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Resale Royalties: from CA to NY

Many works of visual art are so unique that exact reproduction is nearly impossible, which sets them apart from other copyrightable works. For example, literary works can be photocopied, and musical works can be uploaded and downloaded. Whereas a writer sells a literary work for an initial print run, a visual artist sells only one physical copy. Once that physical copy is gone, an artist can maintain copyright but may still lose benefits associate therein. An artist can only sell the work once, but the value of that work may grow over time. Unlike a writer, he or she will not have future opportunities to license or sell that work for future sales or print runs.

Should an artist benefit from future sales that reflect the increased value of their work? In 1977, the state of California decided that the artist should benefit, and the state legislature enacted the California Resale Royalty Act. Under this Act, the seller of a work of art must pay to the artist 5% of the sale price, if the work is sold for more than it was bought. The California Arts Council site provides a good overview of how the Act works.

Although this law was enacted only in California, it affects transactions in other jurisdictions. As ArtInfo point out, “the law applies to both works of art sold in California and those sold outside the state by a California resident.”

This past week, a class action lawsuit was filed against Christie’s and Sotheby’s in New York for alleged violations of the Act. According to the LA Times, the auction houses were charged with failing to comply with the law, by “not withholding this royalty for the artists and by routinely going out of their way ‘to conceal the fact of a seller’s California residency.'” The plaintiffs involved in the class action suit include Chuck Close, Laddie John Dill, and the estate of Robert Graham. It is still unclear how strong the case is, and what affect the case might have on the art market.

[LA Times]

October 25, 2011: The LA Times has an interesting update regarding the class-action suit