Droit de Suite: Let’s talk about Artist’s Resale Royalty Rights

 June 10, 2020

Irina Tarsis
Irina Tarsis

Many have heard about resale royalty rights in many fields of profession, but hardly in the art world. Especially rare to talk or read about it when it comes to artists and their works. In the entertainment field, like the music and film industry it is a well-accepted working process, however in the visual arts it is not a concept that is widely known or used particularly in the US. But what is a resale royalty exactly? Irina Tarsis, Founder and Director of the Center for Art Law gives a detailed and very clear view around this hardly talked-about issue.

Artists enjoy certain economic interest in exploiting their works. These interests according to Tarsis, are protected by intellectual property law, and in some cases through specific moral rights that remain with artists for their entire life and for years after their death. Resale royalty is an opportunity for visual artists and their heirs to benefit from the economic success of their works on the art market. Known as droit de suite, resale royalty right intends to address the perceived injustice of artists not being able to reap benefits from the increase in the value of their artworks, that might have been sold for a lower price in the first sale of their works.

In some jurisdictions, namely the United States, Switzerland China and Canada, the financial windfall from the impressive art prices for works of living artists accrue entirely to the collectors, auction houses and galleries. In a notorious exchange - captured on tape - the famous American artist Robert Rauschenberg’s expressed his resentment, regarding the price generated from the sale of his work, auctioned by a collector, Robert Scully. Scully bought the painting from the artist for $900 and sold it for $85,000” describes Tarsis with an example.

When asked about how resale royalties are calculated, Tarsis says that the calculations differ from country to country. Where applicable, art market professionals who resell works of art have to look at the price realized, whether it exceeds the previous sale or not, and calculate the royalty based on the applicable percentage.

Works that sell below a minimal threshold are usually not subject to resale royalty assessment, and in many jurisdictions there is a sliding scale to calculate the royalty. In the UK, for example, the royalty can be as high as 4% and as low as 0.25%. Resale rights are managed by collecting societies, that are in charge of distributing royalties to the artists or their heirs” clears it further Tarsis.

The obvious question rises as to how widespread and actively used the tradition of resale royalty rights is. Over 70 countries worldwide have passed legislations concerning resale royalty rights. Going through what its development has been, Tarsis opens up a whole new picture to this grey area.

The tradition of collecting and paying re-sale royalty to artists originates in France in 1920, followed by Belgium, Czechoslovakia and Germany. Over the early 2000s, Mexico, UK and India codified resale rights. In the United States, however, the efforts to pass a federal law for resale royalty rights have remained unsuccessful.

In fact, Tarsis provides an in-depth description for this. Starting in the 1970s some states, including New York and Massachusetts demonstrated an interest in recognizing visual artists’ contributions to the success of the secondary art market; only California ultimately passed a law for its resident artists, requiring the seller of fine art to pay the artist a five percent royalty if “the seller resides in California or the sale takes place in California.” Cal. Civ.Code § 986(a).1

In 1992 the US Copyright Office held public hearings on the merits of passing such a law and determined that “based on ... analysis of the foreign and California experience with droit de suite, ... the Copyright Office is not persuaded that sufficient economic and copyright policy justification exists to establish droit de suite in the United States.... Should the European Community harmonize existing droit de suite laws, Congress may want to take another look at the resale royalty, particularly if the Community decides to extend the royalty to all its members.”2

Let’s jump forward to 2001, when the “EU Community,” the European Union (EU) standardized legislation for its member states and precipitated a two-step implementation of resale right scheme in the UK (first application went into force in 2006, affecting private galleries and in 2012 affecting public auctions).

In part, the new EU directive stated that “The resale right is intended to ensure that authors of graphic and plastic works of art share in the economic success of their original works of art. ... (and) ...The imposition of such a right in all Member States meets the need for providing creators with an adequate and standard level of protection...3

In 2012, the US Copyright Office undertook yet another round of hearings, welcoming contributions from members of auction houses, galleries, artists’ professional associations and members of the general public. The 2013 report of more than 100 pages included the following determination “the Office supports legislation as a possible means to address the disparity in its treatment of artists under the current legal system...” It also encouraged a non-legislative route - including voluntary initiatives and market best practices to allow artists benefit from the booming visual art market.

Together with her colleague Carol Steinberg, Tarsis submitted a letter to the Copyright Office in support of a resale royalty right in the United States, indicating the following:

‘Works of visual art’ are unlike any other type of property. Case law suggests that individual states in the United States may not acknowledge the everlasting connection between an artist and her oeuvre by instituting individual resale royalty legislation, which on a state level violates the Commerce Clause of the U.S. Constitution. Still, the Constitutes vests power to promote the arts in Congress and we urge this Congress to enact a resale royalty bill in the United States. Such legislation would promote the arts by taking into account the concept that art is not like other kinds of property and the intrinsic connection between the artist and her oeuvre.4

Unfortunately, up to now “all efforts to pass Equity for Visual Artists Act (introduced in 2011) and the American Royalties Too Act (A.R.T. Act introduced in 2014, in 2015 and again in 2018) have failed. Nevertheless, there seems to be some bi-partisan interest in amending the Copyright Law, and instituting a royalty scheme for visual artists” says Tarsis.

In its latest reiteration, the A.R.T. Act contemplated paying artists up to 5% from the sale price of the artwork, not to exceed $35,000. Works selling for less than $5,000 would be exempt to keep associated administrative costs down.

To put these numbers in perspective, under a proposed US resale royalty scheme, a work of art by a living artist Ed Ruscha, which sold in the fall of 2019 for $52,485,000 may only be subject to $35,000 resale royalty, 0.0667%, payable to the artist via a collecting agency, in this case the Artist Rights Society” explains further Tarsis.

Hearing these eye-opening information about resale royalty rights, one is motivated to ask the artists’ approach to it.

There is no consensus among the community of artists whether they wish to have resale royalty right in the US or not” says Tarsis. “Some artists have been clearly against the “sensibelizing” of the art world. Others, like Frank Stella, have been vocal advocates for the rights. He has been quoted as saying that ‘The adoption of the droit de suite in my country is long overdue... [and] the visual artists are the only members of the creative community in the United States who do not receive residual payments for their works.’

The arguments against instituting resale royalty rights vary from conceptual to financial reasons. Tarsis highlights that some argue that a very small percentage of artists - and most of them famous and successful already - would benefit from the royalty. Estates of deceased artists need not have this economic windfall either, given the efforts put into developing the art market for a particular artist by the dealers, fairs organizers and other players in the market.

Another argument against the right are the increased compliance and administrative costs associated with collecting the royalty, and distributing it to the right recipients. In the hearings against the US federal resale royalty scheme, the auction houses argued that not only does the right have no positive effect on simulation for creation of new works of art, but also the US Constitution precludes having state law governing resale or property.

Moving more towards Europe, and especially to Brexit, some market players and critics have indicated that the British art market was adversely affected by the introduction of the Artist’s Resale Right in 2006- 2012. In Tarsis’s opinion, the British auction houses have been able to maintain their dominance in the art world and have been able to integrate the requirement to collect and distribute royalties to the living artists and their estates.

According to DACS, the UK not-for-profit visual artists’ rights management organization “the Artist’s Resale Right will remain in place after Brexit and continue to allow you as an artist or an artist’s heir to earn a royalty on the secondary sales of art works.”5

When asked about what kind of private or voluntary initiatives exist to allow artists enjoy similar economic benefits in jurisdictions which do not have resale royalty rights, Tarsis explains that:

Artists and dealers may enter consignment agreements, which address future transfers of art and aim to inform artists of the secondary market activities (barter, sale, exchange, transfer etc.) for purposes of tracking their works, and reserving a percentage from the appreciation value to the artists. These are so-called ‘The Artist’s Reserved Rights Transfer and Sale Agreement’ or ‘Artist’s Contracts’.

There are very different approaches and also ways, in terms of whether it is the buyer or the seller who pays the resale royalty to the artists. Historically, resale royalty is calculated by the seller or seller’s agent and is remitted to the collecting society for distribution. Where there is a duty to pay the royalty, what is the expectation as to who bears the burden?

Tarsis sheds some light to this seemingly complex and unspecified issue.

In 2008, Christie’s auction house in France, while collecting the resale royalty, indicated that it would change its general condition of sales, and transfer the resale royalty obligations from the seller of an art work to the accepting buyer. Two French collecting societies, Comité Professionnel des Galeries d’Art (CPGA) and Syndicat National des Antiquaires (SNA) brought a complaint against the new clause, claiming among other things that: Christie’s was gaining a competitive advantage by seeking to charge buyers rather than sellers.

In 2015, the European Court of Justice ruled that the EU directive 2001/84/CE did not ‘preclude contractual agreements related to the resale royalty cost’.6

Following multiple appeals and reversals, the holding of the Cour de Cassation (Court of Cassation) found that even though the French Intellectual Property Code, indicated that the droit de suite should be paid by the vendor ‘without exception’, parties may contract around this language if a sale is done by an art market professional.

Needless to say both buyers and sellers at auction are expected to pay premiums and commissions, uncapped into the millions, concludes Tarsis.

The issue of law and visual arts remains quite complicated, but mostly for artists, who do not speak the legal language and often have no resources to go after and find out more on this issue. The Center of Art Law, a nonprofit in NY, is one of the organisations that offer insights and clarification, providing information to artists and also to art professionals, who are seeking advice and more clarity on law and the arts. One thing is indeed clear, knowing one’s rights on this issue is determinant for all players, and can bring about huge differences before entering specific contracts when buying or selling artwork.

1 California Resale Royalties Act, Cal. Civ.Code § 986 provided for a droit de suite, or resale royalty right, for fine artists. It was struck down as unconstitutional in 2012. Estate of Graham v. Sotheby’s Inc., 860 F. Supp. 2d 1117 (C.D. Cal. 2012), aff’ed Close v. SOTHEBY’S, INC., 909 F.3d 1204 (9th Cir. 2018).
2 Register of the Copyright Office, “Droit De Suite: The Artist’s Resale Royalty” (Dec. 1992) available at https:// www.copyright.gov/history/droit_de_suite.pdf.

3 “Directive 2001/84/EC of the European Parliament and of the Council of 27 September 2001 on the resale right for the benefit of the author of an original work of art,” Official Journal L 272 , 13/10/2001 P. 0032 - 0036 available here https://eur-lex.europa.eu/LexUriServ/LexUriServ.do? uri=CELEX:32001L0084:EN:HTML
4 Steinberg, Carol and Irina Tarsis “Comment in response to the Notice of Inquiry on Resale Royalty Right (Docket No. 2012-10) (Dec. 5, 2012).

5 DACS, “Copyright Uncovered, Brexit update: What will happen to copyright and Artist’s Resale Right?” (Dec. 12, 2018) available at https://www.dacs.org.uk/latest-news/brexit-update- copyright-and- arr?category=For+Artists&title=N
6 Christie’s France SNC v Syndicat national des antiquaires (Christie’s France, C-41/14) available here http://curia. europa.eu/juris/liste.jsf?language=en&td=ALL&num=C-41/14

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