A Blow to Artists for California Resales

     LOS ANGELES (CN) — A federal judge derailed painters’ and sculptors’ long-running crusade to collect royalties from auction houses that resell their works, ruling that copyright law trumps a unique California statute.
     The California Royalty Resale Act requires resellers of fine art to pay a 5 percent royalty to the creator.
     But U.S. District Judge Michael W. Fitzgerald found that the 1976 state law “frustrates the purpose … and disrupts the equilibrium of the [federal] Copyright Act.” The artists’ attorney said he would appeal to the Ninth Circuit.
     California law is preempted by the “first sale doctrine,” which allows someone who owns a copyrighted work, such as a painting or a copy of a book, to sell it without the permission of the copyright owner.
     Purchasers can dispose of copyrighted works as they wish, Fitzgerald wrote in his Monday ruling, “for whatever price the buyer deems appropriate, without regard to the wishes of the copyright holder.”
     California enacted its royalty act to encourage creativity by allowing artists to receive some benefit when the value of their paintings, drawing and sculptures rise, sometimes dramatically. It was prompted in part by the 1973 sale of a work by Robert Rauschenberg for $85,000 that the artist had sold for just $900, according to an amicus brief from California Lawyers for the Arts.
     The brief notes that authors, musicians and playwrights generally receive royalties whenever their works are published or performed. But visual artists who make one-of-a-kind works, such as painters and sculptors, do not.
     Throughout the rest of the world, some 30 countries require resale royalties under a principle called droit de suite, or right to follow.
     “But Congress never adopted droit de suite,” Fitzgerald wrote in his 36-page ruling. “In fact, just the opposite: by enacting [the first sale doctrine], Congress intended to keep downstream sales of copyrighted works … free from restrictions imposed by copyright holders.”
     The litigation began in 2011 as a trio of class actions targeting Christie’s, Sotheby’s, and eBay. The named plaintiffs are heirs of prominent California sculptor Robert Graham, painter and photographer Chuck Close, artist Laddie John Dill and the foundation established by painter and printmaker Sam Francis.
     They initially sought royalties on their works resold anywhere in the United States. But a federal judge found the California law violated the Constitution’s Commerce Clause and struck it down. The Ninth Circuit partially reversed on appeal, holding that the statute could be applied to sales within California.
     Neither the first judge nor the appellate court considered whether the Copyright Act preempts the California Royalty Resale Act.
     Fitzgerald held that it does for two reasons. First, the California statute conflicts with the federal copyright law. By granting artists some say in later sales of their works, the CRRA “disrupts Congress’s efforts to balance the interests of copyright holders and downstream consumers [and] it must be preempted,” Fitzgerald ruled.
     The law also runs afoul of an express preemption clause in the Copyright Act.
     Rejecting an argument by the plaintiffs, Fitzgerald held that a Ninth Circuit ruling in 1980 that upheld the California law had been “eroded” by later decisions from the circuit and the U.S. Supreme Court.
     He dismissed eBay from the litigation, calling it an online marketplace, not a seller: “It is virtually common knowledge that defendant eBay is not a seller of goods.”
     Neither the artists’ attorney Michael Bowse with Browne George Ross, nor Christie’s attorney Jason Russell of with Skadden Arps Slate Meagher & Flom responded Thursday to requests for comment.
     Bowse said, however, in a statement, that the artists will appeal.
     “We have always anticipated that this important artists’ rights matter would need to be resolved by the Ninth Circuit,” Bowse said in the statement.

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