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[Federal Register Volume 78, Number 61 (Friday, March 29, 2013)]
[Notices]
[Pages 19326-19329]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07270]

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LIBRARY OF CONGRESS

United States Copyright Office

[Docket No. 2013-3]

Resale Royalty Right; Public Hearing

AGENCY: U.S. Copyright Office, Library of Congress.

ACTION: Notice of public hearing.

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SUMMARY: The United States Copyright Office will host a public hearing 
to discuss issues relating to the consideration of a federal resale 
royalty right in the United States. The meeting will provide a forum 
for interested parties to address the legal and factual questions 
raised in the comments received by this Office in response to its 
September 2012 Notice of Inquiry.\1\
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    \1\ 77 FR 58175 (Sept. 19, 2012), available at http://www.copyright.gov/fedreg/2012/77fr58175.pdf.

DATES: The public hearing will take place on April 23, 2013, from 1:00 
p.m. to 5:00 p.m. The Copyright Office strongly prefers that requests 
for participation be submitted electronically. A participation request 
form is posted on the Copyright Office

[[Page 19327]]

Web site at http://www.copyright.gov/docs/resaleroyalty/. Persons who 
are unable to submit a request electronically should contact Jason M. 
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Okai, Counsel for Policy and International Affairs, at 202-707-9444.

ADDRESSES: The public hearing will take place in the Copyright Office 
Hearing Room, LM-408 of the Madison Building of the Library of 
Congress, 101 Independence Avenue SE., Washington, DC 20559.

FOR FURTHER INFORMATION CONTACT: Karyn Temple Claggett, Associate 
Register of Copyrights and Director of Policy and International 
Affairs, by email at kacl@loc.gov or by telephone at 202-707-1027; or 
Jason Okai, Counsel for Policy and International Affairs, by email at 
jokai@loc.gov or by telephone at 202-707-9444.

SUPPLEMENTARY INFORMATION: 

Background

    At the request of Congress, the Copyright Office is reviewing: (1) 
how the current copyright legal system affects and supports visual 
artists; and (2) how a federal resale royalty right for visual artists 
would affect current and future practices of groups or individuals 
involved in the creation, licensing, sale, exhibition, dissemination, 
and preservation of works of visual art. The Office published a general 
Notice of Inquiry on September 19, 2012 seeking comments from the 
public. The Notice provided background on the Office's previous review 
of this issue in its December 1992 report titled Droit De Suite: The 
Artist's Resale Royalty \2\ (the ``1992 Report'') as well as recent 
international developments. After extending the deadline for the public 
to submit comments until December 5, 2012, the Office received fifty-
nine comments from various interested parties. The comments raised a 
variety of issues, including purely legal matters as well as specific 
experiences and perspectives of individual artists, corporate entities, 
and collecting societies. All comments, along with the Notice of 
Inquiry, are available at http://www.copyright.gov/docs/resaleroyalty/. 
The Office now announces a public hearing to receive further input on 
issues raised in the comments. The agenda and the process for 
submitting requests to participate in or observe the public hearing is 
available on the Copyright Office Web site.
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    \2\ U.S. Copyright Office, Droit De Suite: The Artist's Resale 
Royalty (1992), available at http://www.copyright.gov/history/droit_de_suite.pdf.
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Subjects of Public Hearing

    The public hearing will cover the following topics: (1) The 
changing legal landscape; (2) portability of the secondary art market; 
(3) effect on the primary art market and the incentive to create new 
works; (4) first sale and the free alienability of property; (5) visual 
artists and sales of works; (6) the Equity for Visual Artists Act; (7) 
effect on museums; and (8) constitutional concerns. Each of these 
topics is explained in more detail below.
    1. The changing legal landscape. In its 1992 Report, the Copyright 
Office did not recommend adoption of a resale royalty right in U.S. 
law.\3\ That report, however, also noted that Congress might wish to 
reexamine whether the United States should implement a resale royalty 
law if the European Union harmonized its resale royalty law.\4\ In 
response to the September 19, 2012 Notice of Inquiry, several 
commenters stated that China, which has established itself as a major 
art market, is also considering a resale royalty right in pending 
domestic legislation. Many commenters also noted that even though the 
European Union harmonized its resale royalty law through its Droit de 
Suite Directive of 2001 (the ``EU Directive''), nothing has changed 
substantively in the United States since the Copyright Office's 1992 
Report and there is therefore no need to consider adopting a resale 
royalty now.
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    \3\ 1992 Report at 149.
    \4\ Id.
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    Have there been changes in the worldwide legal landscape, art 
market, or business practices since the Office's 1992 Report that 
support or undermine implementation of a resale royalty?
    2. Portability of the Secondary Art Market. Some commenters 
expressed concern that if the United States adopts a resale royalty 
right, a substantial portion of the U.S. art market will shift to 
markets where no resale royalty exists currently. Conversely, some 
commenters cited figures showing that the German, United Kingdom, and 
French markets actually grew after the EU Directive was implemented, 
while in the United States and Switzerland, where there is no resale 
right, the markets declined.
    What factors, other than implementation of a resale royalty right, 
affect the portability of the art market? What are the experiences in 
countries following the implementation of a resale royalty where one 
did not exist previously? For example, if China implements a resale 
royalty, how would this impact the worldwide market?
    3. Effect on the Primary Art Market and the Incentive to Create New 
Works. Some commenters addressed whether a resale royalty fosters 
creativity for young artists, contributes to the financial 
sustainability of visual artists, motivates artists to produce more 
artistic works, and enhances an artist's reputation thereby generating 
more primary and secondary sales. Some comments stated that the 
existence of a resale royalty would not incentivize artists to create 
and that the royalty only would benefit a very few artists who are 
already professionally and financially successful.
    The Office is interested in learning more about the effect of a 
federal resale royalty on the primary art market and whether it is an 
incentive for artists to create new work. Additionally, the Office 
would like further information on whether the payment of a resale 
royalty to artists' heirs foster creativity and, if so, how.
    4. First Sale and the Free Alienability of Property. Some 
commenters suggested that a resale royalty is incompatible with the 
first sale doctrine set forth in 17 U.S.C. 109. These commenters argued 
that a resale royalty provides an ongoing property right each time an 
artwork is sold (subsequent to its initial sale), prevents buyers from 
acquiring unencumbered title to a work of art, and adds a layer of 
complexity to secondary transactions. Other commenters argued that a 
resale royalty does not conflict with the ability to freely transfer 
property because the royalty simply would require payment when a 
subsequent sale has been made and does not otherwise restrict the 
transfer or sale of a particular work of art.
    In light of these comments, the Office has the following questions: 
To what extent, if any, are the first sale doctrine and a resale 
royalty right incompatible? Would a resale royalty have a detrimental 
effect on the initial sale of the artwork? Should the right to claim 
royalties on secondary sales be waivable and, if so, what effect would 
that have on initial sales of artwork?
    5. Visual Artists and Sales of Works. Many commenters suggested 
that visual artists are at a great disadvantage in relation to creators 
of other copyrighted works because visual artists are not paid for the 
subsequent resale of their original works and do not enjoy a benefit 
proportional to the success of their work. Thus, these commenters 
cautioned that without a resale royalty, visual artists are excluded 
from the most significant profits that their works may generate 
following its creation.
    Commenters opposing a resale royalty noted that copyright law does 
not assure that each type of work will generate

[[Page 19328]]

similar levels of remuneration and it is not the role of copyright law 
to elevate one type of work over another. These commenters further 
claimed that any perceived inequities in the amount of remuneration for 
a particular category of work exists because of the characteristics of 
that type of work and the attendant methods of exploitation for those 
works.
    Thus, the Office is interested in whether there is such an inequity 
and, if so, to what extent, if any, a resale royalty will affect it.
    6. The Equity for Visual Artists Act. The Office received twenty-
five comments that either cited to the Equality for Visual Artists Act 
(``EVAA'') \5\ or commented directly on the proposed legislation. The 
Office is interested in hearing more about what provisions should or 
should not appear in any resale royalty legislation and, more 
specifically, views on the following EVAA provisions:
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    \5\ H.R. 3688, 112th Cong. (2011); S. 2000, 112th Cong. (2011).
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    a. Transaction Types. The current version of the EVAA applies only 
to live auction sales when the auction house meets certain eligibility 
requirements. Many comments noted that a resale royalty limited to 
certain live auction sales would not represent the majority of 
secondary art sales and would therefore fail to benefit a significant 
number of artists. Other commenters noted that, due to the high volume 
of transactions, it would simply be impractical to apply the right to 
additional types of sales such as online auctions, private sales, or 
gallery sales. The Office would like more information on the proper 
universe of sales to which the resale royalty should be applied.
    b. Scope. A few comments noted that some art buyers view art as 
more than paintings, sculptures, or photographs and therefore any 
definition of art for the purposes of establishing a resale right 
should be broader than that in the EVAA. The Office thus would like 
further input regarding what types of artwork should or should not be 
included in any potential legislation.
    c. Collection and Distribution of Royalties. Commenters stated 
that, generally, either a government agency or a designated collection 
society administers the resale royalty in most jurisdictions that have 
such a royalty law. These government agencies or collection societies 
identify qualifying sales, collect funds, deduct an administrative fee, 
and redistribute the monies to the artists. The collecting society 
scheme proposed in the EVAA would be different because the collecting 
society would not only collect the royalty and redistribute it to the 
artists, but it would also use royalty monies to fund an escrow account 
from which it would distribute grants to museums to purchase more art. 
The Office would appreciate more information on the pros and cons of 
such a structure.
    d. Duration. Many commenters favor keeping the term of the resale 
royalty right consistent with the term of copyright because such a term 
could easily be tracked and calculated and also allows for the royalty 
payments to an artist's heirs. The Office would like to learn more 
about how to calculate a justifiable term for a resale royalty right.
    e. Threshold Value. The EVAA establishes that a resale royalty 
would only be paid on artwork sales of $10,000 or more. Some comments 
noted that a $10,000 threshold amount would exclude many types of 
works, e.g., photographs and prints, but also many artists whose work 
is resold in the secondary market for less than $10,000. Other comments 
suggested that too low of a threshold would result in a situation where 
the cost of administrating some royalty payments would be higher than 
the cost of administering the payments. The Office is thus interested 
in learning more about whether there should be a minimum threshold 
before a resale royalty is owed and, if so, what that threshold should 
be.
    f. Payment. Based on a review of the comments, determining which 
entity should be responsible for payment of the royalty following the 
resale of a work is somewhat controversial. Jurisdictions that have a 
resale royalty differ on which party is responsible for paying the 
royalty. The EVAA provides that the party responsible for remitting the 
royalty to the collecting society would be the party responsible for 
receiving the ``money or other consideration'' from the sale. The 
Office would like further information on which party should be 
responsible for paying any resale royalty to the author.
    g. Royalty Rate. Some comments noted that the EVAA's proposed 7% 
royalty would be one of the highest rates in the world. Many of the 
comments suggested a 5% royalty with or without a limit on total 
remuneration as the most consistent with worldwide practice. The Office 
would like more information on what a reasonable royalty rate could be 
and how to determine what is reasonable.
    7. Effect on Museums. Under the EVAA, museums are eligible to 
receive grants for purchasing art based on a portion of the resale 
royalty paid to the author. One comment noted that the EVAA may 
inadvertently undermine the ways in which museums acquire and 
deacession works as well as limit museums' access to certain pricing 
information related to works or art. The Office is interested in 
learning more about the impact of these grants on museums' purchasing 
behavior.
    8. Constitutional Concerns. Two companies submitted comments 
highlighting constitutional concerns over federal resale royalties. The 
Office is interested in hearing from parties wishing to elaborate on 
the arguments summarized below.
    a. Retroactivity and Due Process. One comment expressed concerns 
that if a resale royalty would apply retroactively to purchases already 
concluded it would benefit artists at the expense of buyers and 
collectors that already purchased the artwork without the requirement 
to pay a royalty on the secondary sale. In addition, the comment stated 
that while application of a royalty to new works may be permissible 
under the Copyright Clause of the U.S. Constitution, its retroactive 
application raises due process concerns. Thus, the Office would like to 
hear more regarding whether retroactive legislation would be barred by 
the Due Process Clause of the U.S. Constitution.
    b. Takings. One comment noted that applying a resale royalty to 
pre-existing works may implicate the Takings Clause of the U.S. 
Constitution through a limitation on the free alienation of property 
and the transfer of the royalty payment from one individual to another. 
The Office would like to learn more about whether pre-existing works 
would implicate the Takings Clause.
    c. Prohibition Against Bills of Attainder. One comment noted that a 
federal resale royalty law such as the proposed EVAA may raise issues 
under the constitutional prohibition on bills of attainder because it 
specifies particular types of auctioneers that must pay the royalty. 
For example, the EVAA proposes that the royalty shall apply if the sale 
takes place in a public auction house that has annual sales in the 
previous year of over $25 million--excluding online and private sales. 
The Office is thus interested in more information on the relationship 
between the EVAA's limitations and the constitutional prohibition on 
bills of attainder.

Requests To Participate

    Requests to participate should be submitted online at http://www.copyright.gov/docs/resaleroyalty/. The requestor should also 
indicate, in order of preference, the sessions in

[[Page 19329]]

which the requestor wishes to participate. Depending upon the level of 
interest, the Copyright Office may not be able to seat every 
participant in every session he or she requests, so it is helpful to 
know which topics are most important to each participant. In addition, 
please note that while an organization may bring multiple 
representatives, only one person per organization may participate in a 
particular session. A different person from the same organization may, 
of course, participate in another session. Requestors who already have 
submitted a comment in response to the Office's September 19, 2012 
Notice of Inquiry, or who will be representing an organization that has 
submitted a comment, are asked to identify their comments on the 
request form. Requestors who have not submitted comments should include 
a brief summary of their views on the topics they wish to discuss 
directly on the request form. Nonparticipants who wish to attend and 
observe the discussion should note that seating is limited and, for 
nonparticipants, will be available on a first come, first served basis.

    Dated: March 25, 2013.
Karyn A. Temple-Claggett,
Associate Register of Copyrights and Director of Policy and 
International Affairs.
[FR Doc. 2013-07270 Filed 3-28-13; 8:45 am]
BILLING CODE 1410-30-P
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