty Act to a Single Year’s Sale, Sullivan & Worcester Art Law Report (July 9, 2018).

[23] Resale Royalties: An Updated Analysis, supra note 20.

[24] Anderson (2019), supra note 5.

[25] See Close v. Sotheby’s, Inc., 894 F.3d 1061 (9th Cir. 2018). See also, Ethan T. Ashley, Case Review: Droit de suite… not so sweet, Center for Art Law (Sept. 27, 2018).

[26] Close v. Sotheby’s, Inc., 894 F.3d at 1064.

[27] Anderson (2019), supra note 5.

[28] Resale Royalties: An Updated Analysis, supra note 20, at 1-2.

[29] Press Release on the Introduction of the ART Act, Artists Rights Society (2018), arsny.com.

[30] Berne Convention for the Protection of Literary and Artistic Works, Art. 14ter (1971).

[31] Nadler (2018), supra note 2.

[32] Dr. Clare McAndrew, The Art Market 2018, An rt Basel and UBS Report, 109 (2018).

[33] Id.

[34] Resale Royalties: An Updated Analysis, supra note 20, at 3.

[35] Nadler (2018), supra note 2.

[36] H.R. 6868, 115th Cong. (2d Sess. 2018).

[37] Nadler (2018), supra note 2.

[38] H.R. 6868, supra note 36.

[39] Anderson (2019), supra note 5.

[40] H.R. 6868, supra note 36.

[41] Press Release: The Art Basel and UBS Global Art Market Report 2019, Art Basel (2019).

[42] Merryman, et al., supra note 19, at 599-609.

[43] Bernhard Berger, Why Resale Rights for Artists Are A Bad Idea, Selected Problems in Art Law, law.harvard.edu (Mar. 6, 2001).

[44] Anderson (2019), supra note 5.

[45] Id.

Additional Resources:

• John Henry Merryman, Albert E. Elsen, and Stephen K. Urice, Law, Ethics and the Visual Arts, Chapter 5, pg. 579 – 609 (5th ed., 2007).
• Nicholas O’Donnell, Au Revoir, Droit de Suite—9th Circuit Narrows California Resale Royalty Act to a Single Year’s Sale, Sullivan & Worcester Art Law Report (July 9, 2018).
• Resale Royalties: An Updated Analysis, Office of the Register of Copyrights (Dec. 2013).
• Art & Cultural Heritage Law Podcast: Discussion with Irina Tarsis: The Future of Resale Royalty Rights in the U.S. (2015).

About the Author: Laurel Wickersham Salisbury is a Summer 2019 Legal Intern at the Center for Art Law. She is a J.D. candidate at Duke University School of Law, Class of 2021. She holds her B.A. in Art History from Emory University (2015), and a M.A. in Art Business from Sotheby’s Institute of Art, Los Angeles (2017). Laurel can be reached at laurel.salisbury@lawnet.duke.edu.