ART LAW- ARTISTE’S  RESALE RIGHTS-Position of Art Law in India

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THE CONCEPT OF ARTISTS RE-SALE RIGHTS

Artist Re-sale rights or Droit De Suite, as known in French terminology, is both an example of an economic right as well as an extension of the personhood theory of Copyright law, which emphasizes upon a work representing the character and personality of the author.[i] It becomes an essential part of Moral Rights, particularly for Visual Artists. This permits the authors of artistic works to benefit from the rising value of the work, due to the nature of an artwork being one, wherein, value appreciates with time, popularity and interpretation. The art market has been argued to be “….too volatile to predict when or to what extent a piece may rise in value, if it does at all, and it needs exposure and multiple sales to get to such a point.”[ii] The rationales which have been proposed by proponents of this right range from equity based models, i.e. putting visual artists on par with other creative works who continue to earn royalties on the use of their works (like musical works), to the moral right argument of a “personal link” between the artist and his artwork and the imperative need for attribution of appreciation of the work. Artists may initially sell their unique, one piece, artwork for a lower cost, however the value may appreciate upon garnering popularity, and it is imperative to not be jeopardized of their interest in the same. [iii] A very important theoretical rationale for Copyright to exist in the first place is incentivizing the author and others to indulge in creative activity and produce more original works,[iv] and re-sale rights, for unique one-off art works, is essential to ensure the same.[v] This shows compatibility of re-sale rights, with the theoretical foundations of Copyright.[vi]

France initiated this concept of Droit De Suite, in 1920, post a lithograph by artist Jean-Louis Forian, which depicted starving artists. This was proposed to be subsequently added in the Berne Convention for the Protection of Literary and Artistic Works, and was done under Article 14ter, which provides an inalienable right to an interest in any subsequent sale of the work after the first transfer by the author. Due to the critique of the same inclusion on various grounds by many, this right has been kept as non-mandatory, however a recent petition was brought in and discussed at the WIPO for mandatory international harmonization and protection of artists in this regard around the world.[vii] Until now, around 80 countries and regions, including India and the European Union, recognize this right. Article 14ter of the Berne Convention provides[viii]:

“The author, or after his death the persons or institutions authorized by national legislation, shall, with respect to original works of art and original manuscripts of writers and composers, enjoy the inalienable right to an interest in any sale of the work subsequent to the first transfer by the author of the work”

 The leader of the pack, in terms of harbouring this concept of Re-Sale rights is the European Union, wherein in 2001 the Artists Rights Directive was implemented. This directive declared the resale right to be “unassailable and inalienable, enjoyed by the author of an original work of graphic or plastic art.” Although it has permitted member states to  set their own minimum prices for enforcement and application, it pertinently states that such a minimum price could not go beyond 3,000 Euros. Further the royalty rate cannot be set at anything less that 4 percent.[ix] The primary purpose of bringing this right in the regional convention was compulsory harmonization, post a transition period, which was successfully done across all member states on January 1, 2012.

INDIA

India is a member of most of the important international conventions governing the area of copyright law, including the Berne Convention of 1886 (as modified at Paris in 1971), the Universal Copyright Convention of 1951, the Rome Convention of 1961 and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). Initially, India was not a member of the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT) but subsequently acceded to this treaty in 2019.

In the case of Artistic works in India, the author receives the right to depict the artwork, communicate the work to the public, issue copies, make any adaptations and so forth.[x]

RE-SALE RIGHTS

In India, Section 53A of the Copyright Act,[xi] enumerates artist’s Re-sale Rights. Under this section, certain artists or their legal heirs enjoy a ‘resale share right in original copies’ of their works provided that certain conditions are met. The original copies referred to in the said Section refer to an ‘original copy of a painting, sculpture or drawing, or of the original manuscript of a literary or dramatic work or musical work’, and to benefit from the right contemplated by this provision of the statute, the artist must have been the first owner of rights under section 17 of the Act.[xii]

The Copyright Act in India distinguishes the doctrine of first sale, commonly applied in USA in the sense that it prescribes protection only to the ‘original’ works of the authors under its provisions.[xiii] To discuss the doctrine of first sale in brief, which is based on the premise that “once a copyright owner has parted with title to a particular copy embodying his work, successive possessors of the copy should not be put into trouble of having to negotiate with the owner each time they contemplate a further sale or other transfer”. It imposes a limit on copyright owners’ right of distribution i.e. it limits the right to control content after a work has been sold for the first time. For example, when an author sells a ‘copy’ of her book, the property that is transferred is not their copyright in the book, but merely the property rights in that particular physical copy of the book. So the buyer is not allowed to reproduce the book but is entitled to re-sell it, as sale is an important aspect of his ownership right. Under the first sale doctrine ownership of physical copy of copyrighted work permits the owner of the item to lend, resell and give away and destroy the copyrighted item, but the owner is not granted the right to copy the item in its entirety.

Hence, the author of the work is entitled to payment of royalty upon every new sale of his ‘original’ work although upon the sale of his copyright he ceases to hold any such right to receive royalty. The lowest sale price at which resale rights begin to apply has been fixed by Section 53A at Rs. 10,000, and the amount due to artists and heirs is capped at 10%, but no decision has been made on the said percentage.

Further, the Copyright Act provides for penalties for the infringement of copyright or other rights conferred by the Act. Any such person who knowingly infringes or abets the infringement of the copyright of the author’s work, except the right to re-sell under Section 53A, is liable to punishment with imprisonment or a term which shall not be less than six months but which may extend to three years and with fine which shall not be less than fifty thousand rupees but which may extend to two lakh rupees.[xiv] This specific exclusion of artist re-sale rights is due to the jurisdiction provided to  the Copyright Board (now merged with the Intellectual Property Appellate Board) to create a new form of punishment as it may deem fit, on a case by case basis, by prescribing the highest allowable percentage of the sale price, where it sees deliberate delays. This provision, in reality, incentivises non-payment of royalty (yes!) until an adverse order is passed by the IPAB, which is in practice almost dysfunctional!

INTERPRETATIONAL AMBIGUITIES AND CONCERNS

The Copyright Act in India is full of interpretational ambiguities, and the Re-sale rights provision under Section 53A is no exception to the same, due to vagueness in the phraseology. Under this provision, which was brought in under the 1994 amendments to the Copyright Act[xv], to harmonize with the Droit de Suite provision in the Berne Convention[xvi], it is specifically mentioned that the “original manuscript of a painting, sculpture, drawing or of the original manuscript of a literary work, dramatic work, musical work” needs to be resold beyond Rs. 10,000 for this section to be applicable, and the royalty on the same shall be accrued to the author  or his legal heirs, notwithstanding any assignment of the copyright in the original work.

Firstly, in my opinion this provision is specifically with respect to Art works and to provide for royalty to artists in a vulnerable art market, wherein prices tend to fluctuate with the popularity of the work or its varied interpretation, and hence the cap has been kept at Rs. 10,000 as generally musical, artistic or dramatic works are not sold (copies) for as much (exceptions in the field of literary works definitely exist).

The first ambiguity surrounds the question as to whether Rs. 10,000 signifies a re-sale which is Rs. 10,000 more than its primary sale amount or any sale beyond Rs. 10,000. For e.g., an interpretive question with this phraseology brings up is that, whether a buyer who has bought an art work for Rs. 10,500 has to pay a re-sale royalty on the re-sale of the work at the rate of Rs 15,000? Here the amount at which the work is sold is beyond 10,000 however is not much higher than the amount at which the buyer had bought it in the first place. Hence a literal interpretation of this provision might suggest an accrual of royalties in such re-sale as well, however the purpose of the provision was to compensate upon large margins in the primary sale and the re-sale. The whole reason as to why Rs. 10,000 has been mentioned in the first place is to avoid a situation wherein royalty is to be paid even on minimal differences in re-sale amount and the first sale amount, to account for the vulnerability of the market. There is no reason to not account a difference of a similar amount as mentioned in the case of Rs. 4,500, even if the initial market price is below Rs. 10,000. It is a non-reasonable differentiation between works sold below Rs. 10,000 and above the same value. Therefore it is imperative that the courts clarify this question, keeping in mind the intent of the provision and balancing it with the doctrine of exhaustion and first-sale effectively.

The second ambiguity concerns with the meaning of the word manuscript, specifically with respect to musical works, under Section 53A. It is interesting to note that the 1994 amendments to the Copyright Act were passed with an intention to liberalise the method of fixation of a musical work, and to not limit it to notational manuscripts but rather technological fixation and storage of performances of the work. This was done to widen the scope of works encapsulated within the definition of “musical work” under the Copyright Act[xvii], to not restrict it to works recorded in the form of a graphical notation or reduced to a material form, in consonance with Article 2(2) of the Berne Convention, to provide for a conscious departure from the British legal tradition of textual fixation for abstract art forms like music.[xviii] Therefore a question persists with regard to the meaning of “manuscript” in relation to a musical work as to whether it means a sound recording which encapsulates the musical work, or the traditional meaning of a notational manuscript. This provision in its literal sense is contradictory to the objects of its own act, and must be interpreted by the court to decipher the intended interpretational consequence.

The third ambiguity persists in relation to assignment agreements in lieu of these works protected. Assignment agreements have rightly been overlooked in this regard, by a notwithstanding clause, however an argument of investment in recording the first copy of the work and the production of the same, may be expended by production companies to seek an equitable share in such royalties in consonance with Section 17 proviso 3. Although literally it seems that an argument to this effect may not succeed due to the requirement of “originality” for claiming re-sale royalties, which is not a feature in the case of protection of sound recordings and cinematographic works (hence only a limited protection)[xix] However, due the problematic judgment in MRF Ltd. v. Metro India Ltd, wherein this requirement of originality has been extended to a cinematographic film, answering the question with respect to whether producers get a share in re-sale royalty or not is imperative, on the part of the court. Investment without any creative ingenuity cannot be covered under the originality threshold and providing for such re-sale royalties to the sound recording companies for the rise in value of the encompassed work in the market, is definitely prejudicial to the original composers of the work. In the case of a book or a literary work, it is however clear that the author-owner divide and an assignment agreement would not be a reason for ambiguities due to the clear provision of the notwithstanding clause.

The fourth ambiguity concerns with clause (2) of section 53A, which basically provides for the implementational mechanism and practice of this substantial royalty right. The provision states that the “Appellate Board (IPAB) may fix the royalty share i.e. the percentage, and this would be a final decision”. The proviso to this clause provides that this share may vary in different classes of work and the determination of the Appellate board shall be final in case of a dispute. Also, the maximum royalty that can be provided cannot exceed 10% of the re-sale amount (balancing the re-sale right with the first sale doctrine and the doctrine of Copyright exhaustion). The use of “may”, gives a prima facie discretionary authority to the IPAB to set royalty, in cases it deems fit, which goes against the entitlement right for re-sale post artwork worth Rs. 10,000 as mentioned in the first clause. The courts must step in, to determine the core interpretational question as to whether the provision of re-sale royalties in the act is discretionary or mandatory when crossing the threshold of Rs. 10,000. Another question which comes up is with respect to a rate of royalty, i.e. whether the rate is a uniform class differentiated rate, or one to be taken up on a case by case basis. The IPAB has not come with any rules decoding how this mechanism is supposed to work, thus providing for more interpretational difficulties and implementations barriers of this provision. The IPAB, for a major part of its tenure has been dysfunctional and has seized to be functional since September 2019, until a recent court order which has re-instated the ex- Chairman with a fresh term until new appointments are made. Such procedural difficulties have, and no rules with respect to royalty determination clearly, has made it extremely tough for contractual negotiations to take place in lieu of this provision, and the actual practical application of the same in the realm of the art industry. Further, with the recent Supreme Court decision in the case of Rojer Matthew v. South Indian bank Ltd rendering the rules under the Finance Act unconstitutional, the functioning and appointment procedure of the members of IPAB continues to be in limbo, make it practically impossible to implement this provision, until final resolutions with respect to the same take place.

There is further uncertainty with respect to the approach which is expected to be adopted by the IPAB in terms of setting the royalty rate. For instance, the EU has evolved a degressive, sliding based, royalty diagram, wherein as the value of the re-sale royalty percentage decreases with an increase in the value of the re-sale. Australia on the other hand has set a fixed flat royalty rate amounting to 5% of the re-sale amount. It has been argued that adopting a high rate of royalty is a “market-killer” however I disagree to intellectual property accounting for the same, as it goes against the natural rights justification of fair return to the Author and a fair fruit for the labour expended in bringing the work into existence. Anyway, as the percentage is generally not high, for a substantial amount to be earned via a royalty for the artists, the re-sale price would have to be extremely high, which is generally not the case in the Indian Art market. Hence, providing a market-based justification for low royalty provision is an unfair deal to the artists in the Indian context.

In India, as quoted in an interview by the ex-registrar of Copyrights and the current Joint Secretary of the Ministry of Justice, Mr. G.R.Raghavendra, there has yet, been no claim to a re-sale right which has been made or wherein the Copyright Board (now the IPAB) has been approached to fix a re-sale right. This is also because of the not so lucrative art market in India as well as a lack of awareness with regard to such a right. This all the more shows the need of a Copyright Society, under section 33(3) of the Copyright Act, to monitor and ensure the provision of such re-sale royalties on an effective basis in India, apart from spreading awareness in lieu of the same amongst the artists. Such organizations have effectively been in place in the United Kingdom in the form of the Design and Artists Copyright Society (DACS) and the Artist Collecting Society (ACS), and need to be incorporated to allow for adequate remuneration and an added incentive for the artist to produce, fulfilling the natural rights justification of Intellectual property protection (although money is not the sole incentive, it definitely is one of them).

CRITICISMS

The Droit Des Suite has been a subject to criticisms due to a multitude of reasons, most importantly being the conflict with the first sale doctrine. The United States has been the major source of such criticism with a landmark opinion being that the first sale doctrine, under section 109 (a), providing for the freedom of the buyers to dispose of the work as and how they wish. The price maybe whatever as deemed appropriate by the secondary seller, without regard to the wishes of the copyright holder,[xx] and this is an essential element of the first sale doctrine to foster an effective consumer based market.[xxi] Another criticism which stems in from the economic perspective is that this concept of resale royalties places the artists in a worse position as the dealer will pay the artist less for the work than if the Droit Des Suite didn’t apply as the dealer will have to share future gains with the artist. This maybe counter-productive for the artists and against their interests.[xxii]

CONCLUSION

Inspite of all these criticisms, it is imperative especially in a developing economy to recognise the resale right for the artists to foster and to incentivise them to produce more. Quoting from the petition brought in by the International Confederation of Societies of Authors and Composers (CISAC) and European Visual Arts,[xxiii]

In a global world, the protection of artists should be the same in different places of the art market, be it London, Paris, New York or Hong Kong. he authors of fine arts from the five continents – and not just those of Western countries – must be able to benefit from the wealth generated by the sales of their creations. And the first ones being concerned are the artists from emerging countries whose works are purchased at low prices and then resold with significant gains on the art markets of Western countries.”

Hence, it is pertinent that these rights are recognised globally for better implementation and viable protection of the interest of the artists.

End Notes:

[i] Alexander Bussey, The Incompatibility of Droit de Suite with Common Law Theories of Copyright, 23 FORDHAM INTELL. PROP. MEDIA & ENT. L.J.1063, 1066-67 (2013).

[ii] Schten, Allison, No More Starving Artists: Why the Art Market Needs a Universal Artist Resale Royalty Right, Notre Dame Journal of International & Comparative Law: Vol. 7 : Issue 1 , Article 6, 117 (2017)

[iii] Simon Stokes, ARTIST’S RESALE RIGHT (DROIT DE SUITE): LAW AND PRACTICE 5, 5 (2006); John Henry Merryman, The Wrath of Robert Rauschenberg, 41 AM. J. OF COMP. L. 103, 111 (1993)

[iv] Twentieth Century Music Corp. v. Aiken, 422 U.S. 151 (1975). The immediate effect of our copyright law is to secure a fair return for an “author’s” creative labour. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good.

[v] See, John L. Solow, An Economic Analysis of the Droit de Suite, 22 J. OF CULTURAL ECON. 209 (1998)

[vi] Lara Mastrangelo, Droite De Suite: Why the United States can no longer ignore the Global Trend, Chicago-Kent Journal of International and Comparative Law, Vol.18, 1 (2018)

[vii] https://www.resale-right.org/; https://spicyip.com/2013/11/artists-petition-for-resale-rights.html

[viii] Article 14ter, Berne Convention For The Protection Of Literary And Artistic Works (Paris text 1971).

[ix]Art. 3-4, Directive 2001/84/EC of the European Parliament and of the Council of 27 September 2001 on the Resale Right for the Benefit of the Author of an Original Work of Art, 2001 O.J. (L 272) 32–36, http://eurlex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32001L0084

[x] Indian Copyright Act 1957, s. 14

[xi] Copyright Act, 1957, S. 53A.

[xii] Copyright Act, 1957, S. 17 ­­– Original Owner of the Work.

[xiii] Copyright Act, 1957, S. 13.

[xiv] Copyright Act, 1957, S. 63.

[xv] Copyright Amendment Act. 1994, Cl.19

[xvi] Statement of Objects and Reasons, Copyright Amendment Act. 1994, Cl.19

[xvii] Copyright Act, 1957, S. 2 (p)

[xviii] Statement of Objects and Reasons, Copyright Amendment Act. 1994, Cl. viii

[xix] Difference between the provision in Section 13(1)(a) and 13(1)(b), (c) in the Indian Copyright Act, 1957.

[xx] Omega S.A v. Costco Whol., 776 F.3d 691, 695 (2015)

[xxi] Kirtsaeng v. John Wiley and Sons, 133 S. Ct. 1351, 1363 (2012)

[xxii] Gilbert S. Edelson. The Case Against an American Droit de Suite. 7 CARDOZO ARTS & ENT. L.J. 260, 262 (1989); Stephanie Turner, The Artists Resale Royalty Right: Overcoming the information problem, 19(2) UCLA Entertainment Law Review 329, 346 (2012)

[xxiii] Supra at n. 6

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