Monday, June 13, 2005

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.

18 comments:

Anonymous said...

And, most uncomfortably, does it only help rich artists anyway?

But of course. To the extent that copyright helps any artists, it typically helps the rich ones. Failed artists -- I'm speaking in a commercial sense here -- don't benefit much from having the monopoly that copyright provides, since an exclusive right as to nothing is still nothing.

This is why Disney was in favor of CTEA, but the author of the worst-selling novel ever probably didn't even notice it.

The utility of copyright is that it spurs artists on with the very slim possibility that they'll be one of the rich ones. Thank God that artists that need this spurring on (it's wasted on them otherwise) are so optimistic as to keep going for it. It's kind of like how the lottery is enjoyed by people with poor math skills.

William Patry said...

True enough, but the unique angle with droit de suite is that because there are minimum price levels before the right kicks in and many works are sold below those levels, the right fails those artists. The reason for the minima is usually stated to be transaction costs, but for poor artists any royalty is better than none.

Anonymous said...

for poor artists any royalty is better than none

And for everyone else, no royalty is better than any. I like a utilitarian copyright system. I have no qualms with artists getting a royalty, or a chance at one -- provided it materially leaves me, and everyone else, better off. I strongly doubt that a royalty scheme as you describe would result in a second renaissance of visual art.

Unfortunately, there's just too much concern for artists, and too little concern for the public in the copyright policy world these days. Hopefully we can do something about that.

William Patry said...

Anonymous:

I think the idea behind copyright is to leave authors "materially" better off, financially, and the public better off from access to the work. And I don't think access means free access, although in some cases like fair use or exemptions, it means excused non-paying uses. Eventually, with an appropriate term of protection, the theory goes, there will be a rich public domain and no payment for the pd works.

There is a strong reaction against copyright today in part because people feel with CTEA and the DMCA the original (at least theoretical) balance has been titled too far in copyright owners' favor, that access is both being denied (DMCA anticircumvention) and that the public domain is being impoverished through the long term: the 20 years added by CTEA cannot incentivize anyone to create and only serves to extend monopoly profits, while discouraging the creation of new, derivative works.

But I think droit de suite raises a different issue: how do we ensure that visual artists, whose primary way of receiving payment is through the sale of the physical object and not through copies or performance (the traditional means of getting paid), receive their "fair share." As I say in the post, droit de suite may be unique because unlike the sharp disagreements with other subject matter, with droit de suite we may be able to gather real data; that data should help us make informed judgments about some of the various theories bandied about.

Timothy Phillips said...

Perhaps it is not the law that should accomodate itself to the habits of artists, but artists who should adjust their business model to the habits of the market, and plan to make their profit from the sale of reproductions, rather than from the sale of the original.

Or perhaps, if we are to compromise the first sale doctrine on behalf of picture-painters, we should exact a quid-pro-quo by extinguishing the exclusive privileges of copyright in the visual work and making the freedom of replication and derivation of the image again publici juris.

Anonymous said...

Prof. Patry--
I think the idea behind copyright is to leave authors "materially" better off, financially, and the public better off from access to the work. And I don't think access means free access, although in some cases like fair use or exemptions, it means excused non-paying uses. Eventually, with an appropriate term of protection, the theory goes, there will be a rich public domain and no payment for the pd works.

Mere access to works isn't enough. Certainly if it were, it wouldn't explain why we have a mandated public domain. Access to works unencumbered by copyright is how the public truly benefits. Whether artists benefit or not is of little importance, save for how it affects the public benefit. Giving artists whatever they want hardly benefits the public; giving them as much as it suits our own interests to, is a different matter.

It is analagous to tipping a waiter by a reasonable amount, but not extravagantly, or how a farmer will treat a group of working animals neither too poorly or too well, such that he can best exploit them.

But I think droit de suite raises a different issue: how do we ensure that visual artists, whose primary way of receiving payment is through the sale of the physical object and not through copies or performance (the traditional means of getting paid), receive their "fair share."

The solution is very simple. Do not provide artists with special rights.

We have copyright because creative works are not like personal property, and we have set up a system to accomodate that somewhat. It is more or less an attempt to simulate property. But here, you're talking about a group of people who basically make their living by selling what is indisputably a piece of personal property. They're no different than people who sell any other kind of tangible thing.

If they think they're selling too low, then let them sell higher, or sell subject to conditions they find favorable. Whether they manage to find buyers that will agree to this is their problem, but the market will cope one way or the other. It's as simple as that.

But there's no reason for artists to get a share from every subsequent sale any more than I have to pay Ford if I sell my car, or my habedasher if I sell my clothes, or whatever. They make their money from selling material things too. There is no difference between them, and no justification at all for special favor.

William Patry said...

I never said I thought droit de suite was required. I tried to indicate that my original thinking was too simplistic and that other factors should be considered, especially those that empirical studies of the effect of droit de suite might provide. And, while I agree that there should be as close a fit as possible (and that is bound to be pretty loose) between the market place and rights, I do think it appropriate to craft rights that can help that fit. This may mean that the rights are different for different works. Architectural works for example don't have a performance right for obvious reasons. To deny that visual artists' market is sale of physical objects is, I think, to ignore how the market actually works. This doesn't mean that one enacts droit de suite and the first sale doctrine exists for sound reasons, but I don't think one should dismiss the idea out of hand. One may dismiss it because, in fact, the market on its own does take care of things adequately without droit de suite or because artists create anyway without the need for droit de suite.

Anonymous said...

Prof. Patry--
Architectural works for example don't have a performance right for obvious reasons. To deny that visual artists' market is sale of physical objects is, I think, to ignore how the market actually works.

Oh, let's not get started on architectural works. The only thing worse than that are design works.

Anyway, I'm not denying that visual artists market is the sale of physical objects. I'm saying that it is, and that we should therefore treat their actions in that market the same way that we treat everyone else's in the same market.

That is, you don't have a statutory right to continuing income after you sell property. Basically, selling a painting is no different from selling a car, or a brick, or any other kind of physical object.

Now, I don't mind talking about different rights for different types of works. I believe that's a good idea too. But this discussion isn't about works. It's about copies. And so again, I don't see how one could possibly say that artists, uniquely, should get a cut when you sell tangible things they made, when we never give a cut to other people for the tangible things they made.

William Patry said...

Anonymous: As I saw the discussion it was about how we might view the concept of copies differently in this one case; you think we shouldn't, and I am not so sure, although I lean toward there being no difference. But I see nothing sacrosanct about first sale nor does Congress since it repealed first sale for the rental of phonorecords and software. (And I helped make permanent the software provision in the 1994 GATT legislation).

To me the approach should be a flexible, pragmatic one. I am a critic of the DMCA and CTEA, but not a critic of the system absent those provisions, as imperfect as it is.

Anonymous said...

Prof. Patry--
But I see nothing sacrosanct about first sale nor does Congress since it repealed first sale for the rental of phonorecords and software. (And I helped make permanent the software provision in the 1994 GATT legislation).

I think that an absolute first sale exception is a central part of the public's expectation as to how copyright works. The law should generally adhere to their norms for two reasons. First, by doing so, we avoid situations (as we see now) where there is rampant, widespread infringement. Second, where the logic of the law escapes people, and conflicts with their expectations as to what is and isn't acceptable, there is often disrespect for the law, and this can spread.

Additionally, is something of a quid pro quo. Where's the quo? Was the software industry in dire peril without limits on first sale? Have they reached otherwise unreachable heights with it? Has this restraint on the public provided them with a benefit that outweighs the harm of the restraint? As noted earlier, I just don't see it. Instead see a special interest group that has managed to get Congress to not do their duty.

As for the permanence of GATT, I hope to someday see the US pull out of every copyright-related treaty. They simply aren't beneficial. National treatment and an avoidance of mutually exclusive copyright regimes is all the international copyright law needed. The former is best implemented unilaterally; no agreement is needed. The latter might want for some dialogs between various nations, but nothing that would approach minimum standards.

William Patry said...

When I speed I should expect to get a ticket as much as I hope I don't. (And I make it to Cambridge Mass. from Stamford CT in under 2 and a half hours, so I regularly speed).

People who rented CDs to copy them and people who rented software to copy it should not have expected that the first sale doctrine would protect them, nor should it have. At the time of the record rental ban (1984) the advertising went "Never ever buy another record." I don't think we should condone that type of behavior under the first sale or any other doctrine. And if consumers did expect to get off, I see nothing wrong with Congress disabusing them of that expectation.

That said, the core of first sale -the purchase of a copy and then its redistribution --is I heartily agree, a key element of people's expectations and a very significant public benefit, one that probably should tip things against droit de suite.

But if you view copyright as instrumental, then you should view everything as on the table, and that's why, as situations may dictate, I don't view first sale as sacrosanct: it too is an end to a means, even if exceptions to it are few and far between.

Timothy Phillips said...

Unlike the anonymous contributor, I am willing to endure the U.S.'s continued membership in the Universal Copyright Convention. But we should definitely skip out on the Berne Union. We get nothing good out of it.

I am trying to make my way through the Iowa study. My initial impression is that it will convince no one to support the so-called "droit de suite" who was not already prejudiced in favor of this artists' right.

Certainly I will need some convincing. The whole idea stinks of the vile "natural rights" theory of copyright. I also wonder whether there is any legally consistent way to draw a clear legal line between works of the fine arts and other graphic or sculptural works. I suggested earlier that we might allow the author to choose droite-de-suite OR copyright, the law making the two monopolistic regimes mutually exclusive. This would require formalities, of course.

William Patry said...

I would like to point out that the two amendments to title 17 that have caused the most controversy, CTEA and the DMCA, were not required by and have nothing to do with Berne or the 1994 GATT implementing legislation.

Anonymous said...

"...how do we ensure that visual artists, whose primary way of receiving payment is through the sale of the physical object and not through copies or performance (the traditional means of getting paid), receive their "fair share.""

Droit De Suite depends entirely as a practical matter on the physical sale of physical objects in secure marketplaces such as established auction houses and very high-end galleries. It's time has passed. It is an anachronistic analog model that the artistic community as a whole has left behind while, apparently, the lawyers keep diddling with it. Frank Stella in Manhattan may want it. No one else does. One should be much more concerned about finding a structure that would compensate for the vast reproduction right uses of visual art on the Internet and elesewhere in the digital realm. The music industry brought MP3.com and Napster to their knees. Google Images, except as to Getty and a few large news photography outlets savvy enough to block it, sails through without a care in the world and a healthy market cap to boot! Just creating a new ASCAP or BMI for images is not a likely or practical result unless there is an organized incentive such as a compulsory license.

Anonymous said...

Prof. Patry--
When I speed I should expect to get a ticket as much as I hope I don't. (And I make it to Cambridge Mass. from Stamford CT in under 2 and a half hours, so I regularly speed).

Speed limits aren't a great counterargument; even if people don't like having to deal with speed limits, the reasoning behind them is commonly understood and agreed with.

With copyright, however, my observations of lay people indicate a big disconnect between what people think copyright is, which they'd basically obey, despite again preferring it not apply to them, and what copyright actually is.

For example, few people have a problem with bans on commercial piracy. That there is even the possibility of a ban on making a mix CD for a friend surprises the hell out of people, at least from my informal observations.

People who rented CDs to copy them and people who rented software to copy it should not have expected that the first sale doctrine would protect them, nor should it have.

Nor am I suggesting that first sale would, but I had thought we were talking about distribution, not reproduction.

But if you view copyright as instrumental, then you should view everything as on the table, and that's why, as situations may dictate, I don't view first sale as sacrosanct: it too is an end to a means, even if exceptions to it are few and far between.

I do view everything as being on the table. I don't assign equal values to these things, however. If a limit on first sale would have a truly amazing increase in creation, it might be worth it. That the limits are recent, and that the industries they're related to were doing fine without them, and didn't have a big upsurge, suggests to me that we made a bad deal.

Indeed, I think we could dump a lot of the term length and the scope of copyright, and see little lost creation. Works turn a profit pretty rapidly, if ever, and many industries are only interested in a subset of exclusive rights, not all of them.

Of course, since everything's on the table, and I regard freedom as to works to be of equal rank with the creation of works, I would not be averse to even significant reductions in creation, if in the course of a greater net good.

More $10 million budget movies than $100 million budget movies wouldn't bother me any more than I'm upset at the current lack of $1 billion budget movies.

I would like to point out that the two amendments to title 17 that have caused the most controversy, CTEA and the DMCA, were not required by and have nothing to do with Berne or the 1994 GATT implementing legislation.

Sure, but most of copyright law (as I've basically been saying) has gone under people's radar, and thus doesn't cause controversy. This doesn't make it good, however. Frankly, I've found many people who object to 506 et al, and simply had no idea that some infringements are criminal now, or that they have been for over a century. I have a habit of trying to publicize what the law is, for I find it's an effective tool to get people riled up about it; they really have no idea just what they're dealing with otherwise.

Timothy--
I am willing to endure the U.S.'s continued membership in the Universal Copyright Convention.

Aside from not liking the minimum standards imposed by the UCC, I still don't care for minimum standards generally. I favor each nation being more free to experiment so as to see what best suits them. If the argument of many of the pro-standards crowd that standards engender strong creative and publishing industries is true, this will be discovered as it is put to the test, and nations would of their own accord meet such standards. I think it's more complicated than that, however, and that looser standards are a good way to building local industries. Still, let's find out together!

The whole idea stinks of the vile "natural rights" theory of copyright.

Looks like we've got something in common!

Anonymous--
Google Images, except as to Getty and a few large news photography outlets savvy enough to block it, sails through without a care in the world and a healthy market cap to boot!

Well, it's a search engine, and it seems to enjoy a strong position with regards to various defenses. It's not similar to Napster or mp3.com.

I think that your concern is better targeted at the direct infringers, though who knows how Grokster will change the landscape?

Anonymous said...

Anonymous--
Google Images, except as to Getty and a few large news photography outlets savvy enough to block it, sails through without a care in the world and a healthy market cap to boot!

Well, it's a search engine, and it seems to enjoy a strong position with regards to various defenses. It's not similar to Napster or mp3.com.


It's a search engine used nearly exactly as the Napster indices were used but for the opportunity to control the placing of the content in the first instance onto a website. I agree Google has better legal, statutory defenses for its behavior but there has hardly been any discussion of the policy of letting Google use copyrighted works to the extent that it does without payments or permission. Obviously, search is so useful that it deserves encouragement. But its a matter of degree.

Timothy Phillips said...

The Professor wrote:

The two amendments to title 17 that have caused the most controversy, CTEA and the DMCA, were not required by and have nothing to do with Berne or the 1994 GATT implementing legislation.

I agree with "not required by", though I have encountered at least one person who thought that the CTEA was intended to harmonize U.S. law with the Berne Convention. Then there are the people who state that CTEA was intended to harmonize U.S. law with "the rest of the world", as if Canada and Japan were not on the same planet with us.

I dispute "nothing to do with". The CTEA, the "device" and "circumvention" provisions of the DMCA, the idea that the foreign copyrights should be restored, the concept of "droit de suite" -- all these vermin crawled out from under the same rock of copyright maximalism. They all partake of scorn and contempt for the idea that the public has rights in works of the human mind, and that the only reliable way of guaranteeing these rights is for all marketing and uses of these works to be publici juris, exceptions to this principle (copyright and patent) to be temporary and carefully limited in scope.

Some of these modifications of copyright, even the CTEA, might be rationalized on other grounds (the CTEA not very convincingly, however). But my sense of the underlying motivations of many of these provisions' supporters, besides the motivation of greed, is that they are thinking silently what Mary Rodgers stated aloud: that they wish that the public domain did not exist at all.

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