Another View on the Proposed Auction House Royalties Bill
Once again, Congress is considering strengthening copyright laws. More specifically, a bill has been introduced to require large auction houses to pay a royalty to artists who own the copyright in a work sold at auction. A similar law already exists in California, but it is difficult to enforce, and its Constitutionality is questionable. The proposed bill would presumably preempt California’s law and find its constitutional justification in the progress clause. The bill’s intentions are good in theory, but as with most attempts to increase the rights of a copyright owner, several problems could potentially arise.
The bill known as the Equity for Visual Artists Act of 2011 would require auction houses that make over $25 million in annual sales to pay a 7% royalty on sales of artwork costing over $10,000. The royalty would be split between the copyright owner and a federal fund that would be established to help museums buy artwork from American artists.
This all sounds wonderful. Artists, who often make only a small profit on the original sale of their work, would now be able to realize the increased value of their work that only occurs long after the first sale has been made. The bill’s sponsors say this will put them on a level playing field with authors and musicians, who can potentially be paid continually as the popularity of their work grows. But will it?
This blogger suspects that a great portion of art sales occur as a form of investment, and if the artist gets a 7% cut of future profits, an investment in art suddenly seems less profitable. So the art collector may be more cautious about his purchases, buying only artwork that is sure to gain significantly in value. This hurts the lesser-known artists. Furthermore, the lesser-known artist is less likely to have work sold at Sotheby’s or Phillips de Pury, so he probably won’t ever see that 7% royalty, but he will see the drop in first sales. So the true beneficiaries of this law are those artists who already make enough money from their gallery sales. Maybe the fund to help museums purchase American art will make up for the lost sales, but there are other flaws. For example, this law does not apply to private dealers or online auctioneers.
An art object is not intellectual property, it is real property. Applying increased copyright protections to tangible objects seems a bit like a limit on alienability—which has always been strongly disfavored in this country. This could be quite a game-changer for the art world. As an opponent of increased intellectual property rights, this blogger (who happens to have a background in the visual arts prior to his legal education) is not enthused by the Equity for Visual Artists Act. I would be surprised to see this bill make it through Congress, and I don’t suspect that it would be beneficial for the art world. I could be wrong though—apparently a similar royalty system has been successful in Europe.