The report states that
A well-functioning copyright law must provide robust support for authors, who are, after all, the first beneficiaries of the copyright system. Indeed, U.S. copyright law derives fundamentally from the principle that authors’ interests are inseparable from the broader public interest. While “[t]he immediate effect of our copyright law is to secure a fair return for an ‘author’s’ creative labor,” the “ultimate aim is . . . to stimulate artistic creativity for the general public good.” Accordingly, to the extent that the current copyright system is not working effectively for authors – or is disfavoring a discrete class of authors – Congress should be concerned.
In the framework of the resale royalty discussions, the authors at issue are certain visual artists, including painters, illustrators, sculptors, and photographers (hereinafter “visual artists” or “artists”). Based on the information and comments provided during the preparation of this report, as well as the Office’s independent research, the Office agrees that, under the current legal system, visual artists are uniquely limited in their ability to fully benefit from the success of their works over time. The distinctive nature of the creation and marketing of visual art has not changed since the Office’s main study on the topic, published in 1992. At the same time, recent developments – including in particular the adoption of resale royalty laws by more than thirty additional countries since the Office’s prior report – would seem to warrant renewed consideration of the issue.
In general, visual artists do not share in the long-term financial success of their works. Instead, the financial gains from the resale of their works inure primarily to third parties such as auction houses, collectors, and art galleries. Moreover, the income typically available to other authors through reproduction and derivative uses of their works is more limited for artists. Although the Internet has provided artists with greater opportunities to exploit derivative images and/or sell mass-produced copies of their works, stakeholders agree that “for most visual artists . . . the amounts involved in reproduction or representation are generally insignificant.” Indeed, it appears to be common ground that reproduction rights represent a “very minor aspect of [most artists’] careers” and that the first sale of a work is “the main or exclusive source of income for almost all American artists.”
The Copyright Office agrees that these factors place many visual artists at a material disadvantage vis-à-vis other authors, and therefore the Office supports congressional consideration of a resale royalty right, or droit de suite, which would give artists a percentage of the amount paid for a work each time it is resold by another party. A large and growing number of countries around the world – more than seventy in total – now follow that approach. Other potential responses might include the facilitation of voluntary initiatives among stakeholders in the art market, amending the copyright law to give artists a continuing economic interest in their works through, for example, greater interests in public display or commercial rental rights, and increased federal grants for visual art programs.
That said, an “information problem” in the art market – something that many have acknowledged – does present certain challenges. Any assessment of the treatment of visual artists under U.S. law suffers from a lack of independently verifiable data about the operation of the art market and a resulting difficulty in determining whether a resale royalty in particular would truly operate to place artists on equal footing with other authors. At the same time, the Office recognizes that many of the arguments against the right are overblown. Moreover, according to the most recent studies, a number of the adverse consequences that this Office’s previous report predicted might follow from implementation of the right have not materialized in countries that have adopted droit de suite since that time. Accordingly, the Office finds no clear impediment to implementation of a resale royalty right in the United States and supports the right as one alternative to address the disparity in treatment of artists under the copyright law.
The Copyright Office makes the following observations and recommendations:
• Although visual artists possess the same exclusive rights under copyright law as other authors, they are disadvantaged as a practical matter by certain factors endemic to the creation of works that are produced in singular form (or in very limited copies) and are valued for their scarcity. There are sound policy reasons to address this inequity, including the constitutionally-rooted objective to incentivize the creation and dissemination of artistic works.
• While a resale royalty could be one of many factors affecting the location of auctions and other art sales, there is no evidence to conclusively establish that it would harm the U.S. visual art market. Studies produced since this Office last examined the issue in 1992 belie earlier assumptions that a resale royalty would substantially reduce prices in the primary art market or shift the secondary art market away from the United States.
• Although adoption of a resale royalty right is one option to address the disparate treatment of artists under the law, it is not the only option, and more deliberation is necessary to determine if it is the best option. The Office’s 1992 report highlighted the fact that resale royalties appear to benefit only an extremely small number of artists. Current studies and reports remain consistent with this view. In light of the potentially limited benefits, the costs of the law (e.g., administration and enforcement), while not insurmountable, suggest that Congress should approach this issue with some caution.
• Should Congress wish to adopt a resale royalty right in the United States, the Office recommends that the legislation:
o Apply to sales of works of visual art by auction houses, galleries, private dealers, and other persons and entities engaged in the business of selling visual art;
o Include a relatively low threshold value to ensure that the royalty benefits as many artists as possible;
o Establish a royalty rate of 3 percent to 5 percent of the work’s gross resale price (i.e., a range generally in line with royalty rates in several other countries) for those works that have increased in value;
o Include a cap on the royalty payment available from each sale;
o Apply prospectively to the resale of works acquired after the law takes effect;
o Provide for collective management by private collecting societies, with general oversight by the U.S. Copyright Office; o Require copyright registration as a prerequisite to receiving royalties;
o Limit remedies to a specified monetary payment rather than actual or statutory damages;
o At least initially, apply only for a term of the life of the artist; and
o Require a Copyright Office study of the effect of the royalty on artists and the art market within a reasonable time after enactment.