Close v. Sotheby’s Inc.: A Major Change in Artists’ Royalty Rights in California
In the 2018 case Close v. Sotheby’s Inc., 894F.3d1061 (9th Cir.2018), the United States Court of Appeals, Ninth Circuit held that the California Resale Royalties Act (“CRRA”), first made effective January 1st, 1977, is preempted by the 1976 Federal Copyright Act.
California’s adoption of the The California Resale Royalties Act granted California artists an unwaivable right to 5% of the proceeds on any resale of their artwork under specified circumstances. It required the seller or seller’s agent of an artwork to withhold 5% of the resale price, which was to be paid to the artist, or if the artist is unlocatable, to be paid to the California Arts Council. Failure to pay this 5% resale royalty allows the artist to bring an action for damages. The CRRA applies only to “fine art,” defined as any painting, sculpture, drawing, or original work in glass.
The CRRA reflects the concept of droit de suite, a French term literally translating to: “the right of following on.” Droit de suite was first recognized in France in 1920 and detailed that artists must receive a royalty whenever their original work is resold. It distinctly protects only the works of visual artists, for while literary and recording artists profit from efforts of controlling the reproduction of their works, visual artists profit only from the sale of their original work. This renders them particularly vulnerable to the capitalization of their work by others.
While droit de suite appears in international copyright law due to the 1948 Berne Convention, signatories are not obligated to adopt droit de suite. Instead, it is recognized as an option, and the countries who choose to adopt it are rewarded through reciprocity. In 1989, the United States became a signatory to the Berne Convention, and although having recommended for approval by the Copyright Office through the 2013 Copyright Report, has yet to adopt the droit de suit. The Copyright Office, however, was clear in stating in their 1992 Copyright Report, that “[g]iven potential problems of preemption, enforcement, and multiple application, any droit de suite that is enacted in the United States should be at the federal level.”
The Ninth Circuit determined that while the CRRA’s resale royalty right and the 1976 Copyright Act are not coextensive, they are, in fact, equivalent. Both acts are at heart concerned with the distribution of artists’ original works and their right (or lack thereof) to payments on downstream sales of these works. However, the Ninth Circuit concluded that the CRRA is ultimately unconstitutional as it encroaches upon federal law by both expanding and restricting the federal distribution rights detailed in the 1976 Copyright Act. The CRRA grants artists an unwaivable right to a 5% payment on all sales of their artworks, whereas the 1976 Copyright Act only grants artists the right to receive full payment of the first sale of their artworks. Furthermore, the CRRA also creates an inalienable restraint on alienation, as it prevents artists from every fully alienating from their works. In essence, the CRRA not only overstepped the boundaries of state law by not only expanding federal law, but also reshape current federal copyright law’s existing distribution rights.
In conclusion, the CRRA was rendered preempted by the adoption of the 1976 Copyright Act. It had only a short effective existence of one year, before the 1909 Copyright Act was replaced by the 1976 Copyright Act on its effective date of January 1st, 1978.