Droit De Suite

The posting on Termination of Transfers prompted some commentary about the eternal struggle between authors and distributors (the latter broadly defined). That struggle may (but need not) be phrased as "Do distributors end up, unfairly, with the lion's share of the money from exploitation of the work?" The term "unfair" is the critical one, of course. No one expects distributors not to make money, and most of it to boot, and few distributors think authors shouldn't get some royalties. How much is too much for either side is the eternal in the eternal struggle.

One area that uniquely raises this issue is droit de suite, called in English speaking countries, resale royalties. (See explanation at this link: European Visual Artists Society). This concept, where legislated or contractually required, places a royalty on the resale of the physical object embodying a work of art. ("Resale" means after the original sale of the object by the artist to the buyer. ) In the United States, only California has such a statutory provision. The right is found in Article 14ter of the Berne Convention, but it is reciprocal, meaning that it is not subject to national treatment. In short, country x will give country y's artists royalty proceeds from resales in country x only if country y reciprocates for resales of works of country x's artists in country y. (As a result of the Phil Collins decision, it was likely that within the European Union, national treatment was required). Given there is no U.S. federal right, U.S. artists are out of luck.

The European Union, in 2001, issued a harmonization directive, EU Directive , but opposition of British art dealers caused a delay of implementation in that country until 2006. Draft implementing regulations have been recently issued. British Patent Office Draft Regulations. In 1991, as a Policy Planning Advisor to the Register of Copyrights, I was assigned the task of being the drafter of a report to Congress on the subject, and pulled the tough duty of traveling to Paris and Munich to interview French and German artists and dealers groups as well as experts. These two countries have considerable experience with droit de suite. The wine and beer were excellent. The Register of Copyrights and I also held a hearing in New York City and I held one in San Francisco.

I pretty much had finished my research, but before I could start on a draft report, I walked across the street and joined the House IP subcommittee. An attorney in the General Counsel's Office, Elliot Alderman, was then assigned the task, but limited to desk work in the Copyright Office's slightly Krushchev-looking building on Capitol Hill. His take on the issue (I believe reflected in the report that was subsequently issued - not in electronic form unfortunately), was quite different than my initial views: his and the report's were quite negative. (His unadorned views can be read here: Elliot Alderman 1999 article).

My initial view was favorable toward the U.S. adopting the right. I say "initial" because they have changed over time and have not really settled. My first look at it was, I fear, based simply on the idea that unlike book authors and music composers who benefit financially from the reproduction right (and in the latter case also the performance right), visual artists benefit principally through the sale of the physical object. Very much like the impetus for the second bite at the apple theory of renewal rights, advocates of droit de suite believe that visual artists are at a decided disadvantage in initial leverage for pricing the sale of the object and that the true market value can't be known at that time.

Distributors, especially gallery owners, point out that through their marketing effort they play an important role in the fame artists achieve, and quite significantly I believe, they also note that if a collector makes a killing on one painting, all of the artist's unsold as well as future paintings automatically go up in value and thus the artist will be able to "cash in." (This takes away for such works the "can't know the value" argument).

There are also a host of very serious administration issues and some of fairness. The fairness issue is triggered by the fact that if the value of a painting declines on resale, the artist doesn't have to pony up a share of the loss. Droit de suite only has an upside for artists, while for distributors there is the reality that they will, sometimes, lose money. Administrative problems are legion: what types of works to include, are there minimum caps, ceilings, deductions for commission fees, does it cover private sales, only public sales at auctions, what about sales through intermediaries? And, most uncomfortably, does it only help rich artists anyway?

There is a considerable amount of law and economic analysis on droit de suite. Here are only a few: Iowa Economic Analysis ; Australian Economic Analysis I and Australian Economic Analysis II ; European Law and Economics 2000 Masters Thesis I and II ; Canadian Law and Economics. Advocates of droit de suite rightly point out that there are always problems and always excuses, but this is one area where the eternal struggle may be more susceptible to empirical evaluation than others.