Nationwide royalty on artwork sales introduced in Congress

A bill introduced Thursday in both houses of Congress would force large art auction houses to pay a 7% royalty on sales of artworks costing more than $10,000. It would apply only to works by living artists, and dead ones whose works haven’t yet entered the public domain, which occurs 70 years after the creator’s death.

Artists and their heirs wouldn’t be the only ones getting paid. The bill, which amends existing copyright law to provide for America’s first nationwide royalty on sales of visual art, calls for funneling half the proceeds to a new federally supervised fund that would help nonprofit museums buy artworks by living, U.S.-based artists.

Royalties on a $1-million auction sale would be $70,000; on a $20,000 sale they would be $1,400. In addition to original, unduplicated works, a royalty would apply to numbered and signed limited editions of up to 200 copies of an image, photograph or sculpture.

Only auction houses with annual sales of $25 million or more would have to pay the royalty; it would not apply to Ebay or other auction sites that operate only online. Executives at the top auction houses, Sotheby’s, Christie’s, Phillips de Pury and Bonhams & Butterfields, could not be reached Thursday for comment.

The sponsors, Sen. Herb Kohl (D-Wis.) and Rep. Jerrold Nadler (D-N.Y.), said the Equity for Visual Artists Act of 2011 would help put painters, sculptors and photographers on a more equal footing with authors, playwrights, composers and musicians who already benefit from major income streams thanks to copyright law. Currently, visual artists get paid just once, when they sell a work to its first owner. Subsequent earnings come from reproduction rights paid by publishers, filmmakers and others who want to present the work’s image in print, online, or onscreen -- which Kohl said is “only a tiny amount.”

The big money in art is from resales that often happen years after the initial transaction in which the artist was paid. The artist’s subsequent output and rising reputation can add to an earlier work’s value, but in the United States, the markup goes solely to the current owner, with a share going to the dealer or auction house that handles the transaction when it’s sold and the increased value is realized.

It has long been different in Europe, where laws commonly recognized a “droit du seigneur” – the right of a creator to take a cut whenever a work is resold.

The bill exempts private sellers, art dealers and galleries from having to pay a royalty. Bruce Lehman, who played a key role in drafting it as counsel for the Visual Artists Rights Coalition, a group of artists and two major American organizations that represent artists in copyright matters, said that focusing only on the big auction houses will capture most of the resale market while simplifying enforcement and avoiding what would otherwise be a likely outcry from the far more numerous ranks of art dealers.

Sales handled by dealers aren’t done openly like public auctions, and monitoring dealer sales would be difficult and probably expensive, said Robert Panzer, executive director of VAGA, which along with the Artists Rights Society is one of the two main New York-based organizations that represent member artists in copyright matters.

The bill specifies that “collecting societies” such as VAGA and the Artists Rights Society can keep up to 18% of the royalties paid to cover the cost of collecting and distributing the money to their members. Lehman said the 18% comes from what musical performing rights societies such as ASCAP and BMI, which represent songwriters and composers, typically incur while administering their members’ copyrights.

Panzer said backers of the federal bill wanted to avoid the problems that have beset a widely flouted, hard-to-enforce California law that’s the only one in the nation providing for artist royalties.

Since the late 1970s, the California Resale Royalty Act supposedly has covered sales of works by living U.S.-based artists and those who’ve been dead less than 20 years. It applies to sales that take place in California, as well as out-of-state sales in which the seller lives in California. Some auctioneers, dealers and individual collectors pay the 5% royalty, but many do not. Christie’s and Sotheby’s, targeted in recent lawsuits brought by artists to enforce the state law, have said they are confident they will win because California has no constitutional authority to enforce copyright law, which is solely a federal prerogative.

“What happens in California has been kind of a joke,” Panzer said.

Allowing museums to share in art royalties serves a double purpose, proponents of the federal bill said: As a matter of practical politics, it figures to put a potentially powerful constituency in their corner – just as excusing art dealers and individual collectors from paying royalties stands to preempt a good deal of potential opposition. Also, dividing the pie between artists and museums could benefit emerging artists whose works might be bought with museums’ share. The share reserved for artists whose work is auctioned would mainly benefit high-profile artists whose work commands the highest prices.

Dan Monroe, president of the Assn. of Art Museum Directors, said he couldn’t comment on the bill’s specifics because he hadn’t read it, but “we support initiatives that … help sustain artists and the art they create.”

Lehman, formerly the Commerce Department’s top intellectual property specialist under President Clinton, said that the bill leaves it to the U.S. Copyright Office to set specific rules for how the royalties would be collected, and how the museums’ share would be distributed – a process he said would involve “ample opportunity for the public to comment” on how the system should work. Ideally, he said, the rules will favor museum purchases of up-and-comers’ work rather than allowing them to stockpile royalty proceeds for high-priced pieces by name brand artists. The Jeff Koons’ and Richard Serras of the world figure to be well taken-care of from the half of the pot reserved for artists whose work is auctioned.

Several bills aimed at creating a royalty for visual art died in Congress during the 1980s, but the landscape has shifted significantly since then. When previous bills were debated, art dealers warned that enacting a royalty in the United States would prompt art-sellers to take their business to dealers and auctioneers in royalty-free London. But the U.K. is now part of the European Union, and since 2006 all EU member nations, including Great Britain and Ireland, have had royalty laws.

“This is a huge game-changer for the art market in this country. It’ll be a great thing for artists,” Marisa Pascucci, associate editor of the Art Economist, a semi-monthly magazine that tracks the international art market, said Thursday. Art auctions in London don’t seem to have suffered since the EU royalty requirement took effect, she said, adding that auction houses will likely pass on the 7% fee to buyers and sellers.

An additional benefit of the new bill, its backers say, is that American artists who don’t qualify for royalties when their work is sold in other countries would start receiving overseas royalties, thanks to reciprocity provisions in the Berne Convention on Literary and Artistic Works that governs international copyright matters. The bill in Congress doesn’t favor Americans over other nationalities; auctioneers would be required to pay the royalty for all artists whose work they sell.