Ninth Circuit Strikes Down California Royalties Law

(CN) – The Ninth Circuit ruled Friday that a California state law that required artists be paid royalties from auction sales only applies to art that was sold before the establishment of the federal Copyright Act.

The decision comes from a seven-year-old class action lawsuit of artists who sued auction houses Sotheby’s and Christie’s, as well as auction website eBay. In April 2016, U.S. District Judge Michael Fitzgerald found that the Copyright Act preempted California’s law.

The California Resale Royalties Act, which went into effect Jan. 1, 1977, gives artists a right to 5 percent of the proceeds of the resale of their art if the transaction takes place in California or the seller is based in the state.

The appellate panel affirmed the district court, finding that the Copyright Act, which went into effect in 1978, preempted the Golden State’s law. Under the first-sale doctrine of the federal law, the owner of a copyrighted work is allowed to sell it without seeking permission of its creator.

In the panel’s decision, Circuit Judge Jay Bybee wrote that the state law is “designed precisely to alter the first sale doctrine” by giving artists an “unwaivable right” to a 5 percent royalty.

“In short, the [state law] does not merely grant an additional right beyond what federal copyright law already provides but fundamentally reshapes the contours of federal copyright law’s existing distribution right,” the ruling states.

The panel did find that relevant art sales between implementation of the state law and federal law, a period between Jan. 1, 1977 and Jan. 1, 1978, were subject to the state law.

This was the second time the case appeared before the Ninth Circuit. In 2015, the court found that a clause of the state law violated the Commerce Clause that grants the federal government power to regulate interstate commerce.

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