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March 6th, 2014
Lawmakers Introduce Resale Royalty Bill for Visual Artists
Last week, U.S. Senators Tammy Baldwin and Ed Markey and Congressman Jerrold Nadler introduced the American Royalties Too Act of 2014 (the "ART Act"). The bill seeks to amend the United States Copyright Act (the "Copyright Act") to provide visual artists a royalty when their works are resold at auction.
The ART Act is a revision of a prior bill to enact federal resale royalty rights for visual artists. That bill, the Equity for Visual Artists Act, was originally introduced by Rep. Nadler in 2011, but stalled in Congress. The revised version of the bill lowers the percentage of the royalty that artists would receive from seven percent to five percent, and sets a fee cap.
If passed, the ART Act would:
- Apply to sales of works of visual art at auction where the entity conducting the auction has sold at least $1 million of visual art during the previous year;
- Establish a royalty rate of five percent of the work's sales price;
- Include a sales price minimum, so that royalties are only required to be paid where the work is sold for $5,000 or more;
- Set a cap on the amount of the royalty payment available for each sale ($35,000 for 2014, and beginning in 2015, subject to increase to reflect a cost-of-living adjustment);
- Allow for the recovery of unpaid royalties and statutory damages as remedies for nonpayment of royalties owed; and
- Require auctioneers to collect royalties, and pay them to visual artists' copyright collecting societies, which must distribute the royalties to artists or their successors at least four times per year.
The bill for the ART Act comes on the heels of a December 2013 report prepared by the Copyright Office entitled Resale Royalties: An Updated Analysis. In that report, the Copyright Office stated that it supports a resale royalty right for visual artists. That is a change of course for the Copyright Office, which in 1992 issued a report opposing the enactment of a resale royalty right. In the 2013 report, the Copyright Office noted that 70 countries have enacted resale royalty provisions in their laws, and more than 30 of them had enacted those laws since 1992.
The ART Act is consistent with some of the recommendations made by the Copyright Office in its December 2013 report. For example, the bill includes a minimum price threshold that is sufficiently low to cover a wide range of sales. The bill also sets a cap on the amount of the royalty payment available for each sale, as the Copyright Office recommended.
But the bill does not follow all of the Copyright Office's recommendations. The Copyright Office recommended that the law apply to sales of art by auction houses, galleries, private dealers and other visual art merchants. The ART Act would apply initially only to auction sales; however, the act would require the Register of Copyrights to conduct a study within five years of the law's enactment to determine whether the act should be expanded to cover dealers, galleries or other visual art merchants. Additionally, while the Copyright Office recommended that Congress limit the remedies to a set monetary payment rather than actual or statutory damages, under the ART Act, auctioneers who fail to pay royalties required under the law would be liable for the full royalty due and statutory damages.
Opponents of a federal resale royalty right advance several arguments against the enactment of legislation affording such a right to artists. Many argue that a resale royalty is bad economic policy, as it would harm the United States art market by driving sales to countries that lack such a right, and would only benefit a handful of already prominent artists. Others argue that a resale royalty right is inconsistent with core concepts of copyright law. First, they argue that a resale royalty right would offend the fundamental principle of free alienation of property underlying the first sale doctrine, which allows the legal owner of a copy of a work to sell the work without the authority of the copyright owner. Second, they argue it is not the role of copyright law to ensure market parity among authors. In light of the opposition to resale royalty legislation, there can be no certainty that the proposed legislation will pass into law.
If you have any questions about resale royalty rights or any other copyright or art-related legal issues, please contact Amelia Brankov at (212) 826-5574 or firstname.lastname@example.org or any other member of the Frankfurt Kurnit Art Law Group or Intellectual Property Group.
Other Art Law Alerts
Recent NYS Sales Tax Law Change Affects Art Sales Between Related Entities
On August 14, 2017, the New York State Department of Taxation & Finance issued a Technical Memorandum, TSB-M-17(4)S, which will be of interest to many New York-area art dealers and collectors.
August 23 2017
Appraisal Relied on by Estate Undervalued Paintings by $1.77 Million
Recently, in Estate of Kollsman v. Commissioner the U.S. Tax Court held that an art collector's estate significantly underreported the value of two artworks for estate tax purposes. The problem: the estate relied on appraisals by an auction house specialist who had an incentive to "lowball" the appraisals to win the right to later auction the works. In addition to this conflict of interest, the court found that the values reported by the estate were unpersuasive because the auction house specialist exaggerated the dirtiness of the paintings and failed to adjust his appraisals after one of the works sold at auction for approximately five times more than the reported value. Here's what you need to know about the case.
April 4 2017
Court Holds Art Advisor Must Pay Collector $1.05MM for Fraud
A New York court has ruled that an art advisor who brokered the sale of a collector's painting and secretly pocketed $1 million will have to pay the money back. Because the dispute turned on the advisor's agreement with the collector and what kind of legal duty the advisor owed to the collector, the case offers valuable lessons for people structuring art transactions. Here's what you need to know.
March 21 2017