Resale Royalty

Why Resale Royalties?
The California Resale Royalties Act took effect on January 1, 1977 and gives visual artists the right to participate in any profit derived from their works of fine art. It is the first piece of legislation of its kind in the USA and places California at the forefront of a growing international movement to improve the legal position of artists.

In other creative fields artists are able to benefit from continuing commercial use of their work e.g. the sale of published sheet music, public performance (live and broadcast) of their music, and sale of sound recordings which incorporate their music. Readers will also be familiar with the attempts being made to introduce a public lending right to benefit authors. Visual artists, by contrast, are rewarded for only one kind of commercial use: sale of reproductions of their work (in magazines, posters, cards, and so on). They have no right to receive a royalty when their work is commercially used by resale.

‘The legislative intent of the California Resale Royalties Act is to fill this gap in the federal copyright laws by giving visual artists the right to receive a royalty whenever their work is resold at a profit. The Act thus expresses a principle of parity between the visual artist and other creators, and it gives recognition – in the visual arts – to the underlying policy of the Constitution that all creators should have the right to participate in the commercial use of their work.’

The Act
The Act is designed to implement this policy and its major provisions are as follows:

  1. The seller or the seller’s agent shall pay the artist 5% of the gross sale price whenever a work of fine art is resold within the State of California or by a California resident.
  2. The artist’s right to receive this royalty may not be transferred and it can only be waved by a written agreement, which gives the artist a royalty in excess of 5%.
  3. The Act applies to private sale between collectors, to auction sales, and to sales by a gallery, dealer, broker, museum or other agent.
  4. The Act applies to works of fine art, ‘an original painting, sculpture or drawing’, created before or after 1st January 1977.

If the artist cannot be found, provision is made for the royalty to be paid to the California Arts Council, which has a duty to find the artist within seven years.

The Act does not, obviously, apply to the first sale and does not apply to resales for less than $1000, nor to works which are resold for less than their original purchase price. It does not apply to resales after the artist’s death.

The right to receive a resale royalty may be enforced only in a civil suit by the artist against the seller or the seller’s agent within three years of the date of resale, or one year after the discovery of the resale, whichever is the longer.

The California Arts Council has a key role to play in the enforcement of the Act. At this stage it is not likely that many sellers will be able to locate the entitled artist, and the royalties will be transferred to the Council. To meet its statutory responsibility to locate the artist, the Council is creating a computerised artists’ registry. It has developed a questionnaire and has invited artists to register; without registration, it is clear that no artist can expect to receive any resale royalties.

The California legislature has taken the first step towards protecting the artist in this way, and the Act described in this article will serve as a model for any subsequent legislation. The Act recognises that the art market is international and it extends its provisions to resales by a Californian resident, which may in fact take place in San Francisco, New York or London.

The next step is national legislation in the USA and, hopefully, in Britain, followed by international co-operation and enforcement.

Although this legislation is American and as such must be viewed in the light of American laws and art markets, it does raise the issue of resale royalties in Britain – a country which, as a signatory to the Berne Copyright Convention (discussed in this column last month), has already undertaken to enact a resale royalties law but has not yet done so. The advantages are clear: artists would share the commercial profit gained from the use of their art; the knowledge of this potential share would encourage many to sell their works at a lower price and at an earlier stage in their careers; any increased sales would help many to shed the potential burdens of capital transfer tax, particularly onerous when many valuable works are left unsold at death; increased sales would also make more art publicly available, and, perhaps, at prices more people could afford; artists would be encouraged to keep track of their work – particularly important also for accounting, cataloguing, copyright, restoration and exhibition purposes; and the establishment of artists, indexes would be stimulated, in a response, perhaps, to a potential disadvantage of such a law: enforcement of it.

The complete answer to enforcement is of course, for every nation to enact an internationally reciprocal resale royalty law: France, Germany and Italy have; now California has.

© Henry Lydiate

[Henry Lydiate gratefully acknowledges the kind assistance of Hamish Sandison, Executive Director of Bay Area Lawyers for the Arts San Francisco, in the preparation of this article].

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This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.