Resale rights revisited: why all the controversy?

The artist's resale "royalty" right or droit de suite refers to an artist's right to a share of the proceeds realized from the resale of such artist's work. As the Lerner and Bresler treatise on art law astutely points out, the "prerogative is an attempt to equalize the copyright status of visual artists with that of other authors" because, unlike those creative authors who make substantial economic gains from the reproduction and/or distribution of their works, "a visual artist's primary source of income derives from the sale of the original work in which the image is embodied." In other words, copyright law alone is inadequate in the case of visual artists who warrant the protection of additional rights aimed at addressing this disparity in sources of income among artists. It is these additional rights "at the juncture of copyright, contract and property law" that are known as resale rights.

While resale rights legislation has been enacted in over 30 countries, including the EU, Brazil and Australia, attempts to federalize the right -- the most notable being those by Senator Jacob K. Javits of New York and subsequently Senator Edward N. Kennedy of Massachusetts -- have thus far failed and at the state level, only California has introduced droit de suite (see the California Resale Royalties Act). The question of whether artists should be entitled to resale rights has proven hugely controversial in the United States as illustrated by the removal of resale-royalty provisions from the original draft of the Visual Artists Rights Act of 1987 to ensure the revised bill's passage into law in 1990. The debate centers not only over entitlement itself but also over what the scope of any enacted rights should be and how resale rights would be enforced in practice (surveys of droit de suite legislation abroad have invariably indicated that these statutes are notoriously difficult to enforce and  generally ignored by market participants). The United Kingdom too has played host to a similar debate and it was not until the EU adopted Directive 2001/84/EC that The Artist's Resale Right Regulations 2006 were (somewhat reluctantly) introduced. The opposition to resale rights in the UK undoubtedly stemmed from London's preeminence within the global art market and the fear of losing out to other markets not burdened with the transaction costs associated with the royalty but interestingly, Lerner and Bresler point to yet another reason: the UK, like the US, is a common not a civil law jurisdiction and "the droit de suite impinges on two basic precepts of common law: the freedom to contract and the inalienability of property" (see Morseburg v. Balyon for an unsuccessful constitutional challenge to the California regime).

The Art Newspaper reports that resale rights are once again back in the spotlight as the Artists' Rights Society ("ARS") continues to lobby Congress for federal legislation that would make droit de suite apply to auction sales whilst exempting private sales. Unsurprisingly, the Art Dealers Association of America opposes the proposed legislation on the basis that the administration costs far outweigh the benefits and the reality that such costs would be borne by collectors -- the bread and butter of artists in the US -- and the majority of artists themselves, with only a handful of already successful artists actually reaping any economic gains. The one obstacle the proposal appears to have side-stepped by limiting rights to public sales is the insurmountable challenge of requiring private art transactions to be disclosed (privacy being one of the most deeply ingrained conventions of the art market). However, despite auction sales taking place in the public sphere, there is still considerable secrecy involved and many collectors will resist having to disclose their identity for the sake of paying a resale royalty. It's unclear if any rights introduced would be payable as a percentage of the total resale price, regardless of whether the resale was at a profit or a loss (as per the EU harmonization directive and the Australian model) or as a percentage of the difference between the purchase price and the resale price such that the royalty is only payable when a work is resold at a gain (as per the original Italian model and the California statute). Clearly, from a business perspective the latter is preferable but to be fair, the former is more consistent with the theory underlying the very nature of resale rights (as stated above, droit de suite is embedded in the act of reselling an original work, just like copyright hinges on the reproduction/redistribution of original works, in both cases the dollar amounts being irrelevant).

Nevertheless, no matter what the scope of a federal resale right is (another key question being the term of the right), the costs imposed on the market and the potential loss of New York's competitive advantage over those countries with such legislation are disproportionate to the limited gains to be made by the minority of visual artists whose work even has a secondary market. Having said that, data has failed to confirm that the introduction of resale rights in the UK has driven business away from London to New York, Geneva, Tokyo or Hong Kong. Which leads me to one final remark -- to date, there is still insufficient data to argue convincingly for or against resale royalty rights.