Central District of California Holds That the California Resale Royalty Act Is Preempted by Federal Copyright Law

by BakerHostetler

As previously discussed on this blog, the validity of the California Resale Royalty Act (the “RRA,” Civil Code Section 986), a 1976 law that requires resellers of fine art to pay a royalty of 5 percent to the artists behind the works, was challenged in a dispute between a group of artists and Christie’s Inc., Sotheby’s Inc., and eBay Inc. The group of artists, which includes painter Chuck Close, brought three related proposed class actions in 2011 in the Central District of California, Estate of Robert Graham v. Sotheby’s Inc., 2:11-cv-08604; The Sam Francis Foundation v. Christie’s Inc., 2:11-cv-08605; and The Sam Francis Foundation v. eBay Inc., 2:11-cv-08622. The cases each involve allegations that the auction houses failed to honor their payment obligations under the RRA.

The auction house defendants recently filed a motion in the Central District of California arguing that the RRA is preempted by federal copyright law because it “runs headlong” into the first sale doctrine codified in the Copyright Act at 17 U.S.C. § 109(a). On April 11, 2016, Judge Michael Fitzgerald of the Central District agreed, and granted the motion to dismiss.

The court first explored the scope of the first sale doctrine, which historically has limited a copyright owner’s ability to control the distribution of his or her work once it has been sold and placed into the stream of commerce. Judge Fitzgerald then sought to determine whether the defendants’ preemption argument should be evaluated under principles of conflict preemption (where a state law frustrates the intention of or presents an obstacle to the full application of a federal law) or express preemption (where express language in a federal law serves to displace a challenged state law).

The court found conflict preemption should apply, holding that the RRA “stands as an obstacle” to the Copyright Act, and that because the RRA “disrupts Congress’s efforts to balance the interests of copyright holders and downstream consumers, it must be preempted.”  In doing so, the court distinguished contractual agreements not to resell copyrighted works from the restraints on resale imposed by the RRA, finding that “[n]o authority supports the proposition that states can eliminate the first sale doctrine and imbue copyright holders with unprecedented market power, simply because a reseller can enter into a distribution agreement with a copyright holder.”

Judge Fitzgerald acknowledged a 1980 decision where the Ninth Circuit rejected a conflict preemption argument for the RRA, Morseburg v. Balyon, 621 F.2d 972 (9th Cir. 1980), but also opined that recent Supreme Court and Ninth Circuit opinions have impacted its vitality.

Acknowledging that Morseburg might nonetheless preclude its finding of conflict preemption, the court also held that express preemption applied because the preemption provision of the Copyright Act, 17 U.S.C. 301(a), had a preemptive effect on the RRA. The decision, relying on legislative history, found that the RRA “creates garden-variety copyright claims based on a violation of artists’ rights from the distribution of their artwork” and that this led to the “inescapable conclusion” that the RRA was preempted.

While the court’s ruling disposed of all of the plaintiffs’ viable claims in the three related actions, the court noted that it anticipated the plaintiffs would appeal its decision to the Ninth Circuit. We will continue to monitor this dispute.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© BakerHostetler | Attorney Advertising

Written by:


BakerHostetler on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.