Ninth Circuit Draws Fine Line Around Fine Art Resale Royalties

by BakerHostetler
Contact

In a partial victory for artists such as Chuck Close and the Sam Francis Foundation—and for other visual artists who sold early works for rent money before establishing their name and value—the Ninth Circuit Court of Appeals last week resurrected part of a California law that enables fine artists to share in the profits from resale of their works. Whether the state law interferes with federal copyright laws remains to be seen.

The 1976 Resale Royalty Act required California art sellers or their agents to locate artists after selling their work and to pay them 5 percent of the purchase price. The well-intentioned law ran afoul of the so-called dormant Commerce Clause by purporting to regulate not only sales in California, but also all sales on behalf of California domiciles, even if the sale itself occurred wholly outside of California. The Commerce Clause, contained in Article I, Section 8, of the U.S. Constitution, permits Congress to regulate interstate commerce, and by implication the dormant Commerce Clause prohibits states from regulating commerce taking place outside of their own boundaries. See, e.g., Healy v. Beer Instit., 491 U.S. 324 (1989). The Resale Royalty Act was therefore struck down in its entirety by the Central District of California. On appeal, however, the Ninth Circuit severed the offending “California domicile” portion, leaving intact the remainder of the law regulating resale taking place in California.

The decision was handed down by a divided en banc court, and included concurring opinions that would have more finely limited the law’s application, essentially exempting out-of-state auction houses Christies, Sotheby’s, and eBay, which had successfully challenged the law’s constitutionality in the district court. The Ninth Circuit majority did not draw the line as fine as the concurrences, but also did not paint with as broad a brush as the district court. It agreed that, by attempting to regulate sales by California domiciles wherever they may occur, the legislature violated the Commerce Clause. Where the district court struck down the entire Act, however, the Ninth Circuit found it permissible and appropriate merely to sever the portion applying to California domiciles.

This effectively lets the auction houses off the hook for non-California sales. The interesting question remains: does the Resale Royalty Act impermissibly interfere with the Copyright Act, which preempts any state incursion into copyright laws? California auction houses still affected by the law can argue that the law encroaches upon the first-sale doctrine, which generally permits the rightful owner of a copyrighted work to resell the original freely. The defendants in the current case made a copyright preemption argument in the district court, but it has not yet been considered. If any portion of the case survives, this key question may be considered on remand.

The Ninth Circuit’s editing of California’s statute, together with the copyright preemption issue, begs the question of whether Congress should act. As U.S. Register of Copyrights Maria A. Pallante recently opined to Congress, visual artists do not benefit from late-career fame the way, say, film or music artists might, as fine art is valued more for its scarcity than for its reproducibility. See The Register’s Perspective on Copyright Review Before the H. Comm. on the Judiciary, 114th Cong. 18-19 (2015). Therefore, the Copyright Act does not protect visual artists, who spend enormous effort to produce singular works, in the same way that it protects authors and musicians. A limited federal resale royalties law could correct this disparity. One reason Congress has not acted is the complexity of administrative and enforcement costs. If California’s experiment is instructive, such complexities have indeed presented barriers to effective enforcement. But unlike the California law, a federal law could put the onus on the big auction houses and avoid the biggest enforcement problems, which, coupled with modern information technology, could make national resale royalties a reality for those once-starving artists.

The case is Sam Francis Foundation et al. v. Christies, Inc., et al. (9th Cir. May 5, 2015).

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
Contact
more
less

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):
hide

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.

Security

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.