Art Law

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Art Law


By Robert A. Baines. He is a retired Santa Clara Superior Court judge living in San Jose, and is a full-time arbitrator and mediator with JAMS.

A little-known and much-misunderstood statute, the California Resale Royalty Act (Cal. Civil Code § 986) requires that an artist be sent a royalty payment when his or her work is resold. The law has been on the books for 30 years, yet it is frequently honored in the breach.

The legal requirements are relatively straightforward: If you sell an artist’s work and certain conditions are met, you must send the artist 5 percent of the sale price. If your sale is made through an auction house, gallery, dealer, broker, or similar agent, that agent must withhold and forward the 5 percent to the artist for you. If you can’t find the artist within 90 days of the sale, you are required to send the 5 percent to the California Arts Council. The council will attempt to find the artist and, if unsuccessful after seven years, will deposit the money in California’s Art in Public Buildings fund.

There are four requirements for a royalty to be due:
The piece must be “fine art”-defined as “an original painting, sculpture, or drawing, or an original work of art in glass.” Although no case has addressed whether this term includes photographs or limited-edition fine art prints such as etchings, engravings, lithographs, and woodblock prints, such works appear to be outside the statute’s ambit.
The seller must live in California, or the sale must take place in California.
The sales price, or the value received in trade, must be at least $1,000-and the amount must be greater than what the seller originally paid for the piece.
The artist, at the time of resale, must either be a U.S. citizen, or have been a resident of California for at least two years.

Under the act, if the artist has died, the royalty must be paid to his or her heirs, legatees, or personal representative-unless the sale is made more than 20 years after the artist’s death. In the case of a resale of a deceased artist’s work, the requirement that the artist be a U.S. citizen or a two-year California resident at the time of the sale would likely be interpreted to mean at the time of the artist’s death.

If you realize that you owe royalties from some of your previous sales, simply send the royalty to the artist, along with a thank-you note for having created a wonderful work that graced your home or office, and which incidentally made you a tidy sum upon resale.
Starving artists like to hear these things. And, apparently, even the well-fed ones get sensitive over the idea of collectors making money off their work and not sharing a portion of that bounty. As Robert Rauschenberg once told a collector who had purchased one of his paintings for $900 and later resold it for $85,000: “I’ve been working my ass off just for you to make that profit!” (Sale of Fine Art: Artist’s Right to a Royalty, Hearing on SB 313, 199596 Sess. (statement of Professor John Merryman).)

Subsection (a)(3) of the act includes a somewhat open-ended “discovery of sale” provision that states: “an artist may bring an action for damages within three years after the date of sale or one year after the discovery of the sale, whichever is longer.” The prevailing party is entitled to attorneys fees.
If capital gains taxes are due on the resale, the legally mandated 5 percent artist’s royalty should be deductible from the sale price, as it is a cost of selling the asset-much as are the fees or commissions paid to a dealer or auction house as part of a sale.

For California Attorneys: Art Law Study

( September 2000 ) The art market has come under increasing regulation in recent years. Not everyone agrees that the changes are for the better. Some of the regulation provides needed consumer protection, such as a California law that requires dealers in multiple copies of fine art to make straightforward disclosures to purchasers relating to the scarcity and authenticity of the work being sold. But much of the new regulation is designed primarily to promote the arts, and some people have criticized that trend because in the process the private property and free speech rights of individuals tend to disappear from view. For example, under a federal “artists' moral rights” statute, art collectors have become not so much owners as custodians of the works for which they have paid good money. And under a unique California law, artists have the right, for life, to share in the profits when their works are resold within the state.

The Visual Artists Rights Act

A federal law enacted in 1990 prohibits tampering with certain works of visual art. The law, known as the Visual Artists Rights Act of 1990 (VARA, 17 USC §106A) protects an artist's right to be known as the author of his or her work and to prevent others from modifying or destroying it, even after the work is sold or licensed.

Such rights, known as droit moral, or a moral right, have long been recognized by France and other nations but are a relatively new concept in U.S. law. They are controversial because they conflict with the private property and free speech rights of art owners.

VARA was enacted to help preserve the nation's culture and to protect the honor and reputation of visual artists. Under its provisions, the author of a “work of visual art” has the right: (1) to claim authorship of that work; (2) to prevent any intentional distortion, mutilation, or other modification of that work if it would be prejudicial to his or her honor or reputation; (3) to prevent any intentional or grossly negligent destruction of that work if the work is of “recognized stature”; (4) to prevent the use of his or her name if the artist is not the creator of the work; and (5) to disavow authorship of a work in the event of a distortion, mutilation, or other modification of the work that would be prejudicial to his or her honor or reputation.

What does this mean? Suppose you purchase a work of visual art that is of recognized stature, such as a painting. If you later grow tired of the work, or decide you do not like it or the artist, you cannot paint over it, touch it up, toss it in the dumpster, shred it in protest, or scratch out the artist's name. If you do, the artist can sue you for monetary damages for the harm done to his or her reputation, plus costs and attorneys fees.

To be protected under VARA as a work of visual art, a work must be a painting, drawing, print, or sculpture, existing in a single copy or in a limited edition of 200 copies or fewer. No minimum dollar value is required. Reproductions, audiovisual works, motion pictures, books, works made for hire, and certain other works are excluded. 17 USC §§101, 106A(c)(3).

VARA prohibits the destruction of a “work of recognized stature” but does not define that term. According to at least one court, the artwork need not be a Picasso or a Chagall, or even aesthetically pleasing, but it must be more important than a five-year-old's finger painting. It must be viewed as meritorious by art experts, members of the artistic community, or some cross section of society. Carter v Helmsley-Spear, Inc. (SDNY 1994) 861 F Supp 303, 324, rev'd on other grounds 71 F3d 77.

How long do the artist's rights endure? With respect to works of visual art created on or after December 1, 1990, the rights endure for the life of the artist. With respect to works created before then but to which title has not been transferred from the artist as of that date, the rights are coextensive with the duration of copyright (generally the life of the artist plus 70 years). 17 USC §§106A(d), 302(a).

The rights conferred by VARA may not be transferred. They may be waived if the artist agrees in writing. A single artist may waive the rights for all artists of a joint work. 17 USC §106A(e).

Conservators, art galleries, and museums may be at risk under the statute. For example, physical modification (such as fading or deterioration) of a work of visual art that is the result of either a failed conservation attempt or the public presentation of the work, including lighting and placement, is a violation of VARA if caused by gross negligence. On the other hand, there is no special liability if a work of art changes from the passage of time, from the inherent nature of the materials, or in the absence of gross negligence. 17 USC §106A(c).

Murals, sculptures, and other works of visual art installed or incorporated in buildings are protected from mutilation or destruction under certain circumstances. The rules are complex and depend on such factors as whether the artwork is capable of being removed without being damaged, whether the artist has consented to the installation, and whether the building owners have properly notified the artist of their intention to remove the artwork. 17 USC §113(d). Building owners who do not carefully comply with the statute may find themselves stuck, for the lifetime of the artist or longer, with artwork they do not want.

The artist whose rights under VARA are infringed is entitled to bring a lawsuit against the offending party. If successful, the artist can be awarded monetary damages for lost profits and injury to reputation, or alternatively statutory damages, temporary and permanent injunctions, seizure of the artwork, and costs and reasonable attorneys fees. 17 USC §§502 et seq.

California has a statute similar to VARA. In fact, the California Art Preservation Act (CAPA, CC §987), enacted in 1979, was the nation's first moral rights legislation and served as a model for similar laws in other states as well as for the federal statute. It appears that state statutes, like California's, have been preempted by VARA to a large extent. But VARA would not preempt, for example, state causes of action relating to works that are not covered by the federal law, such as audiovisual works. However, the California law arguably excludes audiovisual works, since it defines “fine art” as an original painting, sculpture, drawing, or work of art in glass (CC §987(b)(2)) and excludes works prepared under contract for commercial use in print and electronic media (CC §987(b)(7)).

More about Art Law for Lawyers

The California Resale Royalties Act

A controversial California law gives artists the right to share in the profits when their works are resold, but thousands of dollars have gone uncollected because many artists have never heard of the law or are afraid to assert their rights. The California Resale Royalties Act (CRRA, CC §986), enacted in 1976, is the only statute of its kind in the United States. It is based on French legislation known as droit de suite, first enacted in 1920. The idea was to give starving artists the benefit of sometimes skyrocketing values. But the California law has been difficult to enforce, mainly because it requires the often uncooperative seller to withhold the royalty, locate the artist, and pay him or her the money.

CRRA's provisions are readily summarized. Whenever a work of “fine art” is sold and the seller resides in California or the sale takes place in California, the seller or the seller's agent is required to pay the artist 5 percent of the sales price. CC §986(a).

When a work is sold at an auction or by a gallery, dealer, museum, or other person acting as the seller's agent, the agent is required to withhold 5 percent of the amount of the sale and locate and pay the artist. CC §986(a)(1).

If the seller or agent is unable to locate the artist within 90 days, an amount equal to 5 percent of the sales price must be transferred to the California Arts Council, 1300 I St., Suite 930, Sacramento CA 95814. If the council is unable to locate the artist, and the artist does not file a claim within seven years, the money reverts to the council for use in its public arts programs. CC §986(a)(2)&(5).

CRRA, like CAPA, also defines “fine art” as an original painting, sculpture, or drawing, or an original work of art in glass. CC §986(c)(2). This definition includes works created both before and after its passage. CC §986(d). “Artist” means the person who creates the work and who, at the time of resale, is a U.S. citizen or has been a resident of California for at least two years. CC §986(c)(1).

CRRA does not apply to the resale of a work of fine art for a gross sales price of less than $1,000. CC §986(b)(2). Nor does it apply to the resale for a gross sales price less than the purchase price paid by the seller. CC §986(b)(4).

CRRA's constitutionality has been upheld, despite vigorous protests that it deprives collectors, galleries, and other art owners of their property rights without due process and constitutes unnecessary governmental meddling. Morseburg v Balyon (9th Cir 1980) 621 F2d 972.

Art dealers generally fall under the umbrella of CRRA, but there is a limited exception. CRRA does not apply to a resale by an art dealer to a purchaser within ten years of the initial sale of the work by the artist to an art dealer, provided that all intervening resales are between art dealers. §986(b)(6). “Art dealer” means a person who is actively and principally engaged in the business of selling works of fine art and who validly holds a sales tax permit. CC §986(c)(3).

On the death of an artist, the rights and duties created by CRRA inure to his or her heirs for a period of 20 years. CC §986(b)(6).

How is CRRA enforced? Unlike France and some other countries, which have official registries of all works of art and a central organization for collecting royalties, California has no governmental agency to administer this law. It is the responsibility of individual auctioneers, art dealers, and collectors to comply with the statute on their own.

If the seller or the seller's agent fails to pay the required royalty, the artist may bring a lawsuit for damages within three years after the date of sale or one year after the discovery of the sale, whichever is longer. To help make such lawsuits economically feasible, CRRA provides that the prevailing party shall recover reasonable attorneys fees in addition to damages. CC §986(a)(3). Attorneys fees can often far exceed the amount of the 5 percent royalty.

What this means is that the artist must look after his or her own rights. Many sellers refuse to comply voluntarily with the royalty requirements. It is therefore up to the artist to keep track of the location of his or her works, determine when they change hands, and demand payment if the value has increased. Some artists have collected significant payments over the years as a result of their diligence. For example, when Ghirardelli Square in San Francisco changed hands, artist Ruth Asawa was paid $5,000 in resale royalties for a fountain she designed.

Most contemporary artwork depreciates in value. Fairness would suggest that if the artwork loses its value, the artist should pay the collector a royalty. However, that's not the law. CRRA is a one-way street.

Development of Art Law for Attorneys

The Farr Act

The California Sale of Fine Prints Act, also known as the Farr Act, was passed three decades ago but still mystifies many art dealers. Indeed, some dealers are unaware of its existence. Yet the act's provisions are mandatory, and their violation can lead to significant financial liability and civil penalties.

The Farr Act is a state law (CC §§1740 et seq.) that requires art dealers to disclose to prospective purchasers of “fine art multiples” certain details relevant to scarcity and authenticity. The purpose is to enable purchasers to make informed decisions regarding the value of the artwork. The law requires disclosure of such matters as the identity of the artist, the artist's signature, the medium, whether the multiple is a reproduction, and the number of multiples in a “limited edition,” among other things. CC §1744.

A “fine art multiple” is any fine print, engraving, etching, lithograph, serigraph, photographic print or negative, sculpture cast, collage, or similar art object produced in more than one copy. It also includes pages or sheets taken from books and magazines and offered for sale as art objects. CC §1740(a). The Farr Act applies to any multiple offered for sale at wholesale or retail for $100 or more, exclusive of any frame. CC §1741.

An “art dealer” is defined according to the Farr Act as anyone who is in the business of dealing in fine art multiples or anyone who by occupation presents himself or herself as having knowledge or skill peculiar to these works. The term also includes an auctioneer who sells these works at public auction. A dealer must comply with the Farr Act even if multiples are only a part of his or her business. CC §1740(g).

Generally speaking, the Farr Act requires a dealer to furnish to the purchaser or consignee a written certificate of authenticity setting forth certain information before sale or consignment of a fine art multiple. CC §1742(a). With certain exceptions, the dealer must include the same information in any catalog, prospectus, flyer, or other written advertisement that solicits a direct sale of a specific multiple. CC §1742(b). The dealer must post a sign in his or her place of business that informs buyers of their right to receive the information. CC §1742(c). A certificate of authenticity must be furnished to the purchaser even if he or she is another art dealer. CC §1742(a).

The disclosure requirements also apply to artists. Whenever an artist sells or consigns a multiple of his or her own creation or conception, the artist must disclose the same information. CC §1742(e).

If the art dealer does not know some of the information, he or she may disclaim knowledge as to an item, but the disclaimer must be clearly, specifically, and categorically stated and contained in the physical context of the other disclosures. CC §1744.7.

If the art dealer fails to comply with the Farr Act, the dealer is liable to the purchaser for the purchase price plus interest, in exchange for the return of the multiple in its original condition. CC §1745(a); Grogan-Beall v Ferdinand Roten Galleries, Inc. (1982) 133 CA3d 969. If the violation is willful, the art dealer is liable for triple the amount. CC §1745(b). In addition, the court may require the dealer to pay the purchaser's costs, attorneys fees, and expert witness fees (CC §1745(d)), which, in this day and age, can be considerable.

Though any person can sue for an injunction under the Farr Act (CC §1745.5(b)), it also empowers the attorney general or any district attorney to sue for civil penalties of up to $1,000 for each violation (CC §1745.5(c)). The dealer may also be liable for a penalty surcharge of up to $1,000 per violation. CC §1745.5(d).

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