Court Says Artists Cannot Get Royalties on Resales

A federal appeals court in San Francisco has ruled that visual artists may not collect royalties when their works are resold.

The case arose under the 1977 California Resale Royalties Act — the only law of its kind in the US. Other states have attempted to introduce similar laws, but they haven’t been enacted.

Under the Act, California residents who sold their art either in or outside of California were entitled to earn 5% of the price when any of their artwork was resold for more than $1000.

When the artists were deceased, this royalty went to the artists’ estates or heirs.

Groups of California artists filed three class-action lawsuits against eBay and against the auction houses of Sotheby’s and Christie’s for failing to pay resale royalties.

First Sale Doctrine

The court decided that the California law conflicted with federal copyright law’s “first sale doctrine.”

Under the first sale doctrine, once a copyright owner sells a physical work (such as a book or painting) for the first time, the copyright owner loses all control over any future sales of that object.

The first sale doctrine applies only to physical objects, and not to the “work of authorship” contained in them.

For example, once the author of a novel has sold a copy of the novel (most likely indirectly, via a publisher) the author can’t control how or to whom that copy is resold, or for how much.

However, the author retains the exclusive right to make copies and derivative works of that novel. Thus, for example, selling an unauthorized online copy of the book, or producing an unauthorized movie based on the book, would still violate the author’s copyright.

The Ninth Circuit ruled that the California resale law applied only to resales in 1977, because the federal copyright law that pre-empted the Act went into effect in 1978.

Moral Rights

As the New York Times reported,

The state law stemmed from droit de suite, the French concept of offering artists compensation for future sales. Variations of resale royalty laws for artists have been implemented worldwide, in dozens of countries including Australia, and most of the countries in the European Union, but all attempts at creation of a United States law have failed.

The right to receive royalties upon resale is considered an artist’s moral right or “droit moral.”

In the US, the Visual Artists Rights Act of 1990 (VARA) was the first federal copyright law to deal with moral rights.

Under VARA, an artist has the right to:

• claim authorship of a work
• prevent the use of the artist’s name on work the artist didn’t create
• prevent the use of the artist’s name on work that’s been modified, distorted, or mutilated in a way that would damage the artist’s honor or reputation
• prevent the modification, distortion, or mutilation of a work in a way that would damage the artist’s honor or reputation

For example, I wrote about the application of VARA in this post about graffiti artists suing when their work was painted over by a building owner.