Art Market

A U.S. Court of Appeals judge has struck down the final effort to have artists receive royalties when their work is resold.

Nate Freeman
Jul 10, 2018 5:12PM, via court documents

In 2011, the artist Chuck Close, the Los Angeles Light and Space pioneer Laddie John Dill, and the foundations of artists Sam Francis and Robert Graham filed suit against Sotheby’s, Christie’s and online auctioneer eBay alleging decades of withheld royalties owed to them under the California Resale Royalty Act, legislation that allowed artists to collect 5% of the proceeds on all secondary market sales of their work conducted in California or by a California-based entity. CRRA had been in place since January 1977, but by 2011, the law was only partially enforced, and a lawyer for the artists claimed that the auction houses got around the tax by concealing transactions’ connections to California, even in cases where the seller was a resident. The suit sought payments for artists whose work was resold in the previous three years, within the statute of limitations for CRRA claims, plus payments amounting to 5% of all the sales that were never disclosed to artists, dating back to 1977. Had the court found in favor of the artists, it would have been a very costly verdict for the auction houses and the tech company.

But the case never gained much traction. In 2012, a federal judge found the CRRA unconstitutional, as it “explicitly regulates applicable sales of fine art occurring wholly outside California,” and thus violates the Constitution’s Interstate Commerce Clause. In January 2016, the Supreme Court declined to take the appeal, and it went to a U.S. District Court in Los Angeles in April of that year, which again dismissed it. In that ruling, the court argued that the sweeping 1976 Copyright Act refers specifically to original artwork that changes hands, and states that the new owner of a work has a wide breadth of rights to do with it what they please—including to sell it.

The case eventually landed at the Ninth Circuit of the U.S. Appeals Court, where it was once again struck down on Friday, effectively ending the fight for artists’ resale royalties. Again, the decision hinged on the 1976 Copyright Act, which, according to the legal filing, “accomplished a sea change in the relative powers of the states vis-à-vis the federal government over copyright protection,” and thus rendered the state-ratified CRRA moot. One tiny victory: the Copyright Act went into effect in January 1978, one year after CRRA became effective; the court filing from Friday noted that “the district court should determine if any of plaintiffs’ claims arise between January 1, 1977, and December 31, 1977.”

Aside from the silver lining for artists who filed claims in 1977, Friday’s decision is the latest blow to those who believe the U.S. should adopt a policy of droite de suite. Such measures protect artists against speculators and dealers who can make millions as works appreciate in value without giving a cent back to the artists who made them. Currently, such laws only apply to artists who are residents of countries in the European Economic Area, as Christie’s explains in a dry Q&A on its website. But this latest decision makes it clear that, in the eyes of U.S. lawmakers, artists should not get any slice from repeat sales of their work, and should focus on making more work instead.

As Judge Jay S. Bybee wrote in the ruling:

Literary and recording artists can generally profit from their efforts by controlling the reproduction of books or music. For visual artists such as painters and sculptors, however, the right to control reproduction is often not their principal source of income. Rather, it is often the sale of their original work that allows them to make a profit. The droit de suite gives these artists an economic interest in subsequent sales of their original work, thereby allowing them to capture some of its appreciation in value after the first sale.

Activist groups such as the Artists Rights Society will no doubt be disappointed by the likely demise of this case, but those who will surely be most upset must be the artists themselves. As the Art Newspaper notes, even hugely successful L.A. artists like Ed Ruscha and Mark Grotjahn were known to collect their 5%, diligently.

Nate Freeman