Who collects license fees for deceased artists

The opportunity is good to help the resale right to breakthrough worldwide before its 100th birthday in 2020! Because in addition to the European Union, in which the resale right has now been fully harmonized since the beginning of 2012, the USA and China are also preparing to introduce a resale right. This would make it applicable in over 90% of art transactions worldwide. Even Switzerland will then no longer want to be on the sidelines.

Find out in this section what resale rights are actually about and why it is so important for visual artists:

Actually, the copyright should be linked to the enjoyment of the work: Whenever someone reads a book, watches a movie or looks at a painting, a few cents would be paid to the author. On closer inspection, however, such a system would require total monitoring, so that the legislature was probably advised to set the licensing requirement one level above the enjoyment of the work, in the case of work placement.

The remuneration must therefore be paid by those who convey copyrighted works to an audience. Traditionally, this is done by performing a work (opera, theater, concert, cinema), by duplicating and distributing copies of the work (books, CDs, DVDs) or by electronic transmission (radio, television, Internet). It is characteristic in each case that the original - i.e. the first copy of the work - does not play a role economically.

It looks different in the field of fine arts. Everything here revolves around the original: only this is valuable. The Mona Lisa poster in the living room isn't worth much; the original in the Louvre, however, is priceless. Due to this fixation on the original, the artist normally only receives one payment for his work - namely when he sells it. Only the respective owners of the work and the brokers benefit from subsequent increases in value; So the art trade and the auctioneers. This fact puts visual artists at a disadvantage compared to the authors of other categories of work; So for example book authors or composers. This is because they receive royalties for all of the performances, reproductions, broadcasts and films described above (at least that is how it should be).

This is where the resale right comes in: it "follows" the work when it changes hands and grants the artist a small share in the sales price. The more frequently the work changes hands, the more popular it becomes and the greater the increase in value that it experiences from sale to sale. The artist's participation is fair, as the increase in value is largely based on the reputation that he or she has painstakingly developed over the course of an artist's life. It should not be denied that the art trade can also make a significant contribution to the reputation of an artist. He alone benefits from the margin, i.e. the difference between the buying and selling price.

Resale right is a French invention. It was discussed eagerly at the end of the 19th century, only to be put into effect in 1920.

The immediate cause was the sale of the painting "The Angel" by Jean-Francois Millet, which achieved a significant price. Meanwhile, the artist's family lived in abject poverty. A deeper reason was to support the widows and families of artists who died in WWI.

Belgium followed in 1921 with the introduction of a resale right, Italy in 1942, Germany in 1965 and Spain in 1987, to name just a few examples. Today around 70 countries around the world have implemented resale rights in their copyright.

The resale right is also regulated in the "Bern Convention for the Protection of Works of Literature and Art". This set of rules, to which almost all states have acceded, standardizes basic copyright rules and thus creates a basic harmonization of copyright law around the world. However, the contracting states are not obliged to incorporate resale rights into their national legislation. The application of the law is therefore limited to sales of works in which the artist lives in a country with resale rights and the sale also takes place in such a country (principle of reciprocity).

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In Germany, the resale right is standardized in Section 26 of the Copyright Act.

It is triggered by the fact that a work of fine art or photography is resold with the participation of an art dealer or auctioneer for a period of up to 70 years after the artist's death. Architecture and applied arts are not included, nor are transactions between private individuals.

Further requirements are: the sale proceeds are at least 400 euros, the transaction takes place in Germany and the artist is German or a citizen of a country that also has resale rights. (If the work of a US-American is sold in Germany, no resale right is due because the USA has not yet legally introduced a resale right.)

The amount of the remuneration entitlement is based on the net sales proceeds; i.e. the sales price without sales tax. The artist's participation starts at four percent and slowly melts away from sales proceeds of more than 50,000 euros. The remuneration is capped at 12,500 euros, i.e. there is no higher participation for the artist for a single sale, even if the work sells for several million euros.

Claims for information against the art trade can only be asserted by a collecting society. In Germany, Bild Kunst administers resale rights.

The total amount of remuneration has fluctuated between four and five million euros since 2007, of which around one million euros are transferred from abroad to Bild Kunst for the local sales of works by its members, which are subject to legal obligations.

When a resale right is due, it is only a small part of the sales proceeds. Nevertheless, it represents a significant source of income for artists who often only have a below-average income.
After the artist's death, the resale right becomes even more important for the heirs. On the one hand, they cannot create new works of art; on the other hand, they often bear the burden of managing the artist's legacy (storage, restoration, cataloging, research).

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The different design of the resale right in the individual states of the European Union as well as the fact that some countries had no resale right at all was seen as an obstacle to the free development of the EU internal market. Therefore, on September 27, 2001, the EU passed a directive (2001/84 / EC) on resale rights.

The individual states were given a generous implementation period until the end of 2005. Because of the directive, the resale right was introduced in Austria, the Netherlands, Ireland, Malta and Great Britain in the first place. However, these countries were also granted a further transitional arrangement, according to which they could only introduce resale rights for living artists until the end of 2011. The resale right has only been fully harmonized throughout the European Union since the beginning of 2012, i.e. it entitles artists and their heirs without distinction.
    
The directive not only obliges the states of the European Union to introduce resale rights, it also specifies a narrow corridor for its design. The guideline harmonizes the work categories to which the resale right is applicable, the sales transactions concerned and the remuneration rates. The cap on remuneration at 12,500 euros per transaction and the term of protection up to 70 years after the artist's death are also uniformly regulated. The only essential point in which the member states have room to maneuver is the setting of the minimum sales price from which the resale right payment begins. The lower this threshold, the more artists benefit from resale rights. While Germany has opted for 400 euros, the resale right in France only starts from 750 euros and in Austria only from a sales price of 2,500 euros. The maximum value stipulated by the directive is 3,000 euros.

The industry dialogue 2013
In 2013 the EU Commission organized a dialogue between the art trade and collecting societies in order to find solutions to problems of the administration of resale rights in practice. As a result, a recommendation was drawn up, which both sides have undertaken to implement.

For example, the collecting societies will provide the art trade with electronic information about the artists who have the right to reside (Bild Kunst has been offering a corresponding online database for a long time). The art trade will in turn provide the collecting societies with information on the sale of works subject to compliance in a coordinated format; this is already working relatively smoothly in Germany.

In 2015 the EU Commission will review the implementation of resale rights in Europe again.

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Copyright is national law. Just as there is no uniform global copyright law, as is the case with criminal law. At the same time, the states have already come closer together through international treaties, so that, for example, the showing of a film or the broadcasting of a song is subject to a license in most countries in the world.

The situation is different with the resale right: This right, which primarily ensures visual artists a share of the resale value of their works, is not recognized in the USA, Switzerland and China - all of which are important art markets.

The market shares in the global art trade in 2014 were 22% for the UK, 39% for the USA and 22% for China. The rise of China to become the third largest art market in the world (if you consider Great Britain as part of the EU) is significant. In 2006, China's share was only five percent.

An artist from the EU does not currently receive any compensation if one of his works is sold in the USA or China. Conversely, US and Chinese artists do not receive any compensation if their works are sold in the EU because the resale right is only granted on a reciprocal basis. Taking into account the market shares, the resale right would be valid in a third of all art sales worldwide without this mechanism, at least for all sales in the European Union.

However, since the principle of reciprocity has to be observed, in practice even in Europe only a part of the sales trigger the resale right. The artist must not have died longer than 70 years and he must come from the EU or another country that recognizes resale rights. Because of these restrictions, resale rights are currently used in less than ten percent of art sales worldwide. However, the quota would increase significantly if the resale right could be introduced in the USA, China and Switzerland.

The situation in the USA
At the end of the 1970s and again at the end of the 1980s, efforts were made in the USA to introduce resale rights. The second initiative was started by Senator Edward Kennedy, but to no avail.

At least an investigation was initiated by the Copyright Office, which held various hearings in the early 1990s. At the time, the final report recommended waiting for legislation in the European Union before the Congress should deal with the issue again.

As is well known, the European Union issued the Resale Right Directive in 2001, which provided for implementation in the individual states by 2006. In the USA, however, a new push towards the introduction of resale rights was initiated much later. In December 2011, a corresponding bill was introduced to Congress (Equity for Visual Artists Act). Again the Copyright Office was asked for a study on the effects of the introduction of the resale right.

A corresponding report was published on December 13, 2013. Among other things, it contains the following recommendations:

  • First of all, it is recognized that visual artists suffer a disadvantage in copyright law in that it primarily subjects the reproduction, distribution and sending of copies of works to a remuneration obligation and thus has no use for types of work in which only the trade in the original has a market value. As a result, copyright in this area fails to provide an incentive for artists to create further works.
  • Then it is stated that there is insufficient evidence to support the thesis that a resale right has a negative effect on the art market.
  • It is claimed that the introduction of a resale right would only benefit a small group of visual artists. In this respect, the recommendation states that Congress should carefully weigh the costs and benefits of introducing the law.

If the resale right is introduced, the authority recommends:

  • apply this to the entire art trade (auctioneers and galleries),
  • set a low minimum sale price so that as many artists as possible benefit from it
  • introduce a remuneration rate between three and five percent of the sales price for works whose sales price has increased,
  • to set a cap,
  • to apply the resale right only to works that were created after the law came into force,
  • the right to make collecting society mandatory,
  • to link a remuneration to the condition of the work registration and
  • the right to only grant living artists.

The recommendations are generally to be assessed positively. The fact that the resale right should only be awarded to living artists is based on the fact that the extension of the resale right to the heirs in Great Britain did not take place until 2012 and that the authority recommends an observation period. In addition, the resale right to apply only to newly created works is to be rejected.

The legal committees of both houses of the US Congress introduced new identical drafts for a resale rights law into the legislative process in January 2014. Thereafter, the resale right payment should

  • amount to five percent of the resale proceeds,
  • at a minimum sale price of $ 5,000 and
  • subject to a cap of $ 35,000.

The scope of application extends only to auction houses, not to galleries; however, a study on this question is planned. The suggestions of the Copyright Office to make further restrictions (entitlement to claims only for living artists, only for works that have been created since the law and registration obligation for foreign works) were therefore not followed.

In 2014, the Congress Legal Committee discussed a total of 12 different bills to modernize copyright law, including the American Royalties Too Act. The chairman of the committee will probably summarize the various issues in a modernization law.

The chances are good this time that a resale right will actually be introduced in the USA. Bild Kunst has actively and financially supported the process since 2011 together with its sister companies from the USA and Europe as well as the umbrella organization EVA.

The situation in China
In 2012, the legislative process was initiated in China to supplement the copyright law, which also provides for the introduction of resale rights.

The draft states that artists and their heirs should receive a share of the proceeds from auctioning a work of art or photography. The State Council should determine the details (e.g. the amount of remuneration).

At the moment (since the end of 2013) the draft is in the Legal Committee of the State Council. The legislative process could be completed in 2016.

The CISAC will accompany the legislative process and conduct lobbying work. She opened her own office in Beijing on January 15, 2014. The introduction of a resale right is high on the agenda.

The situation in Switzerland
In Switzerland, the introduction of the resale right was discussed intensively in 1992 as part of a new codification of copyright law, but was ultimately rejected because it was feared that it would have a negative impact on the domestic art market. Even an amendment to copyright law in 2007 did not lead to the introduction of resale rights, as the art trade knew how to prevent this through a sophisticated lobby campaign.

But in Switzerland, too, one cannot escape international development, even if it naturally always seems attractive there to form an "island" in the law that gives domestic industry an advantage.

At the beginning of December 2013, visarte, the Swiss professional association for visual arts, called for an action program to introduce resale rights. Our sister company ProLitteris has also been actively involved in the campaign since 2014.

In December 2015, the draft of a new copyright law is to be presented in Switzerland, which will primarily provide answers to the challenge of the digital economy. In connection with this legislative proposal, the introduction of a resale right will be discussed.

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The resale right is perceived by the art trade (galleries, auction houses, art dealers) as a financial burden. In countries like Germany, where the resale right has been known for a long time, however, pragmatic solutions have developed that have contributed to the widespread acceptance of the resale right. The same arguments against resale rights are being used around the world.

1st argument: The art trade is moving to countries without resale rights
This argument is always used by the art trade against resale rights. Many studies have examined the effects of the introduction of the resale right on the local art market, most recently the EU Commission in a report from December 2011. However, emigration tendencies have never been identified. The reason for this is that the resale right is only one of many cost factors that is also of little importance. More weight is given to the general tax system in the country of the transaction; the local sales tax in particular plays a role. In the EU alone, the general VAT rate varies between 15 and 25 percent. The art trade, however, is not entirely based on financial considerations. Much more important is the location where a seller meets the most financially strong buyers. Often certain places crystallize out as a market for certain works of art. These are the places where you can find the best expertise, the greatest options, and the highest level of trust.

2nd argument: The administrative effort outweighs the benefits
The administrative effort for the artists is minimal. The collecting societies observe the market, settle the resale right and pass it on to the artists. The management of the resale right by the collecting societies is easiest if the enforcement is subject to the collecting society. Payment can then be made to the relevant company for each subsequent sale. This is then responsible for passing the remuneration on to non-members. But even without a collecting society obligation, simple information and accounting systems have developed in the market. The information for which artists the collecting society settles the resale right can easily be found using the "artist search resale right" on the VG Bild-Kunst website. Galleries that work directly with the artist generally do not have to pay any resale rights, as their sales are usually first-time sales that are settled directly with the artist. However, you have to pay contributions to the artist's social security fund on the artist payments.

3rd argument: Living artists benefit the least from resale rights
It is true that works by younger artists are less likely to be resold than works by older, well-known or deceased artists. However, the criticism is ineffective, as it is intended that the heirs of an artist receive remuneration. The heirs of a composer or book author also receive royalties for using the works of their parents or grandparents. In addition, the number of living artists who benefit from the resale right depends heavily on the threshold at which the resale right begins. In Germany, this threshold is set relatively low with a resale price of 400 euros. That is why half of the distributions from Bild Kunst are distributed to living artists and half to heirs.

4th argument: Not the purchase price, but the increase in value is the right starting point for the resale right payment
Since the resale right is supposed to involve the artist in increasing the value of his works, this requirement is understandable in theory. In practice, however, such an approach could hardly be implemented, since the calculation of the increase in value would only be verifiable if the purchase price of the work was also disclosed. However, when the resale right was introduced, the art trade had massively resisted. Also, if the resale right were linked to the actual increase in value, the percentage would have to be significantly higher - but the result would be the same. In the English art trade, for example, the so-called "cascade effect" is claimed, for which there is no actual evidence. If it is to consist in the fact that with a rapid succession of resales each sale triggers resale right claims, then this is the logical result of the resale right on each individual sales transaction, as intended by the legislature. If, on the other hand, it arises from the fact that the parties to a sale make regulations on the distribution of the taxes that deviate from the legal model (resale right is to be paid by the seller), then the market will prevent it.

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