Auction Houses already moving against ART Act

Since the American Royalties Too Act was introduced in the US Senate at the end of last month, it appears that Sotheby's and Christie's have already stepped up their lobbying efforts in Washington DC, with Sotheby’s sending lawyers to visit some lawmakers in the Capitol. Indeed, the New York Times notes that "Sotheby’s and Christie’s have spent about $1 million in the last couple of years to hire well-known legal and lobbying talent in Washington..."

In light of the failure of the earlier version of the bill (the Equity for Visual Artists Act), supporters of the ART Act have a tough fight ahead to get it through. However, Sotheby's and Christie's clearly do not want to take any chances.

The auction houses' arguments against a resale royalty are essentially the same as those that have been trotted out in other countries around the world against equivalent laws: that the royalty would damage the art market with little benefit to the majority of artists. However, while there may be artists who support the claim that they see little benefit from the right, there has still not been conclusive evidence to show that an artist's resale right has an negative effect on an art market.

It is still early days. Will it be best arguments or most money thrown at the issue that wins?

Source: The New York Times, 23 March 2014

Henderskelfe Round 2: Still no tax to pay on Reynolds' portrait of Omai

A year ago I reported on the case of Henderskelfe, in which the Upper Tribunal for tax announced an apparently odd decision: that an iconic portrait by Sir Joshua Reynolds, which had been sold for £9.4 million, was a “wasting asset” and that the sale proceeds were therefore exempt from capital gains tax.

The painting’s owners were saved a fortune. HMRC was not pleased, and appealed. More bad news for HMRC: the Court of Appeal’s decision, announced last week, agreed with the Upper Tribunal’s previous judgment and dismissed the appeal.

Sir Joshua Reynolds' Portrait of Omai, c.1775

Briefly, the reasoning behind the Upper Tribunal’s decision of last year was as follows. Since 1952, Castle Howard – the ancestral home of the painting’s owners - had been open to the public as a business. From 1952 until its sale the painting was on display in the Castle for the public to see. As a famous painting, it was one of the Castle’s attractions. The painting was therefore in the nature of “plant” – that is, an object retained and used for the purposes of a trade. Anything in the nature of “plant” is automatically deemed by the capital gains rules to be a “wasting asset”, and in turn wasting assets are exempt from capital gains tax. (See last year’s report for more detail.)

HMRC’s arguments that this exemption did not cover the painting were rejected by the Court of Appeal. The Court pointed out that, despite the fact that the painting was clearly not in any factual sense a “wasting” or depreciating asset (quite the opposite), it nonethless passed the tests set out by case law to be “plant” and as a consequence was clearly deemed by the capital gains tax rules to be a “wasting asset” for tax purposes. 

The Court also pointed out that the rules which exempt wasting assets from capital gains tax are not intended to be a generous measure allowing the "very occasional gainer from the disposal of a wasting asset to keep the gain tax-free”. By definition, wasting assets will normally be sold at a loss. Take a common example of a wasting asset: an ordinary car. On sale, its owner will almost certainly make a loss, not a gain. But since the car is exempted from capital gains tax, any gain on the sale would not be a chargeable gain, and – crucially – neither is any loss an allowable loss. In other words, the rules prevent the sellers of wasting assets from creating allowable losses which they could use to reduce any tax payable on other chargeable gains made during the year.

The present case is just one of those rare occasions when these normally HMRC-friendly rules work in the taxpayer’s favour.

ArtsScape launched

This blogger's friends and former Slaughter and May colleagues Caroline Barnett and Bernadette Thomas have just let him know that they have set up their own legal and business affairs consultancy, ArtsScape, which is dedicated to the arts and creative industries. Caroline and Bernadette say:

"You’ll see from our website that we are now jacks of all trades rather than IP specialists, but IP forms a major part of the work we do".

This blog too is for art-oriented jacks of all trades rather than IP specialists, so we share the same footprint.  Good luck, Caroline and Bernadette, we're curious to see how this venture fares.

Good news for national heritage property in today’s budget announcement

Today’s 2014 budget announcement included some good news for the UK’s national heritage: the combined annual budget for the Cultural Gifts Scheme (CGS) and the Acceptance in Lieu scheme (AIL) is to be increased from £30 million to £40 million.

Head of a Peasant Woman, Vincent Van Gogh c. 1884.
Credit: The National Gallery. Donated under the CGS scheme in 2013

Under the well-established AIL scheme, a person who is liable for inheritance tax can offer pay that tax liability by means of giving “national heritage property” (broadly, art works and other objects which are deemed to be pre-eminent for their national, scientific, historic or artistic interest) in full or part payment of tax, instead of paying cash.

The newer CGS complements the AIL scheme by allowing UK taxpayers to make lifetime gifts of important works of art to the nation in return for reductions in their tax liabilities.

The two schemes currently share a budget of £30 million so that, in any given tax year, the reduction in tax effected under both schemes cannot exceed £30 million. If an artwork for was offered under either scheme whose value would cause the annual limit to be exceeded, it could not be accepted. That budget was raised from £20 million for the AIL scheme alone to £30 million when the CGS was launched, following criticism that the CGS would eat into the AIL scheme’s budget.

Today’s increase means that the potential amount of tax allocated to increasing the UK’s national heritage collection in public hands has doubled since the days since before the CGS was introduced.

Recent donations under the CGS include an early Van Gogh entitled Head of a Peasant Woman (reported on Art and Artifice here), now on display in the National Gallery. 

ArmaLite in Italy's sights over Gun-Toting David ad

Here's a guest post from Ironmark Law Group IP attorney and blogger Lucas Michels on some of the copyright-related aspects of a news item that has attracted a lot of attention in European copyright circles -- ArmaLite Inc's decision to harness the iconic image of Michelangelo's David in a recent marketing campaign.  This is what Lucas has to say:

U.S. Gun Manufacturer in Copyright Dispute With Italian Government Over a Gun-Toting David

Several news outlets reported earlier this week that U.S. weapons manufacturer ArmaLite Inc. is in a copyright dispute with the Italian government over ArmaLite’s advertisement depicting Michelangelo’s David brandishing an ArmaLite AR-50A1 rifle. The ad first came to the Italian government’s attention when ArmaLite published it in the Italian magazine L’Espresso. Following the ad’s publication, Italian cultural minister Dario Franceschini warned ArmaLite that, beyond being offensive, their ad violated Italian copyright law and that the Italian government would take action to stop the ad.

The Italian government can likely take such action because it claims ownership to Michelangelo’s David and the moral rights associated with the famous work. Although no legal claims have been filed in Italy or the United States, the Italian government would likely claim that the ad constitutes a moral rights violation under Italian copyright law because it is “prejudicial to the honor or reputation” of Michelangelo and it is a “distortion” and/or “mutilation” of David pursuant to Article 20(1) of the Protection of Copyright and Other Rights to Exercise (Law No. 633 of 22 April 1941).

This possible claim is by no means novel, even for an IP attorney from a weak moral rights jurisdiction like United States. Yet, what makes this dispute interesting is the possible defenses that ArmaLite could assert. ArmaLite could not likely argue that their ad is permitted as fair use, even under more lenient U.S. fair use standards (17 U.S.C. § 107), because the ad has a commercial purpose and uses the work in its entirety. An Italian Court would accept a fair use defense even less as Italy does not recognize the fair use doctrine under its statutory law, and has only acknowledged a few permissible exceptions to the unauthorized use of a protectable work.

Absent fair use, one of the only potential defenses that ArmaLite may assert is that the Italian federal government does not own Michelangelo’s David. It was reported in 2010 that the City of Florence (where David now resides) disputed the Italian government’s claim of ownership over David. The federal government asserts that they own David by having paid for moving the statute to its current location in Florence after Italy was unified in 1873. In contrast, Florentine officials claim that the Florence City Hall originally commissioned David from Michelangelo in the 16th century, thereby entitling the City of Florence to ownership over the work. To date, the Italian government and the City of Florence have yet to settle their dispute as to the ownership of David. 

Although it remains to be seen how the Italian federal government will pursue their dispute against ArmaLite, or who has valid title to Michelangelo’s David, the one thing no one disputes is that ArmaLite should have known that displaying David with an assault rifle in an Italian publication would have an adverse fallout in Italy.

Keith Haring Foundation sued by collectors claiming $40 million in damages after "fake" label

Keith Haring, "Untitled (Radiant Baby)", 1990

Nine art collectors have recently filed a $40 million lawsuit against the Keith Haring Foundation, which publicly labelled roughly 80 works as fakes, apparently refusing to consider additional information that would have helped to establish their provenance.

The collectors said that they started purchasing Haring's artworks from some artist's friends in 2007. In the same year, a dealer working with Elizebeth Bilinski, one the collectors, submitted photographic transparencies of dozens of the works and letters of provenance to the foundation's authentication committee, which rejected the works as "not authentic", without  any explanation, according to the suit.

In March 2013, the plaintiffs exhibited these works at a Haring show in Miami and the foundation sued the show's organizers claiming that the majority of the works were fake and that many of them had already been found to be "not authentic" by the foundation back in 2007 when Ms. Bilinski had submitted them.

The plaintiffs argue that the foundation's actions have "limited the number of Haring works in the public domain, thereby increasing the value of the Haring works that the foundation and its members own or sell." In this regard, they report that the foundation sold more than $4.5 million worth of Haring's artworks between 2008 and 2011, and then, in 2012, the foundation disbanded its authentication committee.

The plaintiffs seek $40 million in damages, saying that they lost sales because potential buyers were deterred by the foundation's statement and actions. The collectors said that their works were effectively unsalable in major auction houses if they were not first certified by the foundation.

The case is Bilinski et al. v the Keith Haring Foundation Inc. et al, U.S. District Court for Southern New York, No. 14 - cv-1085.

American Royalties Too Act

A quick note further to our story last week.

For those that are interested in reading the full text of the ART Act, which was introduced in the US Senate last week, it is now available here.

Artists v Cody Foster

Hot on the heals of the story of M&S allegedly ripping off the designs of an independent artist, comes a similar tale from the US.

An article by Fast Company details the most recent activities of US company Cody Foster & Co. Most recent, because it seems that this is not the first time Cody Foster & Co. has been accused of copying artists' works.

Indeed, as background to the current story, in the last few years Cody Foster has been regularly accused of selling numerous items on its website which are very similar, if not identical, to the works of several different artists and designers.

Many of these small artists, unfortunately, do not have the resources to bring a legal claim against Cody Foster. Therefore, they have tried to bring the company to account by publicising its actions on the internet and via social media. To some extent this has been successful - with some major retailers ceasing their dealings with Cody Foster. This does not appear, however, to have stopped Cody Foster. In fact, rather than produce their own original pieces, Cody Foster is just trying to suppress the claims against them. The Fast Company reports:

"Accused of ripping off the designs of a number of independent designers late last year, [Cody Foster & Co] is now trying to settle one of the lawsuits that has sprung up in the wake of the allegations. 

...The details of the agreement were initially this: While Cody Foster denied having pirated Smith's designs, Cody Foster was still willing to agree to a license to use Smith's deer antler designs, both retroactively and going forward in perpetuity. In exchange for this license, Cody Foster was willing to pay Smith $650 as long as she submitted to a gag order, which would not only prevent her from talking about the dispute in the future, but which would require Smith to delete any mentions of her dispute with Cody Foster from the web, including tweets, Facebook statuses, blog posts, and more. Smith would also have to acknowledge that she had defamed Cody Foster in the eyes of the company's clients."

In other words, Cody Foster is mainly concerned with cleaning up its online reputation. [Although, I'd argue that it can't be that concerned, considering it was only offering $650.] In any case, whether the artist accepted the settlement or not, Cody Foster still has a way to go. From a quick search on Google for 'Cody Foster', apart from the company's own website, the majority of the results contain references to the copying allegations.

The Fast Company article which provides some excellent detail on Cody Foster's activities, as well as comparisons of artists' designs and Cody Foster's offerings, can be found here.

Source: Fast Company, 5 March 2014 & 18 October 2013

Blue Shield Issues Statement on Ukraine

In light of the current situation in Ukraine, the Blue Shield International - an organisation and network which works to protect the world's cultural heritage during armed conflict - has issued a statement.

By way of background, Blue Shield International works to carry out the mission specified in the Convention for the Protection of Cultural Property in the Event of Armed Conflict with Regulations for the Execution of the Convention 1954 (the 1954 Hague Convention), which regulates the conduct of nations during war and military occupation in order to assure the protection of cultural sites, monuments and repositories, including museums, libraries and archives.

Blue Shield's full statement can be found here.


Key extracts are as follows:

"Following the civil conflict that has been shaking Ukraine, the Blue Shield wishes to express its deep concern regarding the safeguarding and protection of the country's invaluable cultural and historical heritage, as well as the institutions that house them and the people that care for them. 

Ukraine's museums, libraries and documentary heritage, monuments, churches and monasteries are under risk of threat from looting and destruction. The international heritage community wishes to warn of the potential harm that cultural property may suffer.
Reports regarding damages endured by the Kiev History Museum have given the Blue Shield and its members reasons for concern. The destruction of monuments linked to the political history of Ukraine is also at the forefront of the cultural community's concerns... 

Ukraine has been a State Party to the 1954 Hague Convention...and its first Protocol since their ratification on 6 February 1957. Ukraine is also a State Party to the 1972 Convention Concerning the Protection of the World Cultural and Natural Heritage since its ratification on 12 October 1988. Ukraine's 2004 International Humanitarian Law Manual clearly states that personnel responsible for the defence and protection of cultural property are "protected under international humanitarian law" and that directing attacks against such persons or "clearly identifiable cultural property" constitutes "a serious violation of international humanitarian law". Cultural property is clearly defined within the manual as being "objects of great importance to the cultural heritage of peoples [and] that play an important role in their spiritual life." These include, among others, works of art and religious or secular monuments. 

The ratified international conventions, Ukraine's specific legislation, and customary international law impose on nations the obligation to protect their cultural heritage in times of armed conflict. The Blue Shield calls on all parties concerned to fulfil these obligations and to protect the outstanding cultural heritage sites and repositories located within Ukraine."

UK artist squares up to M&S over alleged copying

When UK designer, Louise Verity, came across high street giant Marks & Spencer's latest wall art offerings, she was understandably concerned.

One of Verity's works

M&S piece

Verity has produced and sold her works - which consist of various large messages displayed across printed pages (as in the example above) - through her business Bookishly since 2009.

For their SS14 season, M&S began selling framed wall prints which closely imitated her own.

The World Intellectual Property Review reports:

After seeing the M&S products in November last year, Verity asked for legal advice from a lawyer, who wrote to the retailer suggesting that it was in breach of copyright. 

In response, M&S’s legal representatives said they did not believe the retailer was infringing copyright.

Verity told WIPR: “M&S keeps saying that I don’t own and cannot claim rights on the idea and that the style is an established design practice, but I never claimed the concept was my idea.  

“The problem I have is that it’s a very distinct style and I use the same font in everything I do. The M&S product uses the same font and the layout looks like one of mine.”

Any IP lawyers reading this will be very familiar with the idea of copying the idea versus the expression. I would be interested to hear thoughts on whether this would amount to copyright infringement by M&S. At this stage, however, it does not appear that Verity has gone as far as filing a claim against M&S. Indeed, it seems that M&S has removed their piece from their website and it is no longer available. So perhaps the saga is over for now.


Source: World Intellectual Property Review, 24 February 2014