The Resale Right in the United States, China and Switzerland?

Copyright is national law. Just as with criminal law, there is no uniform copyright law that applies everywhere in the world. Nonetheless, international treaties have brought countries much closer to one another in this regard. Licensing is required, for instance, to show a film or broadcast a song in most countries of the world today. The situation with the resale right looks somewhat different. This right, which primarily ensures that visual artists receive a share of the resale value of their works, is not recognised in the United States, Switzerland, or China – all of which have substantial art markets.

In 2010, the EU accounted for 37% of the global art market while the United States made up 34% and China 23%. China’s rise to become the third largest market for art is significant. As recently as 2006, its share was a mere five per cent.

Artists from the EU currently receive no remuneration when their works are sold in the US or China. By the same token, US American and Chinese artists receive nothing when their works are sold in the EU, as the resale right is only guaranteed on the basis of reciprocity. Considering the market shares, the resale right would apply to a third of all art sales worldwide without this mechanism and at least apply to all sales in the European Union.

However, due to the requirement to observe the principle of reciprocity, in actual practice only a portion of European sales are subject to the resale right. The artists in question must have been alive in the last 70 years and originate from an EU country or one that recognizes the resale right. Due to these restrictions, the resale right is currently applied in less than ten per cent of art sales worldwide, but this number would increase significantly if the United States, China, and Switzerland were to introduce a resale right.

The Situation in the United States

Efforts were made to introduce a resale right in the United States as early as the late 1970s and again in the late 1980s. The second initiative was launched by Senator Edward Kennedy but failed to gain traction.

Nevertheless, the US Copyright Office carried out an investigation and held various hearings in the early 1990s. The final report at that time recommended that Congress wait for the introduction of legislation in the European Union before addressing the topic again.

As is known, the European Union adopted its Resale Right Directive in 2001 stipulating that individual Member States implement it by 2006. However, it was much later that another attempt was made to introduce the resale right in the United States. A bill called the Equity for Visual Artists Act was introduced to Congress in December of 2011, and the Copyright Office was again requested to conduct an impact study on the introduction of a resale right. 

This study produced a report, which was published on 13 December 2013. It contains the following recommendations among others: 

  • The report first recognises that visual artists suffer from a disadvantage in that copyright law primarily deals with royalty payments required for the reproduction, distribution, and broadcast of copies of works. The law, therefore, does not cover categories of works, for which only the original has market value. In this field, copyright law fails to meet its objective of encouraging artists to produce further works. 
  • The report then states that there is a lack of evidence to support the thesis that the resale right has a negative impact on the art market.
  • The report claims that the introduction of a resale right would benefit only a small group of visual artists and recommends that Congress carefully weigh the costs and benefits of introducing such a right.

The Copyright Office recommends the following regarding the introduction of a resale right: 

  • It should apply to the entire art trade (auctioneers and galleries).
  • The minimum sales price should be set as low as possible so as to benefit as many artists as possible. 
  • A royalty rate between three and five per cent of the sales price should be introduced for works for which the sales price has increased.
  • A cap should be established.
  • The resale right should only apply to works created after the law takes effect.
  • The resale right should be subject to administration by a collective management organisation.
  • Remuneration should be tied to a registration requirement for works. The right should be granted to living artists only.

These recommendations can be regarded as generally positive. The recommendation that the resale right only be granted to living artists is based on the fact that the resale right was extended to heirs in the United Kingdom only in 2012 and the Copyright Office recommends an observation period. However, the proposal for the resale right to apply only to new works should be rejected.

The legal committees of both houses of the United States Congress introduced identical new resale right bills in January of 2014 with the following provisions for resale right royalties:

  • They should be set at five per cent of the resale proceeds.
  • They should apply to minimum sales prices of $5,000 or more.
  • They should be subject to a cap of $35,000.

The proposed laws would apply to auction houses only and not extend to galleries. There are, however, plans to conduct a study on this issue.

The recommendations of the Copyright Office to introduce further restrictions (royalty eligibility for living artists only, works created after the law takes effect, and a registration requirement for foreign works) were not reflected in the bills.

The chances are good this time that a resale right will actually be introduced in the US. VG Bild-Kunst has supported the process actively and financially since 2011 in cooperation with its sister societies in the US and Europe as well as the EVA umbrella organisation. 

The Situation in China

In 2012, a process was started in China to amend copyright legislation with provisions for the introduction of a resale right. 

The bill states that artists and their heirs should receive a share of the proceeds from sales of works of art and photographs at auction. The State Council would be responsible for the details (e.g. the amount of remuneration).

The draft law is currently (since late 2013) in the State Council legal committee. A second draft is expected in the first quarter of 2014. The legislative process could be completed in 2015.

CISAC will follow the legislative process and organise lobbying efforts. The organisation opened its own office in Beijing on 15 January 2014. The issue of introducing a resale right in China is very high on its agenda.

The Situation in Switzerland

In Switzerland, the introduction of a resale right was intensely discussed in 1992 as part of the country’s new copyright codification process, but the idea was ultimately rejected due to fears of negative consequences for the domestic art market. An elaborate lobby campaign by the art trade later prevented the resale right from becoming effective in 2007 when the country’s copyright law was amended.

However, not even Switzerland can escape international developments, even if it does seem quite appealing to form a legal "island" of advantage for the domestic industry.

Early in December of 2013, visarte, the association of Switzerland’s visual artists, called for an action programme to introduce the resale right. Our sister society ProLitteris will also be actively involved in the campaign in 2014.

We will keep you up to date.

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