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Above: Plaintiff Chuck Close.
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The Ninth Circuit recently issued its decision regarding the validity of the California Resale Royalty Act (“CRRA”) in three consolidated appeals: Close v. Sotheby’s, Inc., No. 16-56234, The Sam Francis Foundation v. Christie’s, Inc., No. 16-56235 and The Sam Francis Foundation v. eBay Inc., No. 16-56252. 2018 WL 3322222 (9th Cir. July 6, 2018).

As previously discussed on this blog, the CRRA provides that an artist may recover a five percent royalty on subsequent sales of his or her artwork, subject to certain statutory limitations. The plaintiffs in these actions—The Sam Francis Foundation, the Estate of Robert Graham, and the artists Chuck Close and Laddie John Dill—sought recovery of these statutory royalties from the defendants—Christie’s, Sotheby’s and eBay. In response, the defendants argued that the CRRA was unconstitutional because it violated the principles of the “first sale doctrine,” codified in section 109(a) of the Copyright Act of 1976, pursuant to which the lawful owner of a copyrighted work is entitled to dispose of his or her ownership in that property without acquiring the permission of the copyright owner. The Ninth Circuit, therefore, was asked to determine whether the “first sale doctrine” preempted the CRRA.

Handing a resounding victory to the defendants, the Ninth Circuit upheld the Central District of California’s dismissal of the plaintiffs’ claims for resale royalties postdating January 1, 1978, the effective date of the 1976 Copyright Act. The Ninth Circuit largely adopted the defendants’ argument that the CRRA is expressly preempted by section 301(a) of the 1976 Copyright Act. In so holding, the Ninth Circuit determined that the right to resale royalties codified by the CRRA was “equivalent to the federal distribution right codified in § 106(3), as limited by the first sale doctrine codified in § 109(a).” Close, 2018 WL 3322222, at *6. As the court explained:

Although the CRRA’s resale royalty right and § 106(3)’s distribution right are not coextensive, they are equivalent. The two rights differ in that one grants artists the right to receive a percentage payment on all sales of artwork after the first, while the other grants artists the right to receive full payment on the first (and only the first) sale. But, at root, both concern the distribution of copies of artwork and define artists’ right (or lack thereof) to payment on downstream sales of those copies.

Id.

Significantly, the Court of Appeals determined that “the CRRA is designed precisely to . . . afford[] artists a right to at least some measure of payment on every sale after the first. . . . In effect, the CRRA creates an inalienable restraint on alienation.” Id. Accordingly, the court concluded, the CRRA conflicts with the first sale doctrine, which is meant to embody the rule against restraints on alienation:

In short, the CRRA does not merely grant an additional right beyond what federal copyright law already provides but fundamentally reshapes the contours of federal copyright law’s existing distribution rights. This runs counter to § 301(a), which precludes ‘all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright,’ even if they are not precisely within the contemplation of the Copyright Act.

Id.[1]

The Ninth Circuit rejected arguments from the plaintiffs distinguishing between the distributional rights under the Copyright Act and the monetary rights created under the CRRA. See id. at *7 (finding that, despite “differences in how the CRRA and § 106(3) affect artists’ right to payment,” the “significant overlap” between their impacts is a sufficient basis for preemption). The panel also rejected an analogy that the plaintiffs drew between artists’ rights under the CRRA and artists’ right to privately contract with purchasers for resale royalties, noting that, while artists are permitted to contract freely under the Copyright Act, a statutory provision mandating payments to the artist for any subsequent sales imposes an impermissible restraint on the right of contract. See id. (“Plaintiffs have misunderstood the difference between a law that permits an act and a law that compels an act.”).[2]

The Ninth Circuit’s decision will likely present a significant headwind for other states considering similar codifications of resale royalty legislation, and may shift the focus of those in favor of such protection back to the passage of federal resale royalty legislation.[3]

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[1] The Ninth Circuit declined to rule on the Takings Clause argument articulated by the defendants. Id. at *11.

[2] The decision did not end in total defeat for the plaintiffs. Relying heavily on its prior decision in Morseburg v. Balyon, 621 F.2d 972 (9th Cir. 1980), the Ninth Circuit found no preemption under the 1909 Copyright Act, which governed between the CRRA’s enactment on January 1, 1977 and the January 1, 1978 effective date of the 1976 Copyright Act. Close, 2018 WL 3322222, at *10. While acknowledging that several post-Morseburg Supreme Court cases cited by the defendants, including Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. 519 (2013) and Quality King Distributors, Inc. v. L’anza Research International, Inc., 523 U.S. 135 (1998), had created “tension” with Morseburg, the Ninth Circuit held steadfastly that it was “not persuaded that defendants have identified ‘clear irreconcilability’” between Morseburg and the intervening authority of the Supreme Court. Close, 2018 WL 3322222, at *9.

[3] The most recent legislation, the American Royalties Too Act of 2015, was introduced on April 16, 2015 in the House by Representative Jerrold Nadler (D-NY) and in the Senate by Senator Tammy Baldwin (D-WI), but both bills died in committee. See H.R. 1881, 114th Cong. (2015); S. 977, 114th Cong. (2015).

On June 13, 2018, Judge Frederic Block of the Eastern District of New York issued an impassioned decision upholding the $6.75 million damage award he granted the aerosol artists of 5Pointz in February 2018. The court denied the defendants’ post-trial motion to grant a new trial or vacate the February 2018 judgment under Federal Rules of Civil Procedure 59(a)[1] and 52(b).[2]

As discussed previously on this blog, this case arose from defendant property-developer Gerald Wolkoff’s decision to whitewash his Long Island City building complex (“5Pointz”), thereby destroying the extensive aerosol art he had previously permitted artists to paint on its walls.[3] Wolkoff acted in the aftermath of Judge Block’s denial of those artists’ application for a preliminary injunction against Wolkoff’s demolition of 5Pointz, but before Judge Block had issued a written decision and without providing the artists or the community any notice. On February 12, 2018, after a three-week trial, Judge Block ruled that the aerosol artworks at issue were of “recognized stature” under the Visual Artists Rights Act of 1990 (“VARA”) and that Wolkoff’s “willful”[4] destruction of them warranted the maximum amount of statutory damages.[5]

In moving for a new trial or to vacate Judge Block’s judgment, the defendants put forth two central arguments. First, they asserted that the court made several errors in applying the “recognized stature” standard under VARA. They contended that the court erroneously relied on plaintiffs’ expert Renee Vara’s after-the-fact assessments of the merit of the works, which they argued could not serve as proof that the works had achieved recognized stature at the time of their destruction.[6] They separately argued that Jonathan Cohen, the curator of 5Pointz, judged the quality of the artists, not the quality of the works, when he decided to allocate wall space to particular artists, so his assessments of artistic merit were irrelevant to the “recognized stature” inquiry.[7] They further argued that the court failed to make individualized findings of fact on recognized stature for each individual work.[8] Second, the defendants argued that no basis existed for the court to find that Wolkoff acted willfully when he surreptitiously whitewashed the walls of 5Pointz in the middle of the night, because Wolkoff had not violated “clearly established law.”[9] They claimed that, when Wolkoff whitewashed the building, it was not “clearly established” that VARA could apply to aerosol art at all, or that the works at issue were of “recognized stature.”[10]

Judge Block stood his ground. While noting summarily that there was “no basis” to grant the defendants’ motions under the relevant standard for setting aside a prior ruling, he acknowledged that the amount of public interest surrounding the case warranted the “fullest explication of the bases for [his] decision.”[11] Fully explicate he did, in a ruling and appendix totaling 89 pages (this in addition to his original 100-page February 2018 opinion).

Judge Block first provided further analysis of his finding of willfulness. He again focused on Wolkoff’s haste in whitewashing 5Pointz as soon as the court denied the artists’ motion for preliminary injunctive relief. Judge Block argued that Wolkoff acted “at his peril” in doing so, in light of the necessarily “interlocutory, tentative, [and] provisional” nature of a ruling on a preliminary injunction, about which Judge Block “presum[ed]” that Wolkoff’s “skilled counsel” had advised him.[12] In response to the defendants’ argument that Wolkoff had not acted willfully because he had not violated clearly established law, Judge Block asserted that the defendants had “conjure[d] up [that] argument out of whole cloth,” and that the Second Circuit has consistently held that willfulness can be “inferred” from the defendants’ conduct.[13]

Judge Block underscored Wolkoff’s disingenuous testimony and uncooperative demeanor on the witness stand as further factors in the willfulness determination. Judge Block found that Wolkoff had “knowingly mis[led] the Court on a material issue” when he claimed, during the October 2013 preliminary injunction proceedings, that he risked losing “hundreds of millions of dollars” unless he tore down 5Pointz by the end of 2013;[14] at trial four years later, Wolkoff acknowledged that he did not even apply for the requisite demolition permit until March 2014.[15] Judge Block deemed “incredible” Wolkoff’s attempts to justify his actions as having been in the artists’ best interest, and he highlighted Wolkoff’s “persistent refusal to directly answer the questions posed to him by [the court] and under cross-examination,” concluding succinctly, “I did not believe him.”[16] Ultimately, however, it was Wolkoff’s “conscious material misrepresentation” regarding the “imminent” need to demolish 5Pointz that most “stuck in [Judge Block’s] craw,” as Judge Block asserted that, without that misrepresentation, he “would not have rendered the same decision” on the artists’ request for a preliminary injunction.[17] “In the final analysis,” Judge Block concluded, “in addition to Wolkoff’s other reckless behavior, knowingly misleading the Court on a material issue simply cannot be condoned.”[18]

Judge Block also defended his ruling that the works were of “recognized stature” under VARA,[19] noting that courts should use common sense to determine whether a work warrants this broad protection.[20] In response to the defendants’ argument that Cohen’s testimony was not sufficient proof of the works’ recognized stature, Judge Block stated that he “could not disagree more.”[21] Referring to over 500 press mentions about Cohen, Judge Block explained that Cohen was one of the most prominent aerosol artists in the world and that he was “uniquely qualified” to recognize the stature of the 5Pointz works. “No one would contend that a work of art selected by the curator of the Museum of Modern Art, the Guggenheim, or the new Whitney Museum should not qualify as a work of recognized stature,” Judge Block reasoned, “[and] [t]he same can be said of the curator of 5Pointz.”[22] To the defendants’ argument that the works needed to have acquired recognition prior to their destruction, Judge Block noted that VARA explicitly leaves that question open.[23] Finally, in response to the defendants’ criticism that the court did not make its work-by-work findings explicit, Judge Block devoted a 60-page appendix to support his “recognized stature” determinations.[24]

As discussed previously on this blog, it remains to be seen whether Judge Block’s emphatic ruling and sizeable damages award will serve to protect otherwise vulnerable artists – by encouraging property owners to negotiate VARA rights with them in advance – or, perhaps counterintuitively, will act to the detriment of artists and the general public by disincentivizing developers from commissioning or allowing art on their property at all. Judge Block’s recent decision makes clear he is aware of this debate and confidently sides with the former position. In a footnote, he responded head-on to the latter criticism by citing a recent New York Times article reporting that aerosol artists have been commissioned to “bring[] a 5Pointz vibe to Lower Manhattan” as clear evidence that his decision has not “operated as . . . a deterrent” to public art.[25] Time will tell whether this continues to hold true.

Assuming, as Judge Block did in this decision, that Wolkoff intends to appeal, this case may provide more guidance on whether the three disjunctive prongs of the Carter test (recognition of stature by (i) art experts; (ii) other members of the artistic community; or (iii) some cross-section of society[26]) correctly interpret VARA’s requirement of “recognized stature.” While Judge Block suggested that even that test might be too rigorous, it is not beyond the realm of possibility that a panel of aesthetically conservative appellate judges could conclude that “aerosol art” sprayed on the exterior of decaying buildings and predestined to eventual destruction could not be what Congress had in mind when it created this requirement. Likewise, the reviewing court could take exception to Judge Block’s reliance on Jonathan Cohen’s appraisals of the works at issue as worthy of preservation – when he himself had previously “curated” them for inclusion at 5Pointz – or to Judge Block’s analogizing Cohen to curators at establishment institutions such as the Museum of Modern Art. Finally, it is not unusual for appeals courts to reverse or temper lower court decisions when they perceive that the trial judge lost his objectivity because of anger – even well-merited anger – at one of the parties. So it would not be surprising if the reviewing court reduced the $6.75 million award because – as Judge Block made explicit – he would have awarded a modest sum for the destruction of these works but for Wolkoff’s spiteful performance.[27]

On the other hand, the appeals court could affirm Judge Block because it, too, did not want to condone Wolkoff’s behavior, without giving further guidance on “recognized stature” or making a generalized statement about protection of street art outside the unusual facts of how 5Pointz came to be.

Hilary McDonnell assisted with drafting this post.

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[1] Under Rule 59(a), a losing party can ask the court to re-try a case if significant legal errors occurred during the trial. The moving party must make the motion within 28 days after the court formally enters its final judgment.
[2] A Rule 52(b) motion, which often accompanies a Rule 59(a) motion, allows a court to amend its judgment or make additional findings.
[3] Beginning in the early 1990s, Wolkoff agreed to let aerosol artists paint on the 5Pointz walls. Cohen v. G&M Realty L.P., No. 13-CV-05612(FB)(RLM), 2018 WL 851374, at *6 (E.D.N.Y. Feb. 12, 2018). 5Pointz soon became a mecca for internationally recognized aerosol artists, but Wolkoff decided to knock down the building in 2013 to make room for new, high-rise residential buildings. Id. The 5Pointz artists sued, seeking a preliminary injunction against Wolkoff under VARA. Id. at *1. On November 13, 2013, Judge Block denied the plaintiffs’ motion. Cohen v. G & M Realty L.P., 988 F. Supp. 2d 212, 214 (E.D.N.Y. 2013). On November 20, 2013, Wolkoff unexpectedly whitewashed 5Pointz, destroying 45 works of aerosol art. Cohen, 2018 WL 851374, at *6. In response, the artist-plaintiffs filed a Second Amended Complaint seeking damages under VARA. See id.
[4] 17 U.S.C. § 504(c)(2).
[5] 17 U.S.C. § 106A(a)(3)(B).
[6] Def.’s Mem. in Supp. of Mot. for a New Trial, or Alternatively, to Vacate the J. in Pls.’ Favor and Enter J. for Defs., or Alternatively, for Remittur, at 4.
[7] Id. at 14.
[8] Id. at 11.
[9] Id. at 26.
[10] Id. at 7.
[11] Cohen, 2018 WL 2973385, at *1.
[12] Id. at *2.
[13] Id. at *6.
[14] Id. at *3.
[15] Id. at *4. Wolkoff’s willful acts also seemed to offend Judge Block on a personal level, as Judge Block repeatedly used the first person throughout the opinion. Judge Block rarely referred to “the court,” but instead used the word “I” nearly fifty times in his opinion.
[16] Id. at *5.
[17] Id. at *2.
[18] Id. at *7.
[19] Id. While Judge Block reaffirmed that the test first enunciated in Carter v. Helmsley-Spear, Inc., 861 F. Supp. 303, 325 (S.D.N.Y. 1994) rev’d on other grounds, 71 F.3d 77 (2d Cir. 1995), is the appropriate standard for determining recognized stature, he also emphasized that there should not be “rigid views as to whether a particular work is worthy of protection as a work of visual art.” Cohen, 2018 WL 2973385, at *7.
[20] Id.
[21] Id.
[22] Id. at *8.
[23] Id.
[24] Id. at *10. While Judge Block expressly interpreted the Carter test to allow for a finding of “recognized stature” where a work is viewed as “meritorious” by art experts or members of the artistic community or some cross-section of society, id. at *7, he found that each work at issue in fact satisfied all three prongs.
[25] Id. at *10 n.19.
[26] Carter, 861 F. Supp. at 325.
[27] Cohen, 2018 WL 2973385, at *2.

On February 12, Judge Frederic Block of the Eastern District of New York awarded $6.75 million in statutory damages to the aerosol artists of “5Pointz,” agreeing with the jury’s advisory finding that property developer Jerry Wolkoff violated those artists’ “right of integrity” under the Visual Artists Rights Act (“VARA”).

As previously covered on this blog, VARA’s right of integrity grants a visual artist the right to prevent the destruction of her work of art so long as that work has achieved “recognized stature.”  Here, the court followed the test announced by a district court in Carter v. Helmsley-Spear, Inc. for establishing “recognized stature” under VARA, whereby a plaintiff must show, first, that the artwork at issue has “stature,” meaning that it is “viewed as meritorious,” and, second, “that this stature is ‘recognized’ by art experts, other members of the artistic community, or by some cross-section of society.”[1] In determining that 45 out of the 49 works in question had achieved recognized stature, Judge Block considered expert testimony as well as evidence of such factors as the artists’ recognition outside of their work on 5Pointz, “social media buzz” about the works, and whether the works had been selected for long-term display by lead plaintiff Jonathan Cohen in his role as quasi-curator of 5Pointz.[2] While Judge Block stressed that “expert testimony is not the sine qua non for establishing that a work of visual art is of recognized stature,” he gave substantial weight to the testimony of plaintiffs’ expert regarding the technical skill employed in the creation of each work, the importance of 5Pointz as an aerosol art mecca, interest in the works from art world academics and professionals, and her own professional opinion that all 49 works were of recognized stature.[3]

In awarding damages, Judge Block rejected the plaintiffs’ calculation of actual damages because the plaintiffs’ expert failed to account for the cost (or even practicality) of removing the works which had been painted directly onto the 5Pointz walls; did not provide sufficient evidentiary justification for the valuation for each work; and did not consider the narrow market for works as large as the 5Pointz works.[4] While concluding that the artists had failed to prove actual damages, Judge Block underscored the importance of statutory damages to this area of law where actual damages are often difficult to calculate – and found that plaintiffs had earned the maximum amounts of statutory damages allowed under the Copyright Act for willful infringement of their rights.[5]

In assessing statutory damages, Judge Block applied a six-factor test in which he analyzed “(1) the infringer’s state of mind; (2) the expenses saved, and profits earned, by the infringer; (3) the revenue lost by the copyright holder; (4) the deterrent effect on the infringer and third parties; (5) the infringer’s cooperation in providing evidence concerning the value of the infringing material; and (6) the conduct and attitude of the parties.”[6] Judge Block found that the first factor weighed heavily in the plaintiffs’ favor due to Wolkoff’s willfulness in destroying the works.[7] Though Judge Block stated that the second factor is not a clean fit for a VARA case, he found that Wolkoff indirectly profited by pushing the development project forward in the face of the VARA lawsuit – and directly profited by charging licensing fees to film at the site – and that therefore this factor also weighed in the plaintiffs’ favor.[8] The third factor likewise tilted toward plaintiffs because the value of 5Pointz to their careers was significant – albeit difficult to quantify – and thus 5Pointz’s destruction was a loss.[9] With regard to the sixth factor, Judge Block found that the balance of Wolkoff’s “problematic conduct” on one side and plaintiffs’ “dignity, maturity [and] respect” on the other tilted this factor decidedly in plaintiffs’ favor.[10]

Most critically, however, Judge Block identified the fourth factor – the deterrent effect on the infringer and third parties – as “perhaps the most important factor in the case,” going on to elaborate:

Without a significant statutory damages award, the preservative goals of VARA cannot be met. If potential infringers believe that they can violate VARA at will and escape liability because plaintiffs are not able to provide a reliable financial valuation for their works, VARA will have no teeth.[11]

Again pointing to Wolkoff’s lack of remorse, and citing Wolkoff’s conduct and testimony as demonstrating that he was “singularly unrepentant” and “remain[ed] undeterred,” Judge Block concluded that this fourth factor “could not cut more strongly in favor of a high statutory damages award.”[12] At least twice, Judge Block noted that the value of the site had increased from $40 million to $200 million once Wolkoff had succeeded in obtaining a zoning variance to permit his redevelopment, and this doubtless played a role in the court’s calculation of an appropriate deterrent.[13]

While Judge Block maintained an even-handed tone throughout his 50-page opinion (plus 50 pages reproducing the artwork in question), there was no mistaking that his decision was greatly influenced by what he termed the “insolence” that Wolkoff had displayed both in and out of court.[14] Plainly, Judge Block was offended by Wolkoff’s precipitous decision to whitewash the walls of 5Pointz for no apparent reason just eight days after Judge Block had rejected the artists’ motion for a preliminary injunction, before Judge Block had time to explain that preliminary ruling in a written decision, and without giving the artists the 90 days’ written notice required under VARA. Similarly, Judge Block noted that, while Wolkoff had “in the main” told the truth in his trial testimony, the developer did not abide by Judge Block’s admonitions to answer questions directly and was instead “argumentative and prone to tangents and non-responsive answers.”[15] Perhaps even Wolkoff now understands the first rule of court: don’t insult the judge.

This may not be the end of the 5Pointz dispute, as defendants have until March 14 to file an appeal. So long as Judge Block’s ruling stands, however, the decision sends a message that developers and property owners ignore VARA at their own peril. Perhaps the most important practical point can be found in a footnote Judge Block inserted at the end of the decision, in which he noted that disputes such as this one can be easily avoided by property owners’ obtaining a “written waiver of the artists’ VARA rights up front, as § 113(d) expressly contemplates.”[16]

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[1] Carter v. Helmsley-Spear Inc., 861 F. Supp. 303, 325 (S.D.N.Y. 1994) (“Carter I”), aff’d in part, vacated in part, rev’d in part, 71 F.3d 77 (2d Cir. 1995). Judge Block noted that Carter I “remains the seminal case interpreting the phrase ‘recognized stature.’” G&M Realty L.P., at *11.

[2] G&M Realty L.P., at *12-13. In making his determination for why four of the works did not achieve recognized stature, Judge Block cited the fact that they had not attracted “significant” third-party attention or social media buzz.

[3] Id. at *12. Judge Block went on to criticize defendants’ expert for both her restrictive interpretation of “recognized stature”—what Judge Block described as being akin to a “masterpiece standard”—and for her overly restrictive social media and academic search methodology.

[4] Id. at *15.

[5] Id. at *19. For all 45 works eligible for statutory damages, Judge Block granted the maximum statutory damages available – $150,000 – after finding Wolkoff’s infringement willful.

[6] Id. at *18 (citation omitted). Judge Block did not consider the fifth factor, which he found does not apply to VARA cases.

[7] Id.

[8] Id.

[9] Id. at *18-19.

[10] Id. at *19.

[11] Id.

[12] Id.

[13] Readers can also speculate what Judge Block had in mind when he referred to the new housing Wolkoff planned to build on the site at six different places in his decision as “luxury condos.”

[14] Cohen v. G&M Realty L.P., 2018 WL 851374, at *19 (E.D.N.Y. Feb. 12, 2018).

[15] Id. at *5 (E.D.N.Y. Feb. 12, 2018).

[16] Id. at *19 n.22. Similarly, in a Wall Street Journal article following the jury’s advisory verdict in November, Michael Salzman, co-chair of Hughes Hubbard & Reed’s art law practice, highlighted the 5Pointz developer’s missed opportunity to obtain waivers from each of the artists in order to protect himself from their assertion of VARA rights down the road.

Id

On October 27, 2017, the New York Chapter of the Copyright Society of the USA hosted a panel exploring the history, caselaw and policies underlying the Visual Artists Rights Act (“VARA”).[1]  The panel featured Amy Adler, Emily Kempin Professor of Law at New York University School of Law; Irina Tarsis, Founder and Director of the Center for Art Law; and Daniel H. Weiner, Partner at Hughes Hubbard & Reed LLP.  Barry Werbin, Counsel at Herrick, Feinstein LLP, moderated the panel.  Each of the panelists’ unique VARA experience engendered a well-rounded review of a hot area of law.  Fittingly, the panel took place during the second week of the “5Pointz” jury trial, in which the very issues under discussion were being litigated before Judge Block of the Eastern District of New York.[2]

Enacted in 1990, VARA provides artists with “moral rights” protection for their visual works of art, provided the works themselves meet certain requirements.[3]  The two main protections VARA offers are the “right of attribution” and the “right of integrity.”[4]  The right of attribution grants the artist the right to claim authorship of her work (in other words, to prevent the attribution of the artist’s work to someone other than herself) and to prevent the false attribution to her of a work of art she did not create.[5]  The right of integrity grants the artist the right to prevent any intentional modification of her work that would be “prejudicial to his or her honor or reputation.”[6]  The right of integrity also grants an artist the right to prevent the destruction of her work of art so long as that work has achieved “recognized stature.”[7]

Dan Weiner started off the panel by looking back at some of the most important cases in VARA’s history.  Mr. Weiner first spoke about his experience litigating the first case decided under VARA, Carter v. Helmsley-Spear,[8] as plaintiffs’ counsel.  Twenty-three years later, that seminal case served as a central precedent in the 5Pointz trial, as the Helmsley-Spear district court opinion established the test for determining whether a work has achieved “recognized stature” under VARA.  Under this two-tiered test, a plaintiff must first show that the artwork at issue has “stature,” meaning that it is “viewed as meritorious,” and, second, “that this stature is ‘recognized’ by art experts, other members of the artistic community, or by some cross-section of society.”[9]  Mr. Weiner then provided synopses of several of the most prominent post-Helmsley-Spear VARA cases, including Martin v. City of Indianapolis,[10] Phillips v. Pembroke Real Estate,[11] and Massachusetts Museum of Contemporary Art Foundation v. Büchel.[12]

In her presentation, Professor Adler discussed some of the policy considerations implicated by VARA, with a focus on the tension between American copyright law and Europe’s more author-centric civil law tradition of moral rights, “droit moral.”  While the rights granted by VARA are substantially more expansive than the rights otherwise granted under the U.S. Copyright Act, VARA rights are relatively limited when compared with droit moral—both as a matter of the plain language of the statute and, in particular, as a matter of the courts’ narrow interpretation and application of the law.  While acknowledging the almost universal agreement among scholars, practitioners and artists that American moral rights should be expanded—and while granting that, to some degree, she is coming at the issue as a devil’s advocate—Professor Adler advanced her own argument “against moral rights.”  From a policy perspective, she questioned whether it is right to assume that artists given this set of rights would in fact wield them in a manner consistent with the public interest.  For example, Professor Adler suggested that there may be circumstances under which artistic destruction is in the best interest of the public, or, conversely, where an artist’s impulse may be to destroy his work when the public interest is in that work’s preservation.

Irina Tarsis wrapped up the panel by discussing several ongoing litigations invoking VARA, with particular emphasis on the 5Pointz trial.  Ms. Tarsis shared her impressions of the trial after attending as an observer over the course of its first weeks; she noted that much of the testimony focused on the legitimacy of graffiti or “aerosol art” as an art form.  We now know that the 5Pointz jury ultimately agreed[13] with plaintiffs that the “aerosol art” works at issue achieved “recognized stature.”

In the Q&A session following the panelists’ presentations, all three panelists indicated that they shared an interest in promoting the creation of more public art; however, there was no consensus on how effective they thought VARA would prove in furthering that goal. As we await a judicial ruling in the 5Pointz trial, the question lingers as to whether following the jury’s recommendation in favor of the aerosol-artist plaintiffs would embolden other artists to use their VARA rights to their advantage, or, ironically, if it will disadvantage artists by scaring developers away from commissioning or even allowing art on their property—a harm which VARA cannot remedy.

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[1] 17 U.S.C. § 106A.

[2] Cohen v. G&M Realty L.P., 1:13-cv-05612-FB-RLM (E.D.N.Y. filed October, 10, 2013). As discussed further in a separate piece on this blog, the 5Pointz jury subsequently returned an advisory verdict finding that the property-developer defendant violated the 21 “aerosol artist” plaintiffs’ VARA rights.  A written decision from Judge Block is expected.

[3] An earlier piece on this blog examines the distinction between a work of visual art and a work of applied art, to which VARA’s protections does not apply.

[4] 17 U.S.C. § 106A(a).

[5] Id.

[6] Id.

[7] Id.

[8] Carter v. Helmsley-Spear Inc., 861 F.Supp. 303, 325 (S.D.N.Y. 1994), rev’d on other grounds, 71 F.3d 77 (2d Cir. 1995).

[9] Id. at 325.

[10] Martin v. City of Indianapolis, 982 F. Supp 625 (S.D. Ind. 1997), aff’d, 192 F.3d 608 (7th Cir. 1999).

[11] Phillips v. Pembroke Real Estate Inc., 288 F. Supp 2d 89 (D. Mass. 2003), aff’d, 459 F.3d 128 (1st Cir. 2006).

[12] Mass. Museum of Contemporary Art Found. v. Büchel, 565 F. Supp. 2d 245 (D. Mass. 2008), aff’d in part, vacated in part, 593 F.3d 38 (1st Cir. 2010).

[13] Michael Salzman, co-chair of Hughes Hubbard & Reed’s art law practice, is quoted in this Wall Street Journal article regarding the 5Pointz developer’s missed opportunity of obtaining waivers from each of the artists in order to proactively protect himself from the artists asserting their VARA rights down the road.

Id.

“5Pointz” Jury Returns Advisory Verdict in Favor of Graffiti Artists.

A six-member jury has returned an advisory verdict finding that a property developer violated more than twenty graffiti artists’ “right of integrity” under the Visual Artists Rights Act (“VARA”) when it whitewashed a building bearing nearly fifty of those artists’ works. As covered previously on this blog, the artist plaintiffs filed suit under VARA in 2013, seeking to enjoin developer Wolkoff’s demolition of that Long Island City building, nicknamed “5Pointz,” which Wolkoff had previously invited the artists to use as their canvas, and which had eventually gained renown as a “graffiti Mecca.” In November 2013, Judge Frederic Block of the federal court in the Eastern District of New York denied the injunction, but allowed the case to go forward on the artists’ claim for damages.1 Before Judge Block had even issued a written decision, Wolkoff whitewashed the building. The actual demolition of 5Pointz began in August 2014, making way for two luxury high rise towers that are slated for completion by the end of this year.

In March 2017, Judge Block partially granted defendants’ motion for summary judgment, but allowed plaintiffs’ VARA claims to proceed to trial.2 On November 8, 2017, after three weeks of trial testimony, the jury returned a verdict in favor of plaintiffs, finding, among other things, that the “aerosol art” works at issue had indeed achieved “recognized stature” under VARA. The verdict marks the first time that graffiti has been recognized as subject to VARA protection under federal law.

By stipulation of the parties, however, the jury’s verdict is advisory, not final. In addition to the jury’s recommendation, Judge Block will consider post-trial briefs from the parties, due December 11, 2017, before issuing a written decision on liability and damages. If he finds the defendants liable, it will be interesting to see what damages he arrives at. Under the Copyright Act, the court has wide discretion in setting damages, which, at the plaintiffs’ election, may be either actual damages or a statutory sum ranging from $750 to $30,000 per work “as the court considers just” – and up to $150,000 per work if Judge Block finds that the infringement of the artists’ rights was “willful.”3 The court, in its discretion, may also allow recovery of costs and may award attorney’s fees.4

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1. Cohen v. G&M Realty, 988 F. Supp 2d 212 (E.D.N.Y. 2013).
2. Cohen v. G&M Realty L.P., No. 13-CV-5612 (FB), 2017 WL 1208416 (E.D.N.Y. Mar. 31, 2017). While allowing the VARA claims to go forward, Judge Block dismissed the plaintiffs’ claims for conversion, property damage, and intentional infliction of emotional distress, as well as the defendants’ counterclaim for abuse of process.
3. 17 U.S.C. § 504.
4. Id. § 505

Above: Plaintiff Chuck Close.
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The Ninth Circuit has pending before it for the second time a significant challenge to the validity of the California Resale Royalty Act (“CRRA”) stemming from three related cases: Sam Francis Foundation v. Christie’s, Inc., Case No. 16-56235 (9th Cir. notice of appeal filed Aug. 26, 2016); Chuck Close v. Sotheby’s, Inc., Case No. 16-56234 (9th Cir. notice of appeal filed Aug. 26, 2016); and Sam Francis Foundation v. eBay Inc., Case No. 16-56252 (9th Cir. notice of appeal filed Aug. 26, 2016).

These cases will require the Ninth Circuit to examine the scope of the “first sale doctrine” and determine whether it is at odds with California’s attempt to establish economic rights for visual artists on subsequent sales of their works.

I.  Doctrinal Background

A. The CCRA

California enacted the CRRA in 1976 for the purpose of offering visual artists similar financial protections to artists in other media.1  The California statute codifies droit de suite (literally, “a right to follow”), which provides visual artists with a royalty each time one of their works is resold.2  The rationale, at least in part, is that visual artists are often disadvantaged by a time-lag between a work’s initial sale and the ultimate realization of that work’s value.3

To combat this perceived inequity, section 986(a) of the CRRA provides that, subject to certain limitations, “[w]henever a work of fine art is sold and the seller resides in California or the sale takes place in California, the seller or the seller’s agent shall pay to the artist of such work of fine art or to such artist’s agent 5 percent of the amount of such sale.”4

Notwithstanding several attempts by members of the United States Congress to enact federal resale royalty legislation,5 the CRRA represents the only U.S. codification of such a right at present.6  Nevertheless, droit de suite has been codified in several jurisdictions outside the U.S., including France, England and Australia.7

B. The First Sale Doctrine

Section 109(a) of the Copyright Act of 1976 enacts what is widely known as the “first sale doctrine.”8  Under the first sale doctrine, the lawful owner of a copyrighted work is entitled to dispose of his or her ownership in that property without acquiring the permission of the copyright owner.9  “[O]nce a work has been sold, the copyright owner has no further right to control the resale of the work, and the new owner is free to dispose of the work as he or she chooses.”10  As a matter of policy, the first sale doctrine is an embodiment of the rule against restraints on alienation, a central tenet of property law from time immemorial.11  The question raised by these cases is whether a resale royalty requirement imposes such a restraint on alienation of copyrighted works of art.

II.  Procedural Background

In 2011, plaintiffs The Sam Francis Foundation, the Estate of Robert Graham, Chuck Close and Laddie John Dill together filed putative class action lawsuits against each of Christie’s, Inc., Sotheby’s, Inc. and eBay, Inc., alleging “the willful and systematic violation by [each defendant] of its California law obligation [under the CRRA] to pay royalties to U.S. artists and their estates on artworks sold either in California or at auction by California sellers.”12

The defendants moved to dismiss, articulating several bases for the invalidity of the CRRA, including that the CRRA violated the Commerce Clause of the U.S. Constitution, violated the Takings Clause of the Fifth Amendment, and was preempted by the Copyright Act of 1976.13  In 2012, the Central District of California granted dismissal on the sole basis that the CRRA violated the dormant Commerce Clause by “controlling commerce ‘occurring wholly outside the boundaries’ of California even though it may have some ‘effects within the State.’”14

In June 2012, the plaintiffs appealed the Central District’s order. In 2015, sitting en banc, the Ninth Circuit concluded that, while the CRRA “facially violates” the dormant Commerce Clause insofar as it regulates the sale of fine art taking place outside the state of California, “the offending provision [of the CRRA] is severable from the remainder of the Act.”15  Thus, the CRRA remained valid as to in-state sales of fine art.16  Since the district court had ruled that the CRRA as a whole was invalid, the Ninth Circuit remanded for a determination on the defendants’ alternative grounds for dismissal.

On February 1, 2016, the defendants submitted a second round of motions to dismiss, largely renewing their previously-submitted bases for dismissal.17  In an April 2016 order granting the defendants’ motions to dismiss, the Central District of California held that the CRRA was invalid as preempted by federal copyright law.18  The court determined that the CRRA conflicted with the intent of Congress, which had demonstrated its desire to “keep downstream sales of copyrighted works [ ] free from restrictions imposed by copyright holders” when it enacted section 109(a).19  The court also found that the CRRA was expressly preempted by section 301(a) of the Copyright Act of 1976, which dictates that the rights contained in section 106 of the 1976 Act are the “exclusive rights of copyright holders.”20  This order is the decision from which the current appeals stem.

III.  Current Challenge to the CRRA

Critical to the arguments articulated in both parties’ appellate briefs lies one crucial sub-issue: how broadly the first sale doctrine should be interpreted.

Relying on the Ninth Circuit’s 1980 Morseburg decision, the plaintiffs contend in their opening brief that the district court erred in finding a conflict between the CRRA and the Copyright Act of 1976:  “The first sale doctrine prevents copyright holders from prohibiting or controlling downstream distribution of copyrighted works. . . .  It has nothing to do with the right of copyright holders to possess a financial interest in the proceeds of a sale.”21  The plaintiffs reiterate this argument in speaking to the district court’s determination that the CRRA was expressly preempted by section 301(a) of the 1976 Act, arguing that the CRRA does not create an “equivalent” right to those provided for in section 106; therefore, section 301(a) does not apply.22

In contrast, the defendants favor an expansive reading of the first sale doctrine in their answering brief. “Under the first sale doctrine, once a visual artist sells artwork, the artist loses the ability to interfere with future sales.”23  In support of this interpretation, the defendants look to Supreme Court and Ninth Circuit precedent addressing the first sale doctrine:  Kirtsaeng, Quality King, and Omega v. Costco.24  The defendants rely on these decisions for the proposition that the loss of the copyright holder’s exclusive right to control distribution of a work of art after its initial sale should be read to include a loss of the copyright holder’s ability to profit from subsequent sales.25  In other words, the defendants argue that “the Copyright Act intends [downstream resale transactions of works of fine art] to be unrestricted.”26

Addressing these arguments, the plaintiffs’ reply brief focuses on the Supreme Court’s recent Lexmark decision.27  In that patent case, the Supreme Court considered the scope of the “exhaustion doctrine,” which is essentially the patent law analog of the first sale doctrine.28  The CRRA plaintiffs’ reply brief cites dicta from the Supreme Court’s Lexmark opinion standing for the proposition that contract rights and patent rights exist side by side, and that while the sale of a product may extinguish the patent holder’s patent rights, it does not terminate the rights preserved by the patent holder in contract.29  Extrapolating from the Court’s rationale, and transposing it from the context of patent law to that of copyright law, the CRRA plaintiffs argue that, just as contract entitlements endure despite the first sale doctrine, statutory entitlements like the CRRA should not be terminated by the first sale of a copyrighted work.30

The CRRA plaintiffs’ reliance on Lexmark is particularly intriguing, given that the opinion also includes rhetoric that the CRRA defendants pointed to in support of their position – e.g., Chief Justice Roberts’s comment that “extending [intellectual property] rights beyond the first sale would clog the channels of commerce.”31  In any event, it will be interesting to see whether the Ninth Circuit applies Lexmark in determining these cases – and if so, to whose benefit.

IV.  Looking Forward

Despite the Ninth Circuit’s previous holding as to the in-state-only applicability of the CRRA, the Ninth Circuit’s decision on the current appeals has potential implications reaching beyond California’s borders. If the Ninth Circuit decides in favor of the plaintiffs, holding that the CRRA is not preempted by the Copyright Act of 1976, it may inspire other states to enact similar legislation codifying droit de suite. If the defendants prevail, and the CRRA is struck down, it may re-ignite interest in a federal codification of droit de suite that amends the first sale doctrine.

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1. See Anna J. Mitran, Note, Royalties Too?: Exploring Resale Royalties for New Media Art, 101 Cornell L. Rev. 1349, 1354 (2016); John E. McInerney III, California Resale Royalties Act: Private Sector Enforcement, 19 U.S.F. L. Rev. 1, 5 (1984).
2. See David E. Shipley, Droit de Suite, Copyright’s First Sale Doctrine and Preemption of State Law, 39 Hasting Commnc’s & Enter. L. J. 1, 2 (2017).
3. See McInerney, supra note 1, at 5; Mitran, supra note 1, at 1354.
4. Cal. Civ. Code § 986(a).  As discussed further below, the Ninth Circuit has ruled that the language “the seller resides in California or” facially violates the dormant Commerce Clause and should be read out of the statue. See infra nn.15–16 & accompanying text.
5. See Mitran, supra note 1, at 1363.
6. See Shipley, supra note 2, at 7; see also Droit de Suite: The Artist’s Resale Royalty, December 1992, A Report of the Register of Copyrights, 75 (“[Since the CRRA was enacted, d]roit de suite legislation has been introduced in Connecticut, Florida, Illinois, Iowa, Maine, Michigan, Nebraska, New York, Ohio, Rhode Island, and Texas.  To date, none has become state law.”).
7. See generally Herbert Lazerow, Art Resale Royalty Options, 63 J. COPYRIGHT SOC’Y 201 (2016).
8. See 17 U.S.C. § 109(a).
9. See McInerney, supra note 1, at 5; Shipley, supra note 2, at 2.
10. McInerney, supra note 1, at 17 n.110.  This entitlement of the new owner to resell the copyrighted work does not affect ownership of the copyright in that work.  Thus, the copyright holder’s rights and the new owner’s rights coexist within the same framework, without conflict with one another. Id.
11. See Kimberley Byer, Note, The Death of the First Sale Doctrine, 11 J. on Telecomm. & High Tech. L. 389, 392 (2013).
12. Complaint ¶ 1, Sam Francis Found. v. Christie’s, Inc., No. 11-08605-MWF-FFM (C.D. Cal. Oct. 18, 2011), ECF No. 1; Complaint ¶ 1, Estate of Robert Graham v. Sotheby’s, Inc., No. 11-08604-MWF-FFM (C.D. Cal. Oct. 18, 2011), ECF No. 1; Complaint ¶ 1, Sam Francis Found. v. eBay Inc., No. 11-06822-MWF-PLA (C.D. Cal. Oct. 18, 2011), ECF No. 1.  The Sam Francis Foundation was not a named plaintiff in the suit against Sotheby’s.
13. See, e.g., First Joint Motion to Dismiss, Christie’s, No. 11-08605-MWF-FFM, ECF No. 15.  The defendants’ motions also argued that the complaints failed to state a claim under Federal Rule of Civil Procedure 12(b)(6).
14. E.g., Order Granting First Joint Motion to Dismiss at 16, Christie’s, No. 11-08605-MWF-FFM, ECF No. 38.
15. Sam Francis Found. v. Christies, Inc., 784 F.3d 1320, 1322 (9th Cir. 2015).
16. See id. at 1326.
17. E.g., Second Joint Motion to Dismiss, Christie’s, No. 11-08605-MWF-FFM, ECF No. 103.
18. E.g., Civil Minutes: Order re Motions to Dismiss at 10, Christie’s, No. 11-08605-MWF-FFM, ECF No. 113.
19. Id.
20. Id. at 17 (quoting Laws v. Sony Music Entm’t, Inc., 448 F.3d 1134, 1137 (9th Cir. 2006)).  The Central District also held that (i) the CRRA did not constitute a Fifth Amendment “taking”; (ii) eBay was not a proper defendant (i.e., a seller of fine art or seller’s agent) under the CRRA; (iii) punitive damages were not available under the CRRA; (iv) the Estate of Robert Graham had no capacity to sue, and was thus not a proper plaintiff; (v) the complaints adequately plead sufficiently plausible facts under Rule 8; and (vi) Sotheby’s Motion to Dismiss for lack of subject-matter jurisdiction was more appropriately adjudicated on a motion for summary judgment.
21. See, e.g., Appellants’ Opening Brief at 27, eBay, No. 16-56252 (9th Cir. Mar. 8, 2017), ECF No. 8 (citing Morseburg v. Baylon, 621 F.2d 972 (9th Cir. 1980)).  In Morseburg, an art dealer who became obligated to pay royalties under the CRRA brought suit to challenge the validity of the act, arguing, among other things, that the CRRA was preempted by the first sale doctrine codified in the Copyright Act of 1909.  621 F.2d at 974-75.  The Morseburg court, upholding the validity of the CRRA, determined that there was no preemption under the 1909 Act. Id. at 978.  However, the court explicitly stated that it was not addressing the issue of CRRA preemption by the 1976 Copyright Act. Id. at 975.
22. See Appellants’ Opening Brief at 41-47; see also 17 U.S.C. § 301(a) (establishing that “all legal or equitable rights that are equivalent to any of the exclusive rights . . . specified by section 106 . . . are governed exclusively by this title” (emphasis added)).
23. See Joint Brief of Appellees Christie’s & Sotheby’s at 14, No. 16-56235 (9th Cir. June 20, 2017), ECF No. 26.
24. Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. 519 (2013); Quality King Distribs., Inc. v. L’anza Research Int’l, Inc., 523 U.S. 135 (1998); Omega S.A. v. Costco Wholesale Corp., 776 F.3d 692 (9th Cir. 2015).
25. See Joint Brief of Appellees Christie’s & Sotheby’s at 14-18.
26. Id. at 20.
27. See, e.g., Appellants’ Reply Brief at 2-7, Sotheby’s, No. 16-56234 (9th Cir. Aug. 21, 2017), ECF No. 44 (discussing Impression Prods., Inc. v. Lexmark Int’l, Inc., 137 S. Ct. 1523 (2017)).
28. Cf. Lexmark, 137 S. Ct. at 1527 (analogizing the exhaustion doctrine and the first sale doctrine).
29. See Appellants’ Reply Brief at 5.
30. See id. at 6-7.
31. Joint Brief of Appellees Christie’s & Sotheby’s at 18 (quoting Lexmark, 137 S. Ct. at 1532); see also id. (quoting Lexmark, 137 S. Ct. at 1534 (characterizing the exhaustion doctrine as “reflect[ing] the principle that, when an item passes into commerce, it should not be shaded by a legal cloud . . . as it moves through the marketplace”)).

Two recent developments promise to shed more light on the legal status of unauthorized street art, which we explored earlier this year in our post Unchartered Territory: Enforcing an Artist’s Rights in Street Art.

Cohen v. G&M Realty L.P., No. 13CV05612, 2017 WL 1208416 (E.D.N.Y. Mar. 31, 2017).

As discussed in our earlier post, in November 2013, Judge Block of the Eastern District of New York declined to issue a preliminary injunction under VARA that would have stopped property owners’ demolition of 5Pointz “graffiti Mecca” in Long Island City, New York to make way for a residential development.1  In Cohen v. G&M Realty L.P, the plaintiffs argued that they were empowered to prevent the destruction of their mural under the VARA provision that allows an artist to prevent the destruction of his or her work if work is of “recognized stature.”2  The court found that some of the works in the 5Pointz composite piece might qualify as works of “recognized stature,” but otherwise did not carry through with a VARA analysis. Instead, the court declined to issue a preliminary injunction based on its finding that the plaintiffs-artists failed to demonstrate irreparable harm because money damages would be sufficient to compensate them.

The case then moved forward on the artists’ claim for damages.  The defendants moved for summary judgment, contending that the plaintiffs had not made a prima facie case for the “recognized stature” of the 5Pointz murals.  On March 31, 2017, the court denied the defendants’ motion for summary judgment dismissing the VARA claim, allowing the matter to proceed to trial on that claim.  The defendants had argued in part that “the plaintiffs’ expert report focused on the ‘recognized stature’ of the artist, rather than the work itself, in contravention of VARA.”3  The district court rejected this argument, noting that courts have employed various methods to determine “recognized stature” under VARA, including inferring a particular work’s stature based on its creator’s reputation.  The court concluded that, “[w]ith VARA silent as to how a work’s stature may be pegged, acceptance of such methodology in this case has the added benefit of honoring VARA’s broad purpose.”4

Judge Block also rejected the defendants’ contention that the methodology underlying the report on “recognized stature” submitted by the plaintiffs’ expert did not satisfy the minimum standard under the Supreme Court’s Daubert test.  The court found that the plaintiffs’ expert relied on a variety of factors in reaching her conclusion regarding the stature of the plaintiffs’ work, including:

Cohen’s multiple commissions from such entities as Coors, Heineken, Swatch, and Deutsche Bank; another’s commissions from some of Brazil’s famous brands; a third one’s hiring by celebrity clients and a public park; the opinions of leading museum professionals and other artists; the individual artist’s social media followers and their works’ Google hits; flattering newspaper accounts in The Boston Globe, The New York Times, and New York Magazine; academic approval; private and public exhibitions of the artists’ other work throughout the United States and other nations; numerous awards, including induction in the Graffiti Hall of Fame; and more.5

Judge Block found that, by citing such evidence, all of which was relevant to the question of stature, the plaintiffs’ expert adequately explained the documents she reviewed, relevant industry customs and practices, and the general bases for her opinion.  The expert thus satisfied the Daubert minimum, and her opinion would be admissible in evidence for evaluation by the jury, even though the court expressed “some skepticism” regarding its “cogency.”

It would thus appear that—absent an eleventh-hour settlement—we will now have our first VARA trial testing whether unauthorized street art is legally protected from destruction by the owner of the site where the unauthorized art was situated.

Thrasher v. Siegel, No. 2:17-cv-03047 (C.D. Cal. April 24, 2017).

On April 24, 2017, muralist Monte Thrasher brought suit in Los Angeles against various individual and corporate defendants alleging that they had painted over his well-known Six Heads mural in violation of VARA.  Thrasher began working on the Six Heads mural—located on an exterior wall of a building in the Los Feliz neighborhood of Los Angeles—in 1992, and thereafter periodically retouched the mural.  According to Thrasher’s complaint, the defendants painted over the mural in 2014, without first obtaining Thrasher’s permission, so that another mural (commissioned by the occupant of the building) could be painted on the same surface.  Thrasher argues that, by painting over his mural—which included his name and contact information—the defendants infringed his rights of integrity and attribution, in violation of 17 U.S.C. § 106A.  The recently filed complaint does not, however, allege that the mural was of “recognized stature” and therefore protected from destruction.

Given the limited judicial guidance on VARA’s application to unauthorized art, whether and how the Central District of California addresses Thrasher’s claim will be of great interest.

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1. Cohen v. G&M Realty L.P., 988 F. Supp. 2d 212 (E.D.N.Y. 2013).
2. Id. at 215.
3. Cohen v. G&M Realty L.P., No. 13CV05612FBRLM, 2017 WL 1208416, at *3 (E.D.N.Y. Mar. 31, 2017).
4. Id.
5. Id.

As street art – typically painting or drawing on someone else’s wall – grows in status in art circles,1 street artists are finding that their work is increasingly being exploited without their permission. While a number of these artists have attempted to assert copyright2 or Visual Artists Rights Act (“VARA”) rights to protect their work, courts have not yet had occasion to establish a legal framework in which street artists can reliably protect their work because these claims largely have ended in private settlements.

With the increasing appropriation of street art several questions have arisen but are still  unresolved by courts:  Do street artists have copyright in their work?  Should they be able to prevent the unauthorized copying, sale, removal or destruction of their (by and large unauthorized) work?  To the extent copyright offers inadequate protection, may street artists assert VARA rights in their work?

I. Unauthorized Street Art and Copyright

For street artists who create their work on someone else’s property without the property owner’s permission, there is an awkward dilemma:  Should street art which is the result of illegal trespassing and (arguably) criminal mischief3 be entitled to legal protection under federal copyright law?

A. Villa v. Pearson Education, Inc. Casts Doubt on the Copyrightability of Unauthorized Street Art.

The Copyright Act does not explicitly state that illegality in the course of a work’s creation prevents copyrightability or is a defense to an infringement claim. Courts have addressed the copyrightability of unauthorized art on few occasions, without offering clear guidance.

Villa v. Pearson Education, Inc., decided over a decade ago, casts doubt on the copyrightability of unauthorized street art.4  There, street artist Hiram Villa, known by his pseudonym “UNONE,” brought a copyright infringement suit against Brady Publishing alleging, among other things, that the publishing company reproduced his unauthorized mural in a book without his permission.5  Villa had not registered copyright in his works, however, and the court dismissed the action for that technical reason and declined to exercise supplemental jurisdiction over the artist’s state law claims.6  Villa thereafter obtained a Certification of Registration from the United States Copyright Office and filed a new complaint alleging copyright infringement.  Brady again moved to dismiss the complaint, arguing in part that “the mural in question is not protected by copyright . . . because it is illegal graffiti.”7  The court denied Brady’s motion to dismiss, reasoning in part that Brady’s argument “turn[s] on questions of fact” as it “would require a determination of the legality of the circumstances under which the mural was created.”8  By acknowledging a need to assess the underlying “legality”  of a work’s creation to assess its copyrightability, the court implicitly accepted the defendant’s argument that a work’s unauthorized creation on someone else’s property could be a defense to copyright infringement.  Ultimately, the parties reached a settlement, providing no further guidance on the copyrightability of unauthorized art.

A respectable argument exists that the circumstances in which a work of art was made, or the ownership of the physical object on which the artwork is created, should not affect the artist’s copyright rights in the artwork.  It is a well-established principle of copyright law that copyright is distinct from ownership rights in the physical object embodying the work.  Even if the artist trespassed to make her mural, why should that permit a third party to profit off that mural by using it to sell books or handbags?

Since Villa, several other street artists have brought suit under the Copyright Act attempting to protect their work.  In July 2014, Miami street artist David Anasagasti, better known by his pseudonym “Ahol Sniffs Glue,” sued American Eagle Outfitters, alleging the retail brand reproduced his work in apparel advertising campaigns.9  In August of that year, artist Maya Hayuk sued Coach, the handbag retailer, claiming that the luxury brand prominently featured her “Chem Trails NYC” mural in promoting its apparel and accessories lines.10  Around that time, a trio of California-based graffiti artists sued fashion designer Roberto Cavalli S.p.A. and various retailers for reproducing their mural in marketing clothing and accessories.11  To the dismay of artists desiring legal guidance, however, all these cases settled out of court.

B. Banksy and the Splitting of Rights between Artist and Property Owner

Assuming that unauthorized street art is protectable under the Copyright Act, copyright would still not grant the artist ownership of the tangible medium of expression in which the work is fixed; that belongs to the property owner of the wall (or other object) on which the art has been created.  This tension between property law and copyright law splits between property owner and artist the rights that would otherwise belong exclusively to the copyright holder under Section 106 of the Copyright Act:  The property owner, who owns the physical embodiment of the work, would have the right to display and sell the original work, whereas the copyright holder would have the exclusive right to reproduce the work and prepare derivative works without interfering with the property owner’s rights.

This tension between property law and the Copyright Act led to the situation in 2010 where a property owner, not the artist, sought to protect an artist’s graffiti work.  In that case, Bioresource Inc., claiming ownership of the site of the crumbling Packard Plant in Detroit, sued 555 Gallery over the gallery’s removal of a 1,500-pound cinderblock wall featuring artwork by famously elusive British graffiti artist Banksy.12  Bioresource brought suit in Wayne County Circuit Court, arguing that the mural was worth at least $100,000.13  The parties settled the case out of court, with Bioresource agreeing to donate the mural to the gallery, which in turn agreed to pay Bioresource a symbolic amount.14

II. Unauthorized Art and VARA

In 1990, Congress enacted the Visual Artists Rights Act (“VARA”), codified at Section 106A of the Copyright Act, to protect artists’ moral rights – namely, the rights of integrity and attribution.  Thus, VARA entitles an author of a work of visual art to prevent intentional modification of that work “which would be prejudicial to his or her honor or reputation,” prevent the use of his or her name as the author in the event of prejudicial modification, and prevent destruction of a work of “recognized stature.”15  VARA provides another tool that street artists might employ to protect their creations.

A. English and Pollara: VARA Might Offer Protection for Unauthorized Art

In English v. BFC & R East 11th Street LLC, a group of artists brought suit under VARA seeking a preliminary injunction to prevent the defendants’ unauthorized destruction of their unauthorized murals in a community garden.16  The district court held that VARA does not apply to unauthorized works of art if the works are permanently affixed to the structure, invoking public policy considerations:  “[O]therwise parties could effectively freeze development of vacant lots by placing artwork there without permission.  Such a construction of the statute would be constitutionally troubling, would defy rationality and cannot be what Congress intended in passing VARA.”17  English’s distinction between removable and unremovable works of art suggests that VARA may offer protection for unauthorized art if it is removable.

In Pollara v. Seymour, the Northern District of New York highlighted the same distinction between removable and unremovable works of art.  There, the artist installed a mural in the property owners’ plaza under the incorrect assumption that the company that commissioned her work had obtained a permit.18  The property owner subsequently removed the unauthorized mural from its frame and significantly damaged the work in the process.19  The artist brought suit under VARA, and the property owners moved for summary judgment, arguing in part that the work was not entitled to protection under VARA because the work was installed without permission.  The court rejected this argument, reasoning that there was “no basis in the statute to find a general right to destroy works of art that are on property without the permission of the owner.”20  The defendants further argued the mural was not entitled under VARA to protection against intentional or grossly negligent destruction because it was not a “work of recognized stature.”21  The court declined to resolve this issue on summary judgment, finding that there were questions of fact to be decided.22  Following trial, the court ultimately dismissed the plaintiff’s claim and held that the plaintiff failed to demonstrate that her mural was a “work of recognized stature,” reasoning that the mural evidently was “not intended to have any lasting value.”23  Whether street art may qualify as a “work of recognized stature” was addressed by the Eastern District of New York in assessing destruction to 5Pointz, discussed below.

B. 5Pointz:  Preventing the Destruction of Street Art of “Recognized Stature”

In November 2013, the Eastern District of New York declined to issue a permanent injunction under VARA that would have stopped property owners’ demolition of the 5Pointz “graffiti Mecca” in Long Island City, New York to make way for a residential development.24  In Cohen v. G&M Realty L.P, the plaintiffs argued that they were empowered under VARA to prevent the destruction of their mural under the VARA provision that allows the author of a work to prevent that work’s destruction if it is of “recognized stature.”25  The court found that some of the works in the composite piece might qualify as works of “recognized stature,” but otherwise did not carry through with a VARA analysis.  Instead the court noted that the plaintiffs had failed to demonstrate irreparable harm:

[P]laintiffs would be hard-pressed to contend that no amount of money would compensate them for their paintings and VARA—which makes no distinction between temporary and permanent works of visual art—provides that significant monetary damages may be awarded for their wrongful destruction.  In any event, paintings generally are meant to be sold.26

The court further found the “transient nature” of the plaintiffs’ work to be dispositive as to the issuance of an injunction.  According to the court, the plaintiffs had always known that the walls on which they painted their murals would be destroyed.27

Although sympathetic to the artists’ interests – “our souls owe a debt of gratitude to the plaintiffs for having brought the dusty walls of defendants’ buildings to life”28 – the court’s analysis seems to foreclose the availability of injunctions under VARA to graffiti artists, even if they are of recognized stature:   under the court’s reasoning, the availability of statutory damages, the existence of an art market, and graffiti’s very ephemeral nature all mitigate against a finding of irreparable harm.

III. Conclusion

To the dismay of many street artists, it remains unclear whether copyright law affords protection for unauthorized street art.  Villa arguably cast doubt on the copyrightability of unauthorized works over ten years ago, but no subsequent decision has gone so far as to explicitly deny copyright protection on that basis.

Under copyright law, the artist’s rights in street art conflict with those of the property owner insofar as the property owner owns the tangible original work.  The tension between artist’s rights and the property owner’s rights resurface under  VARA, but in a different guise.  In that context, the issue is whether an artist can assert moral rights in street art and thereby freeze the development of a building.  That very policy concern led the court in English to deny VARA protection to an unremovable, unauthorized mural.

Given the unsettled state of the law, there remains the policy-oriented question of whether such works should be copyrightable.  Insofar as copyright law is intended to incentivize creation, assuming that street art is a practice that at least sometimes has value to the public, does the creation of street art benefit under a regime of copyright?  In other words, is copyright necessary to incentivize the creation of more street art?  The proliferation of street art in the absence of robust intellectual property protection probably suggests a negative answer to that particular question.

Conversely, if illegality in creation is a bar to copyrightability, the tension between property rights and copyright still does not disappear.  If we care seriously about property rights, should copyright law extend rights to a book publisher, for instance, seeking to profit from the underlying, unauthorized work?

Finally, there is a fundamental tension when street artists – whose very genre of art is premised on its “outlaw” nature – ask the courts legal protection under the Copyright Act or VARA.

 

1. See e.g., Allison Young, “Making Money by Mocking Power: Inside the New Banksy Exhibition,” CNN WORLD (Oct. 24, 2016), http://www.cnn.com/2016/10/24/arts/the-art-of-banksy-melbourne/ (Stating that street artist Banksy, who has stenciled graffiti in New York, London and Melbourne and other places, “is one of the most influential artists in the world.”); see also, “Street Art Expo NYC 2016 Celebrates Three Generations of Graffiti Art with: Part One, Flint Gennari, Alski, Nic 707, Moody Mutz, Plasma Slug, Chief 69 and more,” Street Art NYC (May 24, 2016), http://streetartnyc.org/blog/2016/05/24/street-art-expo-nyc-2016-celebrates-three-generations-of-graffiti-art-with-part-one-flint-gennari-alski-nic-707-moody-mutz-plasma-slug-chief-69-and-more/; see also Jonathan LeVine Gallery, http://jonathanlevinegallery.com/tag/street-art/; Lowbrow Artique, http://www.lowbrowartique.com/gallery/; Woodward Gallery, http://woodwardgallery.net/; Museum of the City of New York, https://collections.mcny.org/Gallery/24UPN47RMLQ.
2.  Under United States copyright law, a work receives protection if it is an “original work of authorship fixed in any tangible medium of expression.”  17 U.S.C. § 102. A work is “original” if it was “independently created” and possesses “at least some minimal degree of creativity”; it need not be novel.  Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 345 (1991). A work is “‘fixed’ in a tangible medium of expression when its embodiment in a copy . . . is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.”  17 U.S.C. § 101. Copyright entitles the owner to a set of exclusive rights, including the right to reproduce the work, prepare derivative works, distribute copies, and, for certain types of works, display the work. 17 U.S.C. § 106.
3.  N.Y. Penal Law § 145.60 makes it a Class A misdemeanor to make an “etching, painting, covering, drawing upon or otherwise placing of a mark upon public or private property with intent to damage such property . . . on any building, public or private, or any other property real or personal owned by any person, firm or corporation or any public agency or instrumentality, without the express permission of the owner or operator of said property.”
4.  Villa v. Pearson Educ., Inc., No. 03 C 3717, 2003 WL 22922178 (N.D. Ill. Dec. 9, 2003).
5.  Id. at *1.
6.  Id. at *1.
7.  Id. at *2.
8.  Id. at *3.
9.  Anasagasti v. American Eagle Outfitters, Inc., Case No. 1:14-cv-05618 (S.D.N.Y. July 23, 2014).
10.  Hayuk v. Coach Services, Inc. et al, Case No. 1:14-cv-06668 (S.D.N.Y. Aug. 19, 2014).
11.  Jason Williams et al v. Roberto Cavalli, S.p.A. et al, Case No. 2:14-cv-06659 (C.D. Cal. Aug. 25, 2014).
12.  The Associated Press, Banksy Battle: Packard Plant Ownership Sues Detroit Art Gallery for Removal of Graffiti Mural, MICH. LIVE (July 7, 2010), http://www.mlive.com/news/detroit/index.ssf/2010/07/banksy_backlash_packard_plant.html.
13.  Id.
14.  Anne Laure Bandle, Andrea Wallace & Marc-André Renold, Banksy Mural – Bioresource, Inc. and 555 Nonprofit Studio/Gallery, Platform ArThemis, https://plone.unige.ch/art-adr/cases-affaires/banksy-mural-2013-bioresource-inc-and-555-nonprofit-studio-gallery.
15.  17 U.S.C. § 106A.
16.  English v. BFC&R E. 11th St. LLC, No. 97 CIV. 7446 (HB), 1997 WL 746444, at *1 (S.D.N.Y. Dec. 3, 1997), aff’d sub nom. English v. BFC Partners, 198 F.3d 233 (2d Cir. 1999).
17.  Id. at *4.
18.  Pollara v. Seymour, 150 F. Supp. 2d 393, 394 (N.D.N.Y. 2001).
19.  Id.
20.  Id. at 396 n.4.
21.  Id. at 396.
22. Id. at 399.
23.  Pollara v. Seymour, 206 F. Supp. 2d 333, 337 (N.D.N.Y. 2002), aff’d, 344 F.3d 265 (2d Cir. 2003).
24.  Cohen v. G&M Realty L.P., 13-CV-5612 (FB) (E.D.N.Y. Nov. 20, 2013).
25.  Id. at 3.
26.  Id. at 24-25 (citation omitted).
27.  Id. at 26.
28.  Id. at 23.

 

Nathan Cole and Joanna Liu assisted with the drafting of this post.

An erroneous copying of a judicial opinion led the Seventh Circuit to reverse a decision about an erroneous copying of a portrait.

Jesus Muhammad‐Ali, the grandson of deceased Nation of Islam leader Elijah Muhammad, painted a portrait of the current leader, Louis Farrakhan, at his request.  Ali registered a copyright of that commissioned portrait in 1986.

The Final Call, a publication affiliated with the Nation of Islam, sold more than one hundred lithographs of Ali’s portrait of Farrakhan over several years.  Ali eventually sued The Final Call for copyright infringement.  Before trial and in response to a motion to strike its affirmative defenses, The Final Call relinquished its affirmative defenses and advised the court it would argue that Ali could not “establish [his] own burden” of proving the copies were unauthorized.

At trial, The Final Call’s sole witness confirmed there was no corporate relationship between Farrakhan and The Final Call, that Farrakhan had not been acting on behalf of The Final Call in commissioning the portrait, and that The Final Call had no evidence that Ali authorized the creation or sale of the lithographs.

The United States District Court for the Northern District of Illinois concluded that, no matter which party had the burden of proving the prints were authorized, the facts demonstrated that Ali authorized the making of the lithographs.

The Seventh Circuit reversed.  That Court noted that, to establish copyright infringement, Ali was required to prove only two elements: “(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.”  It cited Peters v. West, 692 F.3d 629, 632 (7th Cir. 2012) for this blackletter statement of law.  The parties did not dispute that Ali proved both elements, but Ali did not prove that the copying was unauthorized.

The district court had relied on the Seventh Circuit’s 2013 decision in Hobbs v. John, 722 F.3d 1089 (7th Cir. 2013), which misquoted the Seventh Circuit’s 2012 holding in Peters by adding an additional requirement to prove “unauthorized copying.”  Hobbs states:  “To establish his copyright infringement claim, Hobbs must prove ‘(1) ownership of a valid copyright; and (2) unauthorized copying of constituent elements of the work that are original.’  Peters, 692 F.3d at 632.”  Hobbs, 722 F.3d at 1094 (emphasis added).  The standard established in Peters did not contain the word “unauthorized.”  In reversing the district court’s decision, the Seventh Circuit acknowledged:  “We take some responsibility for the mix‐up here, in light of the mistranscription of the standard for a prima facie case of copyright infringement that appears in our opinion in Hobbs.”

The Seventh Circuit concluded that the district court also erred by crediting defenses that The Final Call had waived.  Since there was no evidence of a written or oral license, the district court considered the defense of an “implied license” to reproduce the lithographs.  The Seventh Circuit rejected that defense, primarily because there was no evidence that Ali intended The Final Call to copy and distribute his work.  The district court also considered the “first-sale” defense, according to which once a copy has been sold, the acquirer may sell it again without the permission of the copyright owner.  The Seventh Circuit rejected that defense because The Final Call did not assert it, much less provide any evidence support it.

This case is of interest to practitioners defending against copyright infringement claims.  In particular, if a party wishes to assert a valid defense against such a claim by alleging that it had a license – even an implied license – it must be prepared to meet the evidentiary burdens in asserting that defense.1  In order to make out a prima facie case of copyright infringement, a plaintiff need only prove that it owns a valid copyright in a work and that defendant copied constituent elements of the work.  The burden to prove that the copying was authorized – and therefore asserting an affirmative defense that a license exists – always lies with the defendant,2 despite the cases that characterize infringement as “illicit copying” or “improper appropriation.”

1. Although The Final Call ultimately asserted no affirmative defenses (as it waived its implied license defense at the pretrial conference), the court assessed the merits of the alluded-to defense, anyway.  In doing so, the court noted that The Final Call met none of the elements of alleging an implied license was present, even though the district court found that Ali had authorized the making of lithographs “no matter which side bore the burden of proof.”  Though the Seventh Circuit questioned the District Court’s rationale in reaching that finding, it reiterated that The Final Call did not present any evidence to satisfy the other two elements of an implied license defense.
2. In clarifying the district court’s reliance on an “unclear or erroneous” pattern jury instruction used in the Seventh Circuit, the Court of Appeals noted that there are two methods that a plaintiff can prove copying:  (1) “that defendant had the opportunity to copy the original” (i.e., “access”); and (2) “that the two works are ‘substantially similar,’ thus permitting an inference that defendant actually did copy the original.”  Peters, 692 F.3d at 633.   In this case, the district court relied on a Seventh Circuit pattern jury instruction which noted that the jury “may consider evidence that defendant’s work was created independently of Plaintiff’s copyrighted work [or that Defendant had authority from Plaintiff to copy Plaintiff’s work].”   The court criticized this pattern instruction as “either erroneous or at the very least misleading,” since it improperly places the burden of proving the existence of a license on the plaintiff.

Carol Highsmith, a renowned American photographer, has filed a lawsuit against Getty Images (“Getty”) and others for violation of the Digital Millennium Copyright Act (“DMCA”).1  Specifically, Highsmith alleges that the three defendants – Getty and Alamy (companies that sell stock photos) and License Compliance Services (“LCS”) (a company that searches the internet for copyright-infringing photographs and seeks to enforce copyright licenses) – violated 17 U.S.C. § 1202 by providing, distributing and altering the copyright management information (“CMI”) of thousands of Highsmith’s photographs.  Statutory damages could bring the final judgment against Getty alone to over a billion dollars.  The case raises interesting issues surrounding the interpretation of § 1202 and the statutory damages framework.

Alleged Improper and Illegal Use of Photographs

According to the complaint, Highsmith donated her photographs to the Library of Congress in 1988, making those photographs free for public use and duplication but remaining the copyright holder.2  Her photographs are all available on the Library of Congress website.  In December 2015, Highsmith’s foundation received a letter from LCS on behalf of Alamy, accusing the foundation of copyright infringement and demanding payment of royalties for the use of one of Highsmith’s own photographs that her foundation was displaying on its website.3  Upon receiving this notice, Highsmith contacted LCS and afterwards received an e-mail stating that LCS had closed her case – “thereby implicitly acknowledging the correctness and propriety of her position.”4  She later discovered that Getty offered over 18,000 of her photographs available for sale on its website and that Alamy had over 500 for sale on its website.5  The Highsmith Complaint alleges that the defendants’ uses of her photos were improper and illegal.6

Both websites provided CMI for the photographs—i.e., information regarding the photographs’ authorship and copyright status—and Getty also provided a watermark claiming it had an ownership in the photographs.7  The Highsmith Complaint states that Getty did not identify Highsmith as the sole author and copyright owner of the images.8  Allegedly, Getty’s CMI for these photographs stated “By: Buyenlarge,” or “Credit: Buyenlarge/Contributor” together with the image title, or partial title, and “(Photo by Carol M. Highsmith/Buyenlarge/Getty Images).”9  The complaint alleges that Getty and Alamy violated 17 U.S.C. § 1202(a), which prohibits providing or distributing false CMI, and § 1202(b), which prohibits removing or altering CMI, by listing incorrect CMI alongside Highsmith’s photographs on their websites.10  Section 1202(c) defines CMI as information, such as the name of an author, the name of the copyright holder, and terms and conditions for the use of the work that is “conveyed in connection with copies or phonorecords of a work.”  The Highsmith Complaint alleges, inter alia, that Getty and Alamy violated § 1202 by not listing Highsmith as the sole author and copyright owner of her photographs on their websites.11

On July 28, 2016, Getty stated that it was reviewing the Highsmith Complaint; that it is not illegal to charge money for works in the public domain; that it provides valuable services—indexing and making content searchable, providing a variety of delivery services for images, and furnishing legal indemnification for copyright violations for those who purchase images from it—and that it intends to contest the case “vigorously.”

Interpreting CMI

The district courts are divided in their interpretation of CMI in § 1202.  In IQ Grp., Ltd. v. Wiesner Pub., LLC, Judge Greenaway of the District of New Jersey limited CMI to information digitally embedded in a copyrighted work.12  “Digital watermarking technologies allow users to embed into audio, images, video and printed documents a digital code that is imperceptible during normal use but readable by computers and software.”13  In contrast, in Agence France Presse v. Morel, Judge Pauly of the Southern District of New York “decline[d] to adopt a narrow construction of the term ‘CMI’” and instead interpreted CMI to encompass the name of the author of eight photographs, where that information was posted next to the photographs on a webpage.14

Highsmith’s complaint alleges that Getty and Alamy posted the false copyright information next to Highsmith’s photographs on their websites.  These allegations fall squarely within the Morel definition of CMI, but safely outside of the IQ Group definition.  Highsmith filed suit in the Southern District of New York, but there is no binding Second Circuit precedent defining CMI, and how the court will interpret CMI is an open question.

Potential Damages

Under the DMCA, Getty is potentially liable for over a billion dollars in statutory damages.  In 2012, the Getty business was valued at $3.3 billion.15  While it seems unlikely that a judge would impose a company-destroying penalty, the case presents an example of how stacking violations in calculating statutory damages linearly can prove problematic.

17 U.S.C. § 1203(c)(3) sets statutory damages for each violation of § 1202 between $2,500 and $25,000, and if a defendant has been found to have violated § 1202 within the past three years, “the court may increase the award of damages up to triple the amount that would otherwise be awarded.”16  Getty was found liable of violating § 1202 in Agence France Presse v. Morel, and Morel, the photographer, elected to receive $1,200,000 in statutory damages.17  Here, Getty’s potential liability is $25,000 each for over 18,000 photographs, tripled:  in total, well over a billion dollars.

Would such statutory damages violate due process?  According to Judge Howard in the First Circuit, a statutory damage award violates due process only “where the penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable,” as  articulated in St. Louis, Iron Mountain & Southern Ry. Co. v. Willams.18  There, the defendant’s argument that statutory damages violated due process because they were not tied to the injury “disregard[s] the deterrent effect of statutory damages, the inherent difficulty in proving damages in a copyright suit, and [the plaintiff]’s evidence of the harm it suffered from conduct such as [defendant]’s.”19  The Eighth Circuit, in Capitol Records, Inc. v. Thomas-Rasset, also followed Williams in upholding a statutory damage award, stating that, as in Williams, “‘the interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence to [federal law]’ support the constitutionality of the award.”20  The Eighth Circuit stated that both the absolute amount of the award and the amount per violation are relevant in determining whether the award’s severity and oppressiveness are disproportioned to the offense and obviously unreasonable.21  In Capitol Records, the plaintiffs opted to sue over twenty-four recordings, and the court noted that, “[i]f they had sued over 1,000 recordings, then a finder of fact may well have considered the number of recordings and the proportionality of the total award” in determining whether the award was disproportional and unreasonable.”22

Professor Bert Huang of Columbia Law School has argued that cases such as this are examples of “diminishing marginal harm,” where each violation of a law that provides statutory damages is less injurious to the individual seeking redress than the last.23  Here, while Highsmith was injured by the first ten or hundred or thousand images that Getty allegedly misappropriated, under standard economic principles her injury from mislabeling the eighteen-thousandth photograph is presumably substantially lower than her injury from the first photograph.  Professor Huang suggests that certain damages instead should be calculated “concurrently,” as sentences are often set in criminal cases.  If Highsmith prevails, it will be interesting to see how the Southern District of New York and the Second Circuit handle statutory damages for over 18,000 of her images.  The courts should consider the logic of Professor Huang’s argument for concurrent damages; however, Getty may settle this case before Highsmith’s statutory damages are adjudicated.

UPDATE: On October 17, 2016, oral argument in this case “focused almost completely on claims brought under Section 349 of New York’s General Business Law,” which forbids deceptive business practices generally.  On October 28, 2016, Judge Jed Rakoff of the Southern District of New York dismissed Highsmith’s claims under the Copyright Act and trademark law, but allowed claims under Section 349 to go forward with discovery.  Perhaps Judge Rakoff was persuaded by Getty’s argument that it did not infringe Highsmith’s copyrights because she “owns no such copyrights, having long ago dedicated [her photographs] to the public domain”; however, he did not issue a written opinion at that time, instead promising a fleshed-out memorandum “in due course.” On November 16, 2016, before issuing a written decision on the copyright and trademark claims, Judge Rakoff so-ordered the parties’ stipulation to dismiss the action with prejudice. Although the terms of the parties’ settlement were not disclosed, the sum was likely much less than the billion dollars originally claimed.
__________________
1. First Amended Complaint, Carol M. Highsmith v. Getty Images (US), Inc., No. 16-cv-5924 (S.D.N.Y. 2016), (hereinafter Highsmith Complaint).
2. Id. at 7.
3. Id. at 18-21.
4. Id. at 20-21.
5. Id. at 12-16.
6. Id.
7. Id. at 12-16, 27.
8. Id.
9. Id. at 12.
10. Id. at 24-32.
11. Id.
12. 409 F. Supp. 2d 587, 597 (D.N.J. 2006).
13. Id.
14. 769 F. Supp. 2d 295, 305 (S.D.N.Y. 2011).
15. In August 2012, the Carlyle Group bought a majority share in Getty Images from Hellman & Friedman; the Getty family and co-founder Jonathan Klein own the rest. That deal valued Getty Images at $3.3 billion.
16. 17 U.S.C. § 1202(c)(4).
17. 2014 WL 3963124 (S.D.N.Y. Aug. 13, 2014).
18. Sony BMG Music Entm’t v. Tenenbaum, 719 F.3d 67, 70 (1st Cir. 2013) (quoting 251 U.S. 63, 66-67 (1919)).
19. Id. at 71.
20. 692 F.3d 899, 910 (8th Cir. 2012).
21. Id.
22. Id.
23. Bert I. Huang, Concurrent Damages, 100 Virginia L. Rev. 711 (2014).