Art Law Gallery

Appropriate Appropriation: Second Circuit Holds That Commentary on Original Work Unnecessary for Fair Use Defense, Only Transformative Quality Required

Sheppard Mullin — Mon, 29 Apr 2013 08:40:00 -0800

In Cariou v. Prince, No. 11-1197-cv (2d Cir. Apr. 25, 2013), an opinion with significant importance for the art world, the U.S. Court of Appeals for the Second Circuit clarified what is required for a defendant’s entitlement to the “fair use” defense to a claim of copyright infringement, holding that the law does not require that a secondary use comment on the original artist or work, or popular culture, but only that the secondary work be “transformative.”

In 2000, photographer Patrick Cariou published a book entitled Yes Rasta, featuring portraits of Rastafarians shot during his years in Jamaica, which enjoyed modest sales and distribution. Years later, well-known appropriation artist Richard Prince, in a series of paintings and collages, incorporated to varying extents several of Cariou’s Yes Rasta portraits into his works. Prince’s work for decades has involved taking others’ photographs and other images and integrating them into his paintings and collages in different contexts. The works at issue were featured in number of exhibitions, including those by the Eden Rock Hotel in St. Barth’s and defendant New York’s Gagosian Gallery, owned by defendant Lawrence Gagosian.

Cariou brought claims of copyright infringement against Prince, the Gagosian Gallery, and Lawrence Gagosian, alleging that Prince’s works infringed Cariou’s rights in his Yes Rasta photographs. Prince (and the other defendants) raised a “fair use” defense. When satisfied, the “fair use” defense, codified in the federal Copyright Act, permits a defendant to make use of another’s copyright work or portions thereof. Courts look to four main factors in determining whether a secondary use is “fair”: the nature of the original copyrighted work, the extent of the original work used, whether the secondary use is commercial or non-commercial, and whether the secondary use replaces the market for the original.

The district court held that Prince’s works were not eligible for the fair use defense and issued a permanent injunction compelling the defendants to deliver to Cariou all infringing works not yet sold for Cariou to destroy, sell, or otherwise dispose of. In doing so, the district court concluded that in order to qualify for a fair use defense, Prince’s work must comment on Cariou, on Cariou’s photographs, or on aspects of popular culture closely associated with Cariou or his photographs. The district court determined that Prince’s works did not make any such comments, so the fair use defense was inapplicable and Prince’s works were infringing.

On appeal, the Second Circuit evaluated whether the district court applied the incorrect standard to determine if Prince’s artworks made fair use of Cariou’s copyrighted photographs. As a primary matter, the Second Circuit looked to the aims of the Constitution’s “intellectual property” clause, reasoning that copyright law was designed to stimulate activity and progress in the arts, and that excessively broad copyright protection would stifle, rather and advance, the law’s objective; the fair use doctrine functions as a mediator between the property rights that copyright law establishes in creative works and the ability of artists or authors to express themselves by reference to others’ works. Quoting its prior precedent, the Court stated that the “ultimate test of fair use is whether the copyright law’s goal of promoting the Progress of Science and the useful Arts would be better served by allowing the use than by preventing it.”

The Second Circuit made clear that the real test for the fair use defense is whether the secondary artwork is a “transformative” use of the original work, and stated that the law imposes no requirement that a work comment on the original or its author in order to be considered transformative. Indeed, the Court said that a secondary work “may constitute fair use even if it serves some purpose other than those (criticism, comment, news, reporting, teaching, scholarship, and research) identified in the preamble to the statute.” What is critical is whether the new work alters the original with new expression, meaning, or message, and how the work in question appears to the reasonable observer. The Court was careful to clarify that cosmetic changes to an original work would not automatically qualify a secondary work to fair use protection; it is possible that a secondary work could modify the original without being transformative.

In evaluating the use of Cariou’s photographs in Prince’s paintings and collages, the Second Circuit concluded that twenty-five of the thirty works at issue were transformative, manifesting “an entirely different aesthetic from Cariou’s photographs” – Cariou’s photos depicted the natural beauty of Rastafarians in their environment whereas Prince’s works were “crude and jarring,” “hectic and provocative.” Further, where Cariou’s pictures were relatively small and in black and white, Prince’s collages and paintings were massive, colorful, and made of varying media, all contributing to the distinct expressive nature Princes’ work. Even though Prince’s works were commercial in nature, the Court did not give that factor significant weight because of the works’ transformative quality. With regard to whether the Prince’s works would harm the market for Cariou’s photographs, the Court said that in a fair use analysis, the concern is not whether the secondary use suppresses or even destroys the market for the original work (or potential derivatives), but whether the secondary use usurps the market for the original work. The Court reasoned that the audiences for Prince’s artwork and Cariou’s photographs were quite different – Prince’s works sold for millions of dollars and were displayed at exhibitions attended by major celebrities, whereas Cariou’s works had modest sales that would not be impacted by Prince’s works. The Court further reasoned that while Cariou’s photographs were themselves creative works of art, which weighed against fair use, that factor was of limited use where the works of art were being used for a creative purpose. In analyzing the significance of how much of Cariou’s photographs Prince took, the Court said the concern was not only whether Prince took more than what was necessary, but also the quality and importance of the taken materials to the original work. The Second Circuit determined that although Prince used key portions of certain of Cariou’s photographs, Prince transformed those photographs into something new and different.

The Court concluded that twenty-five of the Prince works were entitled to fair use protection due to their transformative qualities. The Court was not able to reach that same conclusion as to five other Prince works, and sent the question back to the district court to look at whether those five works, which had relatively minimal alterations, impermissibly infringed Cariou’s copyrights. The Gagosian Gallery and art dealer Lawrence Gagosian could not be held directly or secondarily liable with regard to the twenty-five non-infringing works, but could be held liable were the other five works found to be infringing by the district court.

The Cariou case is an important clarification of copyright law with substantial and obvious impact on the art world, both for artists as well as for exhibitors and dealers of artwork. In not limiting the fair use defense to only those works which comment in some way on the original work, the original work’s creator, or popular culture surrounding the original work or its creator, the Second Circuit’s decision permits a much greater universe of secondary works to be eligible for the fair use defense. This reading of the fair use doctrine permits a more expansive potential for appropriation of original works, provided that the new works actually transform the underlying works by in adding new expression, meaning, or message.

Museum Loans - Part Two

Sheppard Mullin — Tue, 23 Apr 2013 09:40:49 -0800

Last post discussed the legal issues surrounding museum loan agreements. This post continues the discussion of museum loans with a look at loans coming into the U.S. from abroad. When exhibition descriptions use the phrase “supported by an indemnity from the Federal Council on the Arts and the Humanities,” or similar language, the organizers have taken advantage of the laws that provide immunity from seizure and indemnification in the context of international loans.

The United States has a strong national interest in facilitating international cultural exchanges of artwork, so immunizing foreign art loans from seizure in the U.S. contributes to the expansion of our nation’s education and cultural awareness. Cultural exchange would be hampered absent the protections provided by the Immunity from Seizure Act (“IFSA”) and the Foreign Sovereign Immunities Act (“FSIA”). These laws, although often confused for one another, bolster loans from foreign lenders. Many people get the acronyms IFSA and FSIA confused, likewise they confuse the meaning of indemnity and immunity, and understandably so. It is important to keep the meanings clear: indemnity is a security or protection against a loss, whereas immunity is an exemption from prosecution. Both laws provide foreign nations with a broad cloak of protection from either being sued in U.S. courts or from losing control over a loaned object.

IFSA was enacted in 1965, giving the President of the United States authority to grant a work of art, or other object of cultural significance, immunity from seizure by U.S. courts whenever it is determined that temporary exhibition or display of that object is within the national interest of the United States. If immunity is granted, then no state, federal or territorial court may issue “any judicial process” or enforce any order or judgment against the object. A grant of immunity protects a foreign lender from prejudgment attachments for jurisdiction or for security on a potential judgment, prejudgment injunctions, and post-judgment attachments. (It should be noted, though, that neither IFSA nor FSIA provides immunity from executive actions since an Executive Order is not considered a “judicial action.” Therefore, such an Order could freeze the assets of a foreign sovereign and prohibit a museum from returning artworks on loan.)

The other statute, FSIA, also protects a foreign lender against seizure. Enacted in 1976, FSIA gives federal district courts original in personam jurisdiction against “foreign states,” defined as a foreign state, a political subdivision of a foreign state, or an agency or instrumentality of a foreign state. If a defendant qualifies as a “foreign state,” it shall be immune to suit in any U.S. court, unless a statutory exception applies. Some instances where jurisdictional immunity would not apply include if a foreign state has waived its immunity, or if the loan is based upon a commercial activity carried on in the U.S., or if rights in property located in the U.S. are acquired by succession or gift, or where rights in property are taken in violation of international laws. This last exception, known as the “expropriation exception” was recently expanded in 2005 by a federal court decision, creating a gap between the two immunity laws.

Recent court decisions regarding the relationship between IFSA and FSIA have undercut protections of IFSA, slowing the exportation of artwork to the U.S. for temporary exhibition or display. One influential decision, Malewicz v. City of Amsterdam, was brought by heirs of the Russian artist, Kazimir Malevich, against the City of Amsterdam, in the U.S. federal court to recover paintings on exhibition at the Menil Collection in Houston in 2005. The paintings had been left by the artist for safekeeping with a friend in Germany during World War II. Years after the artist’s death, the paintings were purportedly sold, fraudulently, to the Stedelijk Museum, owned and operated by the City of Amsterdam. The heirs cited the expropriation exception in FSIA, which permits a foreign state to be sued if it took property in violation of international law, and if that property is present in the United States in connection with a commercial activity carried out by the foreign state. The court held the temporary exhibition of the artwork in the United States satisfied the definition of “commercial activity” as used in the FSIA exception.

The Malewicz decision gives U.S. courts jurisdiction over foreign governments when artwork is temporarily imported into the U.S. for exhibition. This could place immunized foreign works at risk of seizure and gives a basis for suing the foreign government lender for damages. This new development has caused some foreign governments to decline to lend cultural objects to U.S. museums for fear of litigation in U.S. courts, and has had a negative impact on U.S. museums.

Congress sought to correct the disconnect between FSIA and IFSA in 2012 when it proposed the Foreign Cultural Exchange Jurisdictional Immunity Clarification Act (“Immunity Clarification Act”). Although the Immunity Clarification Act was not enacted, the narrow legislation sought to amend FSIA by including language that made any activity of a foreign nation associated with loaned art that has immunity from seizure, not to constitute “commercial activity,” and thus not to waive the nation’s immunity from suit. Further, the bill included a special carve-out for all claims filed by families whose artwork was taken by Nazis in World War II. Opponents of the bill protested that it goes too far in blocking efforts to recover looted treasures wrongfully taken from proper owners. Proponents urge this will unfreeze artistic exchanges, and that it is consistent with American policy to seek restitution for victims of the Nazi government and its allies. Proponents of the law seldom defended or clarified the proposed legislation though, and the overall news coverage suggests that supporters, such as the Association of Art Museum Directors, were not given the chance to clarify the actual purpose of the law. Though U.S. museums wish to promote Americans’ exposure to objects of cultural significance, the Immunity Clarification Act was mired in controversy earlier this year, and failed to pass.

The issue is off the table for now, with no known future plans, but we will be watching the 113th Congress for any news.

Museum Loans

Sheppard Mullin — Mon, 25 Mar 2013 09:40:21 -0800

Museum loans have many benefits. Generous lenders serve the public good by making works available for display and exhibition both here and abroad. Lenders should have a passing familiarity with legal issues surrounding museum loan agreements because the agreement is designed to govern all aspects of the loan throughout the specified term. What follows is a brief description of the basic provisions of loan agreements and some issues collectors should consider when lending art to museums.

The relationship created by the loan agreement is classified as a bailment. The museum (the bailee) has an obligation to protect and care for the object until the lender (the bailor) claims the work. This obligation could continue indefinitely unless the contract defines the term and method of return shipment, or a state statute provides the means of terminating the loan.

Every lender should be prepared to affirm that he or she is the true owner of the loaned property, or an authorized agent of the owner with full authority to enter the loan agreement because, obviously, museums must assure that they are not subject to unwanted legal proceedings if an object is stolen or the lender is not the proper party to enter into the loan agreement.

Loan agreements address the subject of insurance, covering the perils that may occur at the museum’s premises or in transit. The typical insurance offered by a museum is wall-to-wall coverage, which protects a lender’s artwork from the time the object leaves the owner’s wall, until it is returned to the lender. If the lender chooses to maintain his own insurance, museums will typically request to be listed as additionally insured on the policy. Insurance coverage should apply to each work, with the agreed value of the object listed, together with a notation as to who will carry the insurance policy. If the museum is holding the insurance policy, the coverage typically will not apply to other museums where the work may travel. If the work travels internationally, it is imperative to address additional issues such as immunity from seizure and it might be important to require that the insurer is U.S.-based.

While the artwork is on exhibition, it is general policy not to repair, restore, or in any way alter an object without the lender’s written permission. In California and Illinois, a museum can apply conservation measures to, or dispose of, property without a lender’s permission if immediate action must be taken to protect the property, the health and safety of the public, or the museum staff. However, these statutes are rarely used and generally arise where a museum is unable to reach the lender, or the lender disagrees with the museum’s protective measures yet is unwilling to terminate the loan and retrieve the property. In states like New York, absent an emergency that necessitates immediate action, a museum must provide a lender with three days’ notice before engaging in conservation measures.

Recently, a number of states have passed old loan legislation in reaction to problems that arise where loans are left in museums for indefinite or long periods of time. Old loan statutes set out mechanisms to terminate loans and add clarity where the lender has gone missing and the property remains in the museum. Limiting the duration of the loan to a shorter term will help avoid problems that arise when lenders lose contact or relocate. Specifying an expiration date within the loan agreement helps put both parties on notice of the duration of the loan. It is important to note that it could be better to renew a loan rather than to agree to a longer initial term up front, or include a clause requiring the museum to hold the object at lender’s expense for a stated period of time before a museum can claim the object as its own. Ultimately, it is up to the parties to address problems that may arise by constructing a loan agreement that clearly states each party’s obligations and intentions.

Loan agreements will generally require that the lender give prompt notice, in writing, to the museum should there be any change of ownership or contact information. It is crucial to maintain contact with the museum to assure prompt return upon termination of the loan. Some states allow museums to take title without giving notice if a long enough period has passed without any contact with the lender. In California, for example, if a lender does not file an action to recover his or her artwork within 25 years after the date of the last written contact, then the lender is deemed to have donated the artwork to the museum. When seeking to terminate the loan, a museum is obligated to provide notice to a lender in the form of a Notice of Termination. Once notice has been provided, a lender will have a specific amount of time within which to respond to the museum’s notice. Failure to respond may result in title passing to the museum, which is then free to sell, dispose of, or retain the property.

Lenders must weigh several considerations when deciding to loan their artwork to museums for display to the public -- insurance, conservation, notice, termination of loans, to name a few. However, museums gratefully assist with such considerations and lenders are not dissuaded from lending works for public enjoyment and education.

In our next post, we will explain immunity from seizure and indemnification laws in the context of international loans – so stay tuned.

Russian Revolution Redux

Sheppard Mullin — Wed, 06 Feb 2013 09:45:43 -0800

By Christine Steiner and Valentina Shenderovich

The long-ago Russian Revolution has been fought anew in the Federal courts in New York. The case is Konowaloff v. Metropololitan Museum of Art, and it involves a lawsuit seeking to recover a Cezanne painting seized in the aftermath of the Russian Revolution. In December, the United States Court of Appeals for the Second Circuit affirmed the dismissal of the case, holding that the act of state doctrine barred plaintiff’s action. The Konowaloff case is interesting because it may be seen as an attempt to extend to Bolshevik-loot claimants the steps that U.S. museums have taken to address art expropriation in Nazi-loot cases. The Konowaloff decision makes clear that plaintiffs seeking recovery of, or compensatory damages for, art seized by decree during the Bolshevik/Soviet regime will not succeed under the act of state doctrine – at least not in New York.

In Konowaloff, plaintiff Pierre Konowaloff sought to recover the Paul Cezanne painting Madame Cezanne in the Conservatory (the “Painting”) as well as compensatory damages for “wrongful acquisition, possession, display, and retention” of the painting by the Metropolitan Museum of Art (the “Museum”). Konowaloff alleged that the Painting, which belonged to his great-grandfather, industrialist and aristocrat Ivan Morozov, was taken “by force and without compensation” by the Bolshevik government in 1918. The painting was later sold to Stephen C. Clark in 1933, who, as the Trustee of the Met, bequeathed it to the Museum upon his death in 1960. In May 2010, after learning the ownership history of the Painting, Konowaloff demanded its return from the Met. When the Museum refused, Konowaloff instituted an action alleging that the Museum did nothing to inquire as to whether Clark had good title, locate Morozov’s heirs, or ascertain whether Morozov’s heirs received compensation for the Painting. The Museum moved to dismiss on the grounds that Konowaloff’s claims were barred by the act of state doctrine, the political question doctrine, the doctrine of international comity, and the statute of limitation or laches, or, in the alternative, for failure to state a claim upon which relief can be granted. The Federal District Court found that the Museum met its burden of showing that the act of state doctrine applied to bar Konowaloff’s claims and dismissed the action, and the Second Circuit affirmed.

The District Court explained that the act of state doctrine precludes U.S. courts from inquiring into the validity of public acts of a recognized foreign sovereign power committed within its own territory. Further, the court noted that “[c]onfiscations by a state of the property of its own nationals, no matter how flagrant and regardless of whether compensation has been provided, do not constitute violations of international law.” Even if international law had been violated, the act of state doctrine applied and Konowaloff’s action was barred.

Although Konowaloff submitted that the United States government had not recognized the Bolshevik regime until May of 1933, the Southern District explained that “recognition is retroactive in effect and validates all the actions and conduct of the government so recognized from the commencement of its existence.” The Supreme Court and the Second Circuit have consistently held Bolshevik/Soviet nationalization decrees to be official acts. Thus, the 1918 confiscation of the Painting by the Bolshevik regime was an official act of a sovereign – and the validity of the decree under which the Painting was taken was precisely the sort of inquiry precluded by the act of state doctrine.

Konowaloff also attempted to characterize the 1918 taking of the Painting and the 1933 sale to Clark as acts of a political party (the Politburo) rather than acts of the Soviet state. The Court rejected this argument, finding that the alleged activities of the Politburo pertained only to the sale of the painting, not to its confiscation. Because the Soviet government took ownership of the Painting in 1918 through an official act of state, “the Painting’s sale abroad in 1933 – whether legal or illegal, an act of party or an act of state – becomes irrelevant, as Konowaloff lacks any ownership stake in the Painting.”

Konowaloff raised other arguments against application of the act of state doctrine, including that the Painting was not seized for a legitimate governmental purpose or operation, that the Soviet Union (which collapsed in 1991) was no longer a recognized regime, and that adjudication of his claims would not harm United States relations with the Russian Federation. Having concluded that the act of state doctrine precluded inquiry into the validity of the 1918 decree under which the Painting had been confiscated, the Court found it unnecessary to address the Museum’s alternative grounds for dismissal and dismissed Konowaloff’s claims for declaratory, injunctive and monetary relief.

The Second Circuit affirmed, and held that “[a]s Konowaloff has no right to or interest in the Painting other than as an heir of Morozov, and Morozov did not own the Painting after the 1918 Soviet appropriation, Konowaloff has no standing to complain of any sale or other treatment of the Painting after 1918” or to seek monetary or injunctive relief, or a declaratory judgment.

The Second Circuit has spoken: the Russian Revolution is over, to the victor belong the spoils.

Caveat Consignor

Sheppard Mullin — Wed, 16 Jan 2013 09:40:06 -0800

Auction houses typically do not disclose the identity of the seller on their sales contracts. A recent New York trial court decision may drastically change that longstanding practice.

The auction trade is supply-driven. As such, it heavily depends on sellers - and those sellers usually want to remain anonymous. Consignors have various motives for keeping their identity anonymous. They may want to avoid having relatives or creditors know they sold family valuables, or do not want the public knowing what is "none of their business". Dealers may not want the public to know they are selling stock. There may also be unsavory motives at play, though reputable auction houses carefully vet both the seller and the goods.

Unfortunately, and though these slumbering statutes are unknown to most in the art trade, the desire for anonymity in a sales transaction conflicts with some states’ statutory requirements. For example, Section 5-701(a)(6) of New York’s General Obligations Law requires auctioneers to include “the name of the purchaser, and name of the person on whose account the sale was made” on the memorandum used to confirm the sale of goods at a public auction.

Recently, the Appellate Division of the New York Supreme Court held in William J. Jenack Estate Appraisers & Auctioneers, Inc. v. Rabizadeh that New York auctioneers must include the names of both sellers and buyers, not merely their identification numbers, on sales contracts for the contracts to be valid. The decision stems from the court’s strict construction of the above-cited New York commercial law that requires “the name” of a seller to be written on each sales contract. The court held that use of identification numbers in lieu of actual names, albeit general industry practice, conflicts with a narrow interpretation of the statute, and when such a conflict exists, the statute prevails. If not overturned on appeal, this ruling will likely have far-reaching implications for art buyers and sellers.

This September, 2012 case is the first example of a court taking a hard stance on upholding statutory requirements that conflict with auctioneer practice. Plaintiff William J. Jenack Estate Appraisers & Auctioneers is an auction house located in Chester, New York. During Jenack’s 2008 public auction, defendant Albert Rabizadeh, a Long Island dealer, bought a 19th century Russian decorative box for $400,000 ($460,000 including buyer’s premium). When Rabizadeh refused to pay, Jenack sued. Rabizadeh argued that General Obligations Law § 5-701(a)(6)’s requirement that a vendor’s name be written on a contract insulated him from having to pay the price of the auction contract because the contract only indicated the seller’s identification number (#428) and not his name. The court agreed with Rabizadeh that the law required contracts to note both the names of buyers and sellers, not merely a number assigned to the parties. In so holding, the court recognized that, “[w]hile it may be true that auction houses commonly withhold the names of consignors…, this Court is governed not by the practice in the trade, but by the relevant statute.”

The Jenack decision, if left uncontested, could have far-reaching implications for the New York auction business. Buyers may seek to be relieved of their obligation to pay for auction items if invoices do not include the name of the consignor. Sellers may take their business out of state to maintain anonymity in the transaction. Auction houses could name themselves as the seller’s agent to avoid having to disclose sellers’ names. Sellers may stop using auction houses altogether, instead opting to sell through dealers where the norms of confidentiality do not conflict with the language of the statute.

The decision may also galvanize a political lobbying movement among consignors and auction houses to change the New York law. As the court acknowledged, the decision “may be burdensome to consignors or auction houses or both, [and therefore] a change in the law to eliminate that requirement may be warranted.” Consignors and auction houses may begin to lobby New York legislators to amend the law to accommodate, rather than restrict, auction business.

The increased transparency will undoubtedly have jarring immediate effects on the auction industry. It may be that the long-term benefits of buyers and sellers knowing the identity of the other will outweigh the short-term shock of complying with the well-established but long-forgotten law. Or it may be that New York’s highest court, the New York Court of Appeals, will reverse the Jenack decision.

The prospect of reversal has just increased. Last week the Court of Appeals agreed to review the Jenack decision. The court will hear two issues: first, whether the lower court erred in holding that a contract that listed a bidder’s identification number was insufficient under the New York law, even when considered along with additional identifying documents; and second, whether the lower court erred in applying an explicit and literal reading of the law.

This development in the Jenack case is significant. Not only does it mean the highest court of New York could resolve the requirements of auction practice, it also means that the large auction houses, Christie’s and Sotheby’s, having previously expressed interest in joining the appeal as amici, will now have the opportunity to do so.

We will continue to follow this matter.

Robert Darwell on Art Theft, Third in List of Criminal Trades

Sheppard Mullin — Tue, 11 Dec 2012 09:08:47 -0800

Art blog and news source Art Van Africa interviewed Robert Darwell, head of Sheppard Mullin’s Transactional Entertainment, Technology and Advertising Practice Group, on the criminal trade of art theft. To read the exclusive interview, visit http://www.artvanafrica.com/robert-darwell-on-art-theft/.

Public Art Programs: 1% for the 99% - Part Three

Sheppard Mullin — Mon, 03 Dec 2012 10:50:35 -0800

We conclude our series on public art and percent-for-art programs by focusing on a recent case involving the respected American sculptor, Alice Aycock. The artist’s sculpture, Star Sifter, was created in 1998 for the John F. Kennedy Airport, New York City. The recent lawsuit was prompted by the planned removal, and thereby destruction, of the commissioned work of art.

Aycock filed a complaint for injunctive relief in aid of arbitration against the Terminal One Group Association (TOGA), which is responsible for management at JFK Airport Terminal One, in order to enjoin the defendants from breaching the contract with her and from violating her rights under VARA (the Visual Artists Rights Act). When the case went to court in Manhattan in April 2012, federal judge Robert W. Sweet issued a temporary restraining order blocking TOGA from starting to dismantle the sculpture. It was further decided in May that the case would go to arbitration, as specified in the contract between the two parties.

TOGA commissioned Aycock to create a sculpture for the newly constructed Terminal One. Aycock’s work was meant to be part of the airport’s public art program, and was funded through its percent-for-art provision. The piece was to have a dual purpose: the “sculpture for the second floor would both enhance the experience of passengers as well as address a security flaw in the terminal’s architectural design” by “creating a screen to separate two spaces”. Indeed, it was noted that passengers waiting in the food court area on the top floor could easily slip unscreened items to passengers below, through the open space between the two floors, and thereby avoid the security screening process.

Aycock’s commission agreement specified that removal of the work would only be permitted if such removal was “required or necessary” (section 4.C). However, after 13-plus years in place, TOGA decided to “remove and dispose of” the work, and so informed the artist in a letter dated Dec. 12, 2011. TOGA’s motivation, which was articulated only as the matter reached the courts, was that it wished to create space for additional food concessions in the rotunda.

Aycock’s lawyers made several counter-arguments: this stated motivation did not meet the “required or necessary” requirement pertaining to the removal, thereby breaching the contract and additionally violating plaintiff’s rights under VARA by the intentional distortion, mutilation or destruction of the work, prejudicial to the artist’s honor and reputation (17 U.S.C. §106A(a)(3)(A)). Moreover, the contract had provided for recourse to arbitration in the event of a dispute, which is why Aycock had no other choice but to seek temporary and preliminary injunctive relief.

VARA is a federal law granting exclusive rights to artists of visual works such as paintings, drawings, sculptures, and still photographs (see previous post for text). VARA’s key concepts are the artist’s right of attribution and right of integrity. The latter right prevents “any intentional distortion, mutilation or modification of a work of visual art that is prejudicial to the author’s honor or reputation”, and “any intentional or grossly negligent destruction of a work of recognized stature”.

Aycock claimed that removal of the sculpture would lead to its destruction, as it was created specifically for the particular rotunda site within Terminal One. Also, Aycock argued that her work has acquired recognized stature through various press statements, both from art experts and from TOGA itself: in its 1998 press release, TOGA praised the art’s “elegance and beauty”, as a “mantle of Alexander Calder” and “focus of great attention”. This argument satisfied the 2-prong test set out in an earlier VARA case, Carter v. Hemsley-Spear: in order to be “of recognized stature”, a work of visual art needs to be meritorious and be recognized by art experts or other members of the artistic community.

Additionally, it seemed that in its December 2011 letter, TOGA had no real motive justifying its desire to remove the sculpture, as this food concession-related reason was articulated only in the federal court hearing – and is not fully supported by the facts: there are currently seven food concessionaires in the mezzanine alone.

The plan to expand the food offerings does not seem to fit in any of the exceptions provided for in VARA. (VARA permits a modification of the work as a result of the passage of time or the inherent nature of the materials, or as a result of conservation or public presentation (17 U.S.C. 106A(c) (1)&(2)).) Nor does the plan meet the conditions for removal under the agreement: the defendants do not explain how replacing the work with additional food concessions is “required or necessary”.

This case is not isolated, other cases illustrate the possible fate of a public work of art when it is “removed”. Most notoriously, Richard Serra’s Tilted Arc, commissioned for the Federal Plaza in New York by the General Services Administration’s Art-in-Architecture program in 1981, was dismantled in 1989 after much controversy. Many publicly opposed the sculpture, invoking various reasons such as aesthetic repulsiveness, inconvenience in walking around it, or its ability to attract graffiti and rats. Many others, though, notably the arts communities, applauded its monumentality and importance. The decision to remove and dismantle the sculpture, in spite of Serra’s strong opposition, occurred the year before VARA was enacted.

In Martin v. Indianapolis, plaintiff’s large outdoor stainless steel sculpture was demolished by the City as part of an urban renewal project, and when the artist sued the City, the Court acknowledged a “bureaucratic failure within City government, not a willful violation of the plaintiff’s VARA rights”.

In Phillips v. Pembroke Real Estate Inc., a real estate company wished to remove and relocate a sculpture from a Boston park. The court ruled on whether the art was a single work of integrated art: it found that most of the elements were a single integrated piece, but not all of them. Therefore, the moving of the sculpture was allowed, as long as the individual elements were not “altered, modified or destroyed”. While this ruling echoes previous cases in stating that VARA’s objective is “not to preserve a work of art where it is but rather to preserve the work as it is”, this reasoning has been questioned by other courts.

Discouragingly, the conclusion that can be drawn from the Aycock case is that, even where a negotiated agreement is crystal clear, an owner can act in disregard of this agreement. The parties had a solid commission agreement, covering most of the deal points described in our previous posts: creation according to specific purpose and design; artist’s responsibility to design, fabricate and install the work; payment in several installments; artist retaining ownership of copyright; granting a limited license to TOGA for reproduction rights; removal only upon notice to the artist, and if “required or necessary”; etc. And yet, the parties found themselves in court – in spite of the arbitration provision. Therefore, there are times when parties work their best to craft thorough and careful agreements for public art commissions, but they might not be able to avoid litigation.

This three-part overview of public art exposes the makings of public art programs such as percent-for-art initiatives, how they are implemented through complex art commission agreements, and the occasional court proceedings that follow. Yet, and thankfully so, the potential legal hassle does not seem to deter public art projects: on the contrary, public art is prospering and communities are striving to make culture accessible. It seems that 1% will continue to Occupy public space for the great pleasure of the 99%, indeed, the 100%.

Public Art Programs: 1% for the 99% - Part Two

Sheppard Mullin — Thu, 01 Nov 2012 08:50:56 -0800

As we described in our previous post, percent-for-art programs are successful and popular. However, because there are few common norms in the field or understandings regarding implementation of program initiatives, the importance of thorough negotiations and carefully constructed contracts cannot be overstated.

There is structure in the sense that every ordinance sets forth specific rules and procedures, but complexity lies within the nationwide diversity and the rapid evolution of the programs. Comprehensive contracts, hammered out following patient negotiations, are well advised, and this is so whether the commission is for a public agency or a private developer, and whether the lawyer is representing the artist or the commissioning party.

Indeed, there are few boilerplate terms because art commission agreements are not construction contracts, nor are they services contracts; they are neither vendor agreements nor purchase agreements. One might ask, then, what are they? They are their own animal.

The nonprofit organization, Americans for the Arts, has provided some guidance in the matter, thanks to two model agreements: the Model Public Art Commission Agreement (Agency), and the Agreement for Commission of Public Artwork between Artist and Non-Agency – Private Entity. From these can be drawn a non-exhaustive list of deal points to consider when negotiating contracts for public art commissions.

As noted earlier, there are only a few common expectations. Typically, the artist will be responsible for furnishing all the materials and services necessary for the fabrication of the artwork. The artist is expected to prepare an estimated budget: budget allocation can be tricky in terms of what it actually comprises. Sometimes, the percent-for-art ordinances will clearly state what is contained in the budget. For example, New York City’s policy specifies that the commission must cover the artist’s budget, including design fee, contingency, fabrication, installation, transportation and insurance costs.

The owner will typically be responsible for preparing the site and for giving timely approvals.

Regarding copyright, the artist typically retains ownership of the copyright and the owner is granted a license for reproduction purposes. The scope of the license, and permitted uses by both sides, tends to be an important negotiation point. For example, can the owner make reproductions, such as photographs, for promotional purposes?; does the license cover non-commercial uses, commercial uses, or both? As for warranties, the commissioning party will likely demand that the work be unique and solely the artist’s creation, and that it be free from infringements or encumbrances of any kind. Moreover, the artist is expected to warrant quality and condition, placing on the artist the burden of guaranteeing the delivered work is free from faults or defects for a fixed period (most usually one year from final approval following installation).

Title to the work passes from artist to owner upon acceptance. After acceptance, the burden of maintenance also transfers to the owner for upkeep in accordance with a maintenance manual provided by the artist. Adequate maintenance is important, both because an artist has likely retained some integrity right and because defaulting on that obligation could lead the owner to lose warranty claims regarding quality and condition.

Beyond these few common understandings, the negotiation is up for grabs, depending on the nature of the project, the expectations of the parties, the relative bargaining positions, etc. The issues to be considered include, at a minimum:

Timing schedule
Payment schedule
Approvals
Alteration
Insurance
Risk of loss
Arbitration
Transportation
Maintenance
Removal or relocation

It is possible that additional provisions will apply when the commissioning party is a public entity because the public’s money was used for the commission. These would include non-discrimination stipulations, audit requirements, fiscal and contracting transparency or funding stipulations.

A related point to consider is the artist’s rights, a state law right in certain jurisdictions and provided nationally in the Visual Artists Rights Acts (VARA). This Act states that the author of an artwork of visual art has rights of attribution and integrity, specifically:

(1)[…] the right—

(A) to claim authorship of that work, and
(B) to prevent the use of his or her name as the author of any work of visual art which he or she did not create;

(2)[…] the right to prevent the use of his or her name as the author of the work of visual art in the event of a distortion, mutilation, or other modification of the work which would be prejudicial to his or her honor or reputation; and

(3)subject to [certain] limitations, […] the right—

(A) to prevent any intentional distortion, mutilation, or other modification of that work which would be prejudicial to his or her honor or reputation, and any intentional distortion, mutilation, or modification of that work is a violation of that right, and
(B) to prevent any destruction of a work of recognized stature, and any intentional or grossly negligent destruction of that work is a violation of that right.

The rights granted under VARA can be waived, but only in writing. Where this occurs in a public art agreement, the waiver is typically substituted with certain provisions governing integrity of the work and attribution to the artist. These artists’ rights issues will come into play if an owner desires to alter the work, or remove it or relocate it to a site not intended by the artist, as will be discussed in more detail in our next post on this topic.

Approvals are important to the process. The owner will be entitled to give its approval (or not) at different stages of the process. For instance, the parties can negotiate to obtain approval on preliminary design of the work, or any subsequent modification, or before fabrication actually starts. Initial consent goes hand-in-hand with final approval, which approval the owner will give upon acceptance of the artwork.

Approval can also become the artist’s prerogative in case of alteration or projected removal of the artwork. Consent is typically not necessary in the few cases where the artwork is deemed to be a hazard to public health or safety. It is left to the parties to decide whether, when and how consent from the artist should be obtained, and for what purposes the owner can remove, sell or even destroy the art, unless the matter is governed by VARA and state law. For example, in California, Section 989 of the Civil Code places certain obligations on an owner of real property who wishes to remove a work of fine art which is a part of that property.

The commission agreement creates an enduring link between the parties, as their relationship will exist throughout the entire process and for the lifetime of the artwork itself. This non-exhaustive overview of issues demonstrates the need for expert and specialized advice when drafting percent-for-art commission agreements. Whether one is the artist or future owner of the art, both parties should seek to avoid an ugly legal dispute by addressing these considerations in the commission agreement.

In our next post, we will conclude this topic by addressing a very public lawsuit involving the public art of Alice Aycock at JFK Airport, and will note some other public art cases as well.

Public Art Programs: 1% for the 99% - Part One

Sheppard Mullin — Wed, 10 Oct 2012 09:21:06 -0800

The Art Law Blog introduces the first in a series of three articles on "percent-for-art" programs. The common purpose of percent-for-art ordinances is to invigorate the public cultural environment, and to develop and enhance public interest in the visual arts by creating enduring and specific art for public spaces. Some jurisdictions even articulate this goal as their “responsibility”.

We are currently witnessing bustling activity in public art – indeed, art in public spaces is flourishing. The importance of public art is safely anchored in the public mind. This has been achieved through the development and implementation of public art programs throughout the nation, since the New Deal and in the post-WWII era.

More recently, however, the dire economic situation both nationally and internationally has threatened funding for public art –many deem it to be one of the first sources to be cut in order to reallocate priorities.

But, thankfully, this trend was countered by the latest boom in real estate and construction. As supporting evidence, take LAX’s new expansion project totaling a staggering $4.1 billion – and Los Angeles is not the only city where the airport is getting a makeover: airports in the cities of New York, Dallas, and Chicago are but some examples. Charlotte, Atlanta and Las Vegas all have improvement and expansion projects ranging from $1 billion to $2.4 billion; other cities are currently in negotiations with airlines to obtain financial support for their own projected developments.

This is good news for public art as most of these construction initiatives include artwork as part of their projects. The most likely funding source is through percent-for-art ordinances – a type of public art program that emerged in the 1950s, and expanded in the last few decades.

Percent-for-art programs require that a certain percentage of the cost on large-scale development projects be allocated to fund and install public art to be exhibited and regularly accessible to the general public. This percentage generally ranges from 0.5 to 2%, with most programs adopting the classic 1%. These funds provide for the acquisition of existing art or for the commissioning of new works of art. The art may be an integral part of the architectural and functional aspects of the project, or a separate formal element of the site.

Such programs are typically aimed at construction and remodeling projects. They are planned through governmental construction initiatives or by private developers building private structures in percent-for-art jurisdictions. In the latter instance, the owner of a development project for a commercial or industrial building will be required to incorporate public art in the project or pay an arts fee. Depending on the ordinance, there could be additional provisions, such as a specific minimum threshold of construction costs for the program to apply; community input during the artist selection process; a residency requirement favoring local artists; or residential projects included in some public art programs.

Presently, the percent-for-art programs administered in Los Angeles make it overall the largest initiative in the United States. Los Angeles’s policy since 1989 has been to allocate 1% of all capital improvement costs to commission public artwork, whether undertaken by the City or by private developers, and the “Downtown Art in Public Places” program requires that 1% of private development costs for new commercial and market-rate residential developments be committed to involving artists in the project and enriching the Downtown Cultural Trust Fund. Similar public art programs exist in neighboring Santa Monica, West Hollywood, Beverly Hills (allocating 1.5%) and Culver City (which occasionally acknowledges architecture as public art).

Other west coast cities are similarly engaged. San Francisco and San Diego set aside 2% of qualified public works costs for art, and provide for private projects as well. San Diego also has a mandatory set aside of 0.5 to 1% for art and/or cultural facilities in non-residential development projects where a building permit value exceeds $5 million. San Francisco’s ordinance has long applied to all private development within its downtown core, and new amendments allow the developer to place some of the set aside into a trust for off-site or temporary public art installations.

On the east coast, the classic 1% is favored by a number of cities including New York City, Philadelphia, Washington D.C., Pittsburg, Charlotte and New Haven, among others. In these cities, too, percent-for-art ordinances apply to private as well as public construction projects. New York City’s “Percent-for-Art Law” states that no less than 1% of the first $20,000,000 plus no less than 0.5% of the exceeding amount should be allocated for artwork, capped at $400,000 per commission. Philadelphia’s policy is more limited in that it that applies to public buildings (including bridges, arches, gates and structures paid for wholly or in part by the city) and to private developers only when they purchase public land through the Philadelphia Redevelopment Authority. Nationwide, diversity rules: artful and full of art Chicago opted for 1.33%, while no city in the state of Texas could agree on a uniform percentage (Dallas ranges from 0.75 to 1.5%, Houston is 1.75%, Austin is 2%).

Many states are also in the art business. Art is mandated in state-financed buildings through art enrichment programs in 25 states. On the federal level, the percent-for-art initiative is administered by the General Services Administration’s Art in Architecture Program, a longstanding program which oversees the commissioning of artworks for new federal buildings nationwide. The program earmarks 0.5% of the estimated construction cost of each new federal building to commission project artists. The GSA program has commissioned artworks from 1997 to 2008 from significant American artists including Ellsworth Kelly, Alice Aycock, Martin Puryear, Maya Lin, Jim Campbell, Jenny Holzer, James Turrell and Edward Ruscha, among others; and more recently, from artists such as Robert Irwin, Sol LeWitt, Robert Mangold, Pae White, Leo Villareal, Spencer Finch, Tony Feher and Do Ho Suh, among others.

Given the success of these programs and the positive impact the resulting artwork has had on communities, the field has become more sophisticated, more complicated and more regulated. As a result, the importance of carefully negotiated contracts cannot be overstated. In our next post, we will examine some deal points to be considered when negotiating such agreements. And, finally, Part III will examine ongoing litigation involving high-profile public art… To be continued.

Art Fortresses Hold Taxes at Bay

Sheppard Mullin — Fri, 07 Sep 2012 08:38:50 -0800

The prices fetched by famous artworks continue to astound industry-watchers. In spring 2012, Edvard Munch’s The Scream set the record for a work sold at auction—$120 million. Sales of contemporary and modern art have also been setting records. As the value of famous works climb, many collectors are motivated to warehouse their collections while they appreciate in value. The location of the chosen warehouse can also help reduce the taxes owed on such collections.

Normally, art that is sold has tax ramifications for the buyer and the seller. The seller will pay taxes on the income received for the work, and the buyer will pay taxes based on the sales price, and also customs and import or export taxes if the work is moving internationally. A freeport offers collectors the advantage of temporarily avoiding taxes on a work for as long as the work is stored there. Freeports are secure warehouses located within economic free trade zones in which goods can be stored indefinitely and can be sold there without the imposition of taxes and duties of any sovereign country. Such facilities boast additional benefits, as described below, for the art owner—so long as the buyer of the piece has no desire to view or exhibit the work.

Eager for the discreet storage options, lower insurance premiums and beneficial tax treatment, many art collectors have long stockpiled their collections in freeports, and the use of such repositories appears to be on the rise. While goods are stored in a freeport, owners pay no import taxes or duties, which are normally in the range of 5% to 15% of the work’s value. If the work is also sold at the freeport, the owner pays no transaction tax. Meanwhile, the pieces in a collection may appreciate in value while they are absent from the marketplace.

The tax advantages of freeports are only one part of the draw. Freeports also represent the promise of enhanced security to collectors of all types. One example of the security offered is illustrated by the newly built freeport in Singapore. Self-described as an “art fortress in the heart of Asia,” and “the ultimate safe for the world’s finest collections,” it boasts armed auxiliary police officers, fully furnished offices for the transaction of business, and private viewing suites within its confines. This freeport is also a design gem—the lobby features a large sculpture by Ron Arad; the furnishings and interiors of the building are by Arad and Johanna Grawunder. The hyperbolic marketing of the Singapore freeport aside, the facility is open 24-7 and offers limousine service for patrons to and from the nearby airport. Works stored here can also be displayed at local museums and public exhibitions without being subject to the country’s taxes, according to the facility’s website.

Dozens of countries offer freeports or customs-free zones, and more are being constructed to accommodate demand. The freeport in Geneva is adding a new special wing for art storage. Luxembourg and Beijing also have freeports under construction. The Luxembourg freeport, owned by the same group behind the facility in Singapore, plans to offer the services of onsite photographers, framers, and restorers in addition to the usual amenities. In the United States, there are hundreds of so-called Foreign-Trade Zones (FTZs). Primarily located next to ports of entry, FTZs in the U.S. are generally not used for art storage, but instead for the import of raw materials. Manufacturers will then incorporate these customs-free elements into finished goods and pay export taxes on the finished goods upon their exit from the FTZ, or pay the import tax on the value of the imported foreign raw materials if the goods are to be sold in the U.S.

Freeports located in other countries are useful not just for the warehousing of art. There is great diversity among the objects in freeports, as recent reports in the New York Times about the freeport in Geneva indicate. Stored collections are reported to include: gold bars, taxidermy, rugs, exotic sports cars, cigars, rugs, wine, and fine art.

In the past, freeports like the one in Geneva were associated with trade in grey market and illegal goods. Concerned about aiding and abetting the trade in looted cultural property and other forbidden items, the Geneva freeport has since been placed under Swiss jurisdiction. According to the freeport’s press materials, items stored there, though still handled with confidentiality, can now be inspected by customs officials, and the increased transparency means items are now traceable to their owners. These efforts to ensure compliance with international law enhances the legitimacy of freeports overall, and will no doubt pay dividends in attracting new business. For the strategic super-collector and those who approach art acquisitions as investments, the knowledgeable use of freeports and other customs-free warehousing options can make good sense.

Tax Bill Lands on Illegal Eagle

Sheppard Mullin — Tue, 07 Aug 2012 08:39:58 -0800

An artistic work’s beauty may be in the eye of the beholder, but its valuation for taxation purposes is in the eye of the Internal Revenue Service. Recently, one of Robert Rauschenberg’s works captured attention for an uncommon tax and art valuation imbroglio surrounding the combine, Canyon. The IRS claims the work is worth $65 million and that the owners of the work owe $40 million in estate taxes for the work, despite having received three expert appraisals that held the work to be valueless.

The owners and appraisers of the work contend that the work (which incorporates a taxidermy specimen of a bald eagle, shot and stuffed by one of Theodore Roosevelt’s Rough Riders) is valueless because selling the work constitutes a felony under The Bald and Golden Eagle Protection Act (16 U.S.C. 668). Enacted in 1940, the Act prohibits anyone to “take, possess, sell, purchase, barter, offer to sell, purchase or barter, transport, export or import, at any time or any manner, any bald eagle ... [or any golden eagle], alive or dead, or any part, nest, or egg thereof." Violators of the Act can be fined up to $200,000 and imprisoned for one year for a first offense. A further violation of the Act is a felony and invites increased fines and imprisonment terms.

As such, the sale of Canyon would be illegal and it arguably has no market value. The piece could be donated to an organization with the lawful ability to own such a work, but this donation would not affect the now overdue tax bill. As the eagle in the piece was killed and stuffed before 1940, the owners have been able to retain the work, but the location of Canyon, which has been on long-term loan to New York’s Metropolitan Museum of Art, must always be known by US officials. At present, the piece must also carry special permits whenever it is scheduled for exhibition or travel. Finally, there is no international market for the piece because US authorities will not grant an export permit for the piece to be sold.

Any tax statement that contains an object of art valued at $50,000 or more is reviewed by the IRS and must be accompanied by a statement of the fair market value (FMV) of the work by a qualified appraiser. Similarly, the IRS uses this FMV to determine how to tax its owner. Any valuation claim submitted by an owner is also reviewed by the Art Advisory Panel, which is part of the Art Appraisal Services unit in the IRS. This Panel is charged to substantiate, dispute, or corroborate the values that are submitted with the owner’s tax returns. In existence since 1968, the Panel is diverse. Its members have variously served as museum curators, art scholars and private dealers. Disagreement among Panelists as to a work’s value is rare according to the IRS’s 2011 report on the activities of the Panel. The Panel’s recommendation about the work’s market value is then reviewed by the Art Appraisal Services unit and, if approved, becomes the position of the IRS. For 2011, the unit adopted 93% of Panel recommendations in full. Valuation matters can be appealed by furnishing new information to the IRS which might affect the unit’s assessment.

Despite the legal reality that Canyon cannot have any legal domestic buyers, and cannot be legally exported for sale, the IRS can alternately maintain the work’s tax valuation based on a theory about its black market value, as it has for other works in the past. For example, a World War II veteran’s successors inherited rare illuminated manuscripts and artifacts that were stolen by the G.I. from a German cathedral in Quedlinburg and secreted in a Texas bank vault for decades. Upon the veteran’s death, his heirs attempted to sell the items on the black market despite the lack of provenance and war-loot status, and were caught and tried for a variety of federal crimes. In addition, the IRS assessed tax penalties based on the black market value of objects that otherwise could not lawfully or legitimately be sold. Accordingly, fear the owners of Canyon, an object that otherwise cannot be sold at any price might still have value for taxation purposes.

The lawful conduct exhibited by the owners of the work in this case makes it, unlike the Quedlinburg case, extremely unlikely that there would be any attempt at realizing the piece’s black market value. In response to this tax quandary, the owners of Canyon have filed suit against the IRS to challenge the work’s valuation. Negotiations are set for in August, 2012, and some evidence suggests that the IRS art experts simply failed to consider the unique legal issues surrounding the piece in its valuation. Whether the tax bill represents a disciplined reasoning of the object’s value, or a flight of fancy on the part of the IRS, remains to be seen.

Please see Sheppard Mullin’s next item on art and taxation focusing on the tax implications of works stored in international freeports.

Lend Us Your Ears: Museums Implore Senate

Sheppard Mullin — Tue, 24 Jul 2012 09:45:23 -0800

By Kathryn Hines and Manuel Gomez

This year, visitors to the Metropolitan Museum of Art were able to view Rembrandt’s Portrait of the Artist (ca. 1665), on loan from the Kenwood House in North London and in the United States for the very first time. Also this year, visitors to the Philadelphia Museum of Art experienced Van Gogh Up Close, an exhibition featuring some of the artist’s most innovative paintings, on loan from private collectors and museums worldwide, including the Van Gogh Museum in Amsterdam, the Centraal Museum in Utrecht, and the Hague. And, on the west coast from July 3 to September 23, 2012, visitors to the J. Paul Getty Museum will have the opportunity to see Gustav Klimt: The Magic of Line, the first retrospective fully dedicated to the drawings of the popular modern artist, on loan mostly from the Albertina in Vienna.

International loans such as these allow Americans to witness the world’s most precious art close to home. Enabling this intercultural exchange is the Immunity from Seizure Act (“IFSA”), 22 U.S.C. § 2459, the United States’ guarantee to foreign art lenders that their art is immune from judicial seizure while in this country. But despite the legislative protection of the IFSA, foreign lenders have grown increasingly hesitant to make loans to U.S. museums in recent years, in large part because of the 2005 decision of the District Court for the District of Columbia in Malewicz v. City of Amsterdam.

Applying the Foreign Sovereign Immunities Act (“FSIA”), the court in Malewicz held that fourteen Kazimir Malevich paintings, on loan to the Solomon R. Guggenheim Museum from the Stedelijk Museum in Amsterdam, were subject to an ownership claim despite the works’ immunity under the IFSA. The FSIA, which generally immunizes foreign governments from suit in U.S. courts, includes an exception for lawsuits involving property taken in violation of international law and that has a connection to a commercial activity conducted by the foreign state. The Malewicz court found that the practice of lending and borrowing art constitutes “commercial activity” for purposes of the FSIA. In doing so, the court created an inconsistency under federal law, which undermined the IFSA’s immunity and, according to many American museum directors, potentially impairs or even halts borrowing of loaned artwork by U.S. museums.

The Foreign Cultural Exchange Jurisdictional Immunity Clarification Act (“FCEJICA”) (S. 2212), currently pending in the Senate, seeks to restore the protections Congress meant to provide through the IFSA. The FCEJICA would amend the FSIA to bar all ownership claims over foreign art on loan in the United States, except those brought by families whose art was expropriated by the Nazis during World War II. The FCEJICA would thus overturn Malewicz by explicitly providing that the lending and borrowing of cultural objects among sovereign states is not “commercial activity” for purposes of the FSIA.

Supporters of the FCEJICA, most prominently the Association of Art Museum Directors, recognize that, absent increased legal protection for foreign art lenders, many Americans might never have the opportunity to view some of the world’s great artistic treasures. Just last year, for example, Russia banned art loans to the United States in response to a 2010 ruling by the D.C. District Court that a historic collection of rabbinic books and manuscripts seized during the Bolshevik Revolution belongs not to Russia, but to the U.S.-based Hasidic group, Chabad-Lubavitch, and must be returned to it. Although American diplomats have tried to assure Russian officials that federal law protects foreign art through, for example, court filings that promise Russia that 38 works that were set to go on loan to the Los Angeles County Museum of Art in May 2011 would be protected from seizure, the Russian government remains steadfast, demanding more legal assurances before the loans resume. Arguably, then, the increased protection provided by the FCEJICA would promote the international exchange of cultural objects, which is in the nation’s interest.

Opponents, however, find the legislation deficient in many respects. For starters, the bill is said to go too far in protecting lenders at the expense of owners trying to reclaim stolen art. Moreover, by immunizing foreign art lenders from suit in U.S. courts, the FCEJICA could effectively permit U.S. museums to exhibit art that they know was stolen (assuming, arguendo, museum policies would permit such a consequence). The most pointed criticism takes aim at the bill’s special treatment of art looted by the Nazis during World War II, because, critics say, the bill creates a hierarchy of atrocities by elevating the Holocaust above all others. Supporters, though, see this as consistent with obligations museums have long recognized to address and resolve issues concerning Nazi-era looted works.

Absent passage of the FCEJICA, it appears that procuring loans from foreign museums and collections will be increasingly difficult in light of recent U.S. court decisions in these art-related cases. Foreign lenders need clear notice from the United States that artworks on loan for public display will not be caught up in expensive court proceedings simply because the works are being exhibited on our soil. Unfortunately, the art world may have to wait for a final decision on the FCEJICA’s fate, as nonpartisan support for the bill has slowed in the Senate amid increasing public opposition over the legislation’s perceived shortcomings and, of course, the political realities of diminishing momentum for legislation in an election year.

Authentication and the Art Market: What Appraisers and Collectors Should Know

Sheppard Mullin — Wed, 11 Jul 2012 09:59:14 -0800

The LA Chapter of ASA is proud to host this special event featuring: Debra Burchett-Lere, Acting President and Director of The Sam Francis Foundation and Christine Steiner, Art Attorney at Sheppard Mullin Richter & Hampton LLP.

A number of panels, organized by IFAR (International Foundation for Art Research), Christie’s, and the Catalogue Raisonné Scholars Association, have been held in recent months pertaining to the issues involving artists’ foundations, authentication, the legal environment, lawsuits, artists’ catalogues raisonnés, and the impact on the art market. The distinguished speakers, from both the art and legal worlds, will continue the dialogue.

Click here for more information.

The Studious Studio - Business Practices for Artists

Sheppard Mullin — Mon, 11 Jun 2012 09:23:58 -0800

By Christine Steiner

The recent troubles of Knoedler Gallery, now airing in the press and later, presumably, in the courtroom, may shed some light on certain art world concerns – due diligence, gallery sale practices, sophisticated fakes/forgeries, and problems with authenticity in the market. This piece discusses the importance of carefully managing the business of artistic production. These considerations include strict inventory lists, transaction history, image and information database management, responsible studio control, and good artistic practices in general.

In one of our December blog articles, we discussed an artist’s catalogue raisonné as a crucial source of information for any collector conducting pre-purchase due diligence. There, we said that omission of a work from an artist’s catalogue raisonné indeed can prove fatal to any potential resale of a work, notwithstanding proof the owner may offer to support authenticity. We advised that potential art buyers should exercise due diligence in investigating the authenticity of a work, and should likely seek the advice of impartial third parties in evaluating the genuineness and potential value of a work not included in an artist’s catalogue raisonné. The artist’s studio or estate should be consulted as well, if practicable.

These considerations were spotlighted in connection with allegations by Richard Diebenkorn’s estate that Knoedler Gallery, the artist’s longtime dealer, had been trading in fakes, Diebenkorn fakes, for some years. In a May 7, 2012 New York Times account of the dispute, the executive director of the Diebenkorn Foundation implied that fakes are easy to track where good studio practices are maintained: “…the family was very suspicious of these [alleged fakes] and totally confused about how they could get out of the studio with nobody knowing about it." Clearly, a well-run artist studio has information about the works, including what they are and where they go after they leave the studio. Without good inventory controls, quality images of the work, cultivation of longtime professional contacts, and studious management practices, it could prove difficult to assert and support these authenticity claims. The Diebenkorn estate conducted careful research and compiled a catalogue raisonné as part of managing the artist’s work and his legacy. These practices protect the market and now aid in tracking suspicious works.

Some of these good artist management practices include developing the following support structures:

Technology Support

an information management software system that integrates and tracks inventory, transactions, contacts and the like;
organized and accessible contract files to assure prompt and complete performance of sales, communications, merchandise licenses, etc.;
an image database for fulfilling permissions requests, preparing inventory, responding to requests from museums, galleries, publications and the like.

Professional Support

strong relationships with trusted advisors, including curators, consultants, accountants, attorneys, galleries, appraisers, arts writers and other professionals;
experienced studio manager(s), fabrication support and other professional personnel.

Infrastructure Support

organized studio space,
safe storage with climate controls and adequate security.

These matters become especially important when an estate takes over because the artist is no longer around to guide the studio. We addressed some artist estate issues in our September blog article (“Pacific Standard Time – The Artist’s Legacy”). These issues, important for assuring artistic legacy, include:

care for the physical works, including planning for inventory, conservation and storage;
placement of the work – sales, donations, gallery relations;
estate planning – appointing executors, attorneys, accountants;
planning for intangible assets – copyright, trademark, existing and potential licensing rights.

Artists face unique issues which must be carefully considered to ensure continued creative output and to preserve the artistic reputation. Artists recognize that prudently managed business affairs will also minimize problems commonly encountered when closing down a studio and during the transition of business affairs from the artist’s life to the artist’s estate. A comprehensive business and legal framework, which includes strong and consistent management practices, can assure that an artistic legacy is preserved in accordance with the artist’s wishes.

My Fellow Californians - Our Long National Nightmare is Over

Sheppard Mullin — Mon, 21 May 2012 10:05:39 -0800

By Christine Steiner

In the same era Gerald Ford advised his fellow Americans that “our long national nightmare is over,” as he succeeded Richard Nixon as president, the California Legislation enacted the sloppily-drafted California Resale Royalty Act, Civil Code Section 986. The act was not exactly a nightmare, in truth it slumbered for most of its thirty-plus lifetime. It seemed more honored in the breach than the observance. Recent awareness of the resale royalty obligation, though, has caused confusion and consternation for California sellers, for California artists and for the art trade nationwide. Some have, in fact, described it as a nightmare. As of late last week, the nightmare may be over.

On May 17, Judge Nguyen, the newly-appointed judge to the U.S. Ninth Circuit Court of Appeals, issued her District Court ruling in the class action lawsuit brought by a class of artist against auction houses Christie’s, Inc. and Sotheby’s, Inc., and internet auctioneer eBay, Inc., alleging that the defendants sold their artwork at California auctions and on behalf of California sellers, but failed to withhold royalties due.

In short, Judge Nguyen ruled that the statute violated the Commerce Clause because it expressly sought to regulate conduct beyond the California borders. The court struck down the statute in its entirety as unconstitutional.

There remains the likelihood that plaintiffs will appeal the action. They have 30 days to file notice of appeal (so the decision is not yet final); and while it’s not over until it’s over, we are close to conclusively resolving the matter. On a related note, actions under the statute are pending against certain defendant galleries, and rulings have not been issued in those cases.

Enacted in 1976 and effective in 1977, the Resale Royalty Act states that an artist shall be entitled to a royalty upon the resale of the artist’s work of art provided that (a) the artist at the time of the sale is a United States citizen or has been a California resident for at least two years; (b) the seller resides in California or the sale takes place in California; (c) the work is an original painting, drawing, sculpture or original work of art in glass; (d) the work is sold by the seller for more money than she or he paid; (e) the work is sold for a gross price of more than $1,000 or is exchanged for one or more works of art or for a combination of cash, other property, and one or more works of fine art with a fair market value of more than $1,000; and (f) the work is sold during the artist’s lifetime or within 20 years of artist’s death.

Finally, at the federal level, legislation proposing a nationwide artist resale royalty is currently making its way through the U.S. Congress. In an election year, most think there’s not a glimmer of hope for passage. As we noted in our October blog article on this subject, we will continue to monitor these lawsuits. Please stay tuned.

A Murality Play

Sheppard Mullin — Wed, 09 May 2012 12:14:14 -0800

By Valentina Shenderovich and Christine Steiner

Public wall murals have been the subject of much attention recently. Legislators for Los Angeles, considered the “mural capital of the world”, are reviewing a proposed city ordinance to preserve vintage art murals and to repeal an existing ban on private murals (enacted as an overzealous attempt to stem graffiti). Wall murals are the focus of attention in other cities as well. Murals are visible and public “public art”, presenting social, political and aesthetic ideas in and on everyday media.

There are few cases involving art murals but recently, Maya Hayuk, a Brooklyn-based muralist and painter, filed suit against RCA Records and Sony Music over the music video “I Only Wanna Give It To You” (the “Video”). The Video by recording artist and musician Elle Varner features one of Hayuk’s murals titled “Sunshine” (the “Mural”), which was originally created by the muralist for the music video of the same name by artists Rye Rye and M.I.A. Although Hayuk voluntarily dismissed the action on April 14, 2012, the complaint touched on some interesting issues.

Hayuk’s complaint, which was filed in the United States District Court for the District Court of Massachusetts on February 12, 2012, alleged copyright infringement in that RCA and Sony incorporated the Mural into the Video without Hayuk’s authorization. Specifically, Hayuk alleged that the Video includes numerous scenes that incorporate videographic reproductions of the Mural and that such use “adds greatly to the mise-en-scene.” Hayuk, whose art has appeared in numerous gallery shows, installations and publications, previously licensed her artwork for use on apparel, consumer electronics, and sporting goods, commanding “premium fees and royalties for the use of her work in commercial settings.” Hayuk alleged that the Video has been a huge financial success for RCA and Sony, noting that “extensive pre-roll, pop-up, overlay, and other display advertising appears in connection with online streams of the Video,” which had been viewed more than 2.7 million times on YouTube at the time she filed the suit.

This case posed a more interesting query than a typical copyright infringement claim because, notably, the Sunshine Mural appears only for an aggregate of twenty four seconds in the four minute long Video – and it does not appear in its entirety, with only portions of the Mural on display at any one time. Courts have routinely dismissed infringement claims based on de minimis use of a copyrighted work (i.e., that the use was so slight that it did not rise to the level of copyright infringement). See, e.g., Dereck Seltzer v. Green Day, (a recent California case discussing fair use of public art as part of a concert backdrop); Forlenzo v. AT&T, (a 2004 California case dismissing an infringement claim as de minimis where small portions of plaintiff’s mural appeared for no more than three seconds, and a larger fragment appeared for one second). However, here, Hayuk alleged that the Mural added greatly to the mise-en-scene. An argument that the Video was aesthetically based upon the Mural could have had enough traction to overcome a dismissal based on de minimus use.

In a recent case involving Rihanna’s “S&M” music video, for example, Judge Shira Sheindlin of the New York Federal District Court allowed copyright infringement claims brought by photographer David LaChapelle to survive a motion to dismiss. David LaChapelle v. Robyn Rihanna Fenty. In that case, LaChapelle alleged that the S&M video used protected expressions from his photographs. The judge found that while the common theme of S&M and elements like leather, whips, ball gags, etc. were not protectable, LaChapelle’s selection and orchestration of props and the way he controlled “angles, poses and lighting” were copyrightable. The judge noted that “an ordinary observer may well overlook any difference and regard the aesthetic appeal [of the video and the photographs]…as the same.” To that end, although the Mural in “I Only Wanna Give It To You” appears in the background for only a portion of the video, often fragmented, one may argue that the Mural informs the colors worn by the performers and the general “look and feel” of the Video.

Perhaps even more intriguing to the Hayuk complaint was the tension between copyright and public space. Despite having been created for use in another music video, the Mural is painted on the side of an abandoned building, easily viewable from the sidewalk, street, etc. As such, it would be difficult, albeit not impossible, to film the building without incidentally reproducing the Mural. Would anyone taking a photograph containing a portion of this publicly viewable Mural have to pay royalties to the artist? If it had gone to trial, a decision in this case could have proven an interesting analysis of the interplay between copyright law and the public space – for now, there is no handwriting on the wall.

Life After Death - Right of Publicity Law

Sheppard Mullin — Mon, 16 Apr 2012 08:47:29 -0800

By Kathryn Hines and Christine Steiner

Society is consumed with celebrity. We can survey Hollywood marriages and divorces, analyze Golden Globe wardrobe choices and comment upon the latest Lindsey Lohan foible. It is not surprising that many artists have channeled this societal obsession, featuring celebrities in paintings, collages and video installations. Moreover, as we approach the anniversaries of the death dates of Elizabeth Taylor, Michael Jackson and Amy Winehouse, commemorative portraits are likely to be in high demand. But when does using a celebrity image in art infringe that celebrity’s right of publicity? It depends. While an artistic rendering of a recognizable person may be protected under the First Amendment, there are limits to this protection.

The right of publicity is a state law intellectual property right. It is a commercial tort of unfair competition if that right is infringed. It can be defined, quite simply, as the right to limit the public use of one’s name, likeness and/or identity, particularly for commercial purposes. To show infringement of the right of publicity, a plaintiff must plead and prove: (1) Validity - That plaintiff owns an enforceable right in the identity or persona of a human being; and (2) Infringement (a) That defendant, without permission, has used some aspect of identity or persona in such a way that plaintiff is identifiable from defendant’s use; and (b) That defendant’s use is likely to cause damage to the commercial value of that persona.

Whether a celebrity retains the right of publicity after death (i.e., a postmortem right) is a complicated question, and the answer varies from state to state. A total of twenty (20) states recognize a postmortem right of publicity – fourteen (14) states by statute and six (6) states by common law. California, a celebrity-friendly state, recognizes a postmortem duration of seventy (70) years, see Cal. Civ. Code § 3344.1. By contrast, New York does not recognize a postmortem right at all, New York only grants the right to living celebrities. See NY CLS Civ. R § 51. Accordingly, a star’s domicile at death is significant when examining whether his or her image can be safely put to use.

Suppose I am an artist who wants to use Elizabeth Taylor’s image in a large commemorative mural. Must I secure a license from her estate or will my First Amendment right of expression trump? This question was addressed by the Sixth Circuit in ETW Corporation v. Jireh Publishing, Inc.. There, artist Rick Rush depicted golfer Tiger Woods in a painting entitled “The Masters of Augusta.” The painting is a golf-related collage, featuring one image of Woods. Woods sued Rush, asserting that the painting violated his right of publicity. Rush claimed First Amendment protection and the Sixth Circuit sympathized, reasoning that his work had “significant transformative elements” which made it less likely to interfere with the economic interest protected by Woods’ right of publicity. By contrast, in 2001, the Supreme Court of California ruled against artist Gary Saderup, who specializes in making charcoal drawings of celebrities. In that case, Comedy III Productions, Inc. v. Gary Saderup, Inc., Saderup was sued for producing lithographs and T-shirts which bore the likeness of The Three Stooges. The court held that Saderup had violated the Stooges’ publicity rights as it could discern, “no significant transformative or creative contribution.” The court went on to opine that Saderup’s:

. . . undeniable skill is manifestly subordinated to the overall goal of creating literal, conventional depictions of The Three Stooges so as to exploit their fame. Indeed, were we to decide that Saderup’s depictions were protected by the First Amendment, we cannot perceive how the right of publicity would remain a viable right other than in cases of falsified celebrity endorsements.”

Thus, the state of the law seems to be that when a celebrity is the subject of a work that is wholly transformative, free expression will prevail; whereas when the work is not sufficiently transformative, publicity rights will not be outweighed by rights of free expression. This rule is extremely subjective, though, and artists would be wise to tread cautiously. For while you might envision your great homage to Elizabeth Taylor or Whitney Houston, the litigation costs may not be worth the risk.

Of course, after 70 years, Elizabeth Taylor’s image will be fair game no matter how presented, as the California statute does not extend beyond that point. (Though one could argue that Elizabeth Taylor as Cleopatra would be permissible no matter what or when, for even Cleopatra would not enjoy a postmortem right of publicity for 2000 years.) However, perhaps after 70 years, celebrity adulation will be a foregone artistic fad. Although, judging from the unprecedented success of the Elizabeth Taylor auction earlier this year and the ever growing string of reality television stars, the obsession with celebrity does not seem to ebbing anytime soon.

Rastaman Vibration

Sheppard Mullin — Thu, 01 Mar 2012 02:08:48 -0800

By Sarah Pavlock and Christine Steiner

The appeal in the case of Cariou v. Prince is shaping up to be the biggest visual arts copyright case in many years. It will likely result in guidance on what qualifies as a transformative use for appropriation art under the doctrine of fair use. Appropriation art "borrows" pre-existing works or images of the creative work of another artist in order to create something new and original. While this alone may seemed packed with copyright issues, it is generally not an appropriation artist's intent to "rip off" another artist's work. Usually, the success of the new work depends on the viewer's recognition of the underlying work; the "aha" moment is the connection between the old and the new as the viewer recognizes the original work or that another work has been taken, and differentiates the creative changes that have been made in the new work.

Patrick Cariou, a professional photographer, spent six years photographing Rastafarians in Jamaica. He then complied those photographs as a book titled Yes, Rasta, released in 2000 by PowerHouse Press. Several years later, in 2007, well-know appropriation artist, Richard Prince, showed his work titled "Canal Zone" at an exhibit in St. Barths. "Canal Zone" depicted a collage of photographs of the Rastafarian people overlaid with brightly colored paints and other images such as guitars, enlarged hands and naked women. Some people depicted in Prince's collages were from the photographs taken from Cariou's Yes, Rasta. Following the success of "Canal Zone," Prince created an entire show consisting of 29 painting, 28 of which had photos taken from the Cariou book. The works were shown at the Gagosian Gallery which heavily marketed the exhibition and the interest resulted in the sale of 8 works.

Cariou sued Prince and Gagosian Gallery for copyright infringement. Prince, in reply, claimed fair use. Fair use is an exception to infringement, built into the Copyright Act. It allows use of the work of another for certain public policy purposes. The New York trial court found that fair use was not available to Prince for these works because, said the court, the use was for a commercial purpose and "Canal Zone" was more of a derivative work of Cariou's photographs than a new and transformative work because Prince changed little from Cariou's underlying work. When asked the meaning behind the work, Prince stated that it doesn't "really have a message" and that his intent in creating the work was to pay homage to other artists. The court found Prince liable for copyright infringement and ordered him to deliver all of his paintings containing Cariou's photographs for impoundment or destruction. Gagosian Gallery was found to be acting in bad faith by not confirming that Prince had a license to use the photos because, reasoned the court, Prince was well known for using the works of others without their permission.

Both Prince and Gagosian Gallery appealed the decision. The Prince brief argues that the artist is not responsible for explaining the meaning or message of his work. While Prince may not have articulated it, there is social and political commentary in the work and, more importantly, the viewer, and not the artist, determines the message of a piece. Gagosian Gallery argues that this ruling would have an immediate chilling effect throughout the art world because showing appropriation art will come to a halt if galleries and museums must check the licensing agreement on each work an appropriation artist creates. The Cariou brief responds that it was Prince's responsibility to prove fair use and he failed, while the court should view the art in the context of its overall message, it must be the message the artist intended and, by this standard, Prince's work fails the fair use test. Several major museums, the Andy Warhol Foundation, as well as Google and licensing services Getty Images and Corbis, have all submitted individual amicus briefs in order to weigh in on the decision.

Beyond this, the larger question is how much must the underlying work be changed in order to constitute a transformation for the purposes of fair use? In considering whether the fair use exception applied, the trial court looked at all 29 of Prince's "Canal Zone" paintings as a whole. Some paintings only used small portions of Cariou's originals while others were effectively the entire photograph, changed only slightly. Prince argues that the court should consider each painting individually to determine if it has been "transformed" enough to fit the fair use requirement. This is important because it would likely allow some of Prince's paintings not to be destroyed.

We will continue to follow this case as it progresses through the appeal. At this writing, the parties are submitting their second round of briefs and it can be expected that both will garner wide interest.

Fashion Designers: Legally Naked?

Sheppard Mullin — Fri, 10 Feb 2012 14:13:14 -0800

By Tyler Baker and Christine Steiner

With New York's Fashion Week upon us, the time is appropriate to examine the intellectual property protections available to some of the most prominent artists in popular culture: fashion designers. No one would seriously question the great artistic talents of many designers. Their imaginative, inventive, and daring creations and their lasting legacies have pushed artistic limits of the fashion world for decades. And yet, despite being undoubtedly artists in their craft, fashion designers do not enjoy the same protection in their work under current U.S. intellectual property laws that their artistic peers enjoy in the worlds of visual arts, film, music and dance.

Fashion designs do not fit neatly into a traditional intellectual property realm. Copyrights generally are not granted to apparel because articles of clothing are considered functional "useful articles," as opposed to non-utilitarian works of art. Design patents are intended to protect ornamental designs, but clothing rarely meets the demanding requirements of "novelty" and "non-obviousness" for patentability. Trademark law, while useful to protect brand names and logos, generally does not protect the clothing itself, and the Supreme Court has refused to extend trade dress protection to apparel designs. [1]

This lack of copyright protection for fashion designers has in part created the phenomenon of "red carpet copycats": companies that hurriedly create and sell copies of the glamorous or bold garments worn by celebrities at red-carpet events. Knockoff goods are a huge part of the fashion industry, and have become common practice. The instantaneous nature of the internet and mobile camera phones has made fashion designs even more susceptible to immediate widespread display and copying.

Over the decades, Congress has gradually expanded the subject scope and duration (currently life plus 70 years) of federal copyright protection. However, Congress has not yet elected to include fashion products in the categories of works entitled to copyright protection. On December 1, 2010, the Senate Judiciary Committee passed a bill called the Innovative Design Protection and Piracy Prevention Act (IDPPPA), aimed at giving copyright protection to clothing designs. The bill was an updated version of the 2006 Design Piracy Prohibition Act, which had stalled in Congress. Unfortunately for designers, and despite strong support from groups like the Council of Fashion Designers of America and the American Apparel and Footwear Association, the IDPPPA bill is currently still pending in Congress. Further, the scope of its protection may not be as wide and strong as many fashion designers would like. Observers note that the bill is very narrow; it protects only truly new designs and the proposed "substantially identical" standard, similar to the definition of a trademark counterfeit, may potentially be circumvented by slight modifications in order to avoid infringement.

Given the limited intellectual property protections available to the fashion world, fashion designers have often attempted to expand the protections they do enjoy. The most recent and prominent example of this is being played out in the case of Christian Louboutin S.A. vs. Yves Saint Laurent America Holding, Inc., currently pending in the U.S. Court of Appeals for the Second Circuit in New York City.

In this case, Louboutin has alleged that some of YSL's all-red shoes infringe Louboutin's trademark in the U.S. for his all-red lacquered "signature soles." What makes the Louboutin case particularly interesting is the artistic hook to the trademark. The district court's opinion denied Louboutin a preliminary injunction and seriously doubted whether a color should be trademarked in the fashion industry. The district court explained that color has a rather unique aesthetic functionality to the world of fashion, in that fashion designers use particular colors on their products not as a source indicator, but as an enhancing or attractive quality of the product. Comparing Louboutin's exclusive use of the color red on shoe soles to Picasso garnering a monopoly on the use of the color blue based on his "trademark" blue period, the district court concluded that the industry needs to use colors on outsoles without restriction to permit designers to make artistic choices in creating their designs. Relevant to the district court's opinion were Louboutin's apparent past admissions that he chose the red sole not purely as a source identifier, but also because of its eye-catching and seductive qualities.

The Louboutin case highlights the odd reality of intellectual property law and the pressure on fashion designers to frame their aesthetic or artistic choices, for which they are known and celebrated, merely as brand identifiers in order to secure intellectual property protection in their products. The ultimate outcome of the case will undoubtedly have great effect on both the fashion and legal worlds, and fashion designers are quite tuned in. For example, Louboutin was accompanied in the Second Circuit courtroom by Diane Von Furstenberg, renowned designer and president of the Council of Fashion Designers of America, a major advocate for stronger laws against copyright infringement in the fashion world.

If nothing else, the Louboutin case holds in balance the legal protection that they may either gain or lose as a result. It also underscores a need for more defined laws in fashion branding and design in the legislative arena, as opposed to the courts. Given the case's national prominence and the various recent congressional hearings regarding the IDPPA, that legislative change may soon be arriving.

[1] See Christine Cox & Jennifer Jenkins, Between the Seams, A Fertile Commons: An Overview of the Relationship Between Fashion and Intellectual Property, Norman Lear Center Conference (2005).

The Year In Review

Sheppard Mullin — Fri, 06 Jan 2012 12:31:39 -0800

By Lano Williams and Christine Steiner

The past year was packed with litigation that ranged from broad constitutional questions to the ever present scourge of forgeries. Art Law Gallery presents highlights of some of the most important cases:

The Walking Dead Copyrights: Conductor Lawrence Golan's long-running "zombie" copyright case was argued before the Supreme Court in October. The case centers around the fate of millions of pieces of literature, music, and art that were previously in the public domain. A treaty that the US signed (TRIPs: Trade Related Aspects of Intellectual Property Rights) and the resulting congressional legislation restored the copyright on the pieces of work in question. For Golan, a professor and conductor at the University of Denver, this meant that the resulting rental fees put a vast body of work beyond the scope of his and other small orchestras with limited budgets. The case has far-reaching implications for the art world as well and involves the copyright protection of pieces by Picasso, Escher, and many other artists. The case below is Golan v. Holder, 609 F.3d 1076 (10th Cir. 2010), granted cert. Mar. 2011, argued before S.Ct. Oct. 5, 2011.

Rastappropriationist: Photographer Patrick Cariou sued high-profile artist Richard Prince, his gallery and the book publisher, for copyright infringement. The case is the most closely followed case in the area of appropriation art. It brings to the fore the booming culture of "remixing" old images to make new art. The advent of the Internet and digitization of media has made it easier and easier to practice this craft. This has pushed the genre up against the limits of copyright, which this case will likely define for the near future. In the case at hand, Cariou was successful at trial and won his claim that Prince had infringed on his copyright, ordering that all infringing copies be impounded and destroyed. The case is Cariou v. Prince et al, 784 F.Supp.2d 337 (S.D. NY, 2011), and is currently on appeal.

Droit de Suite Life: A group of artists and artists' estates sued Sotheby's and Christie's for failure to pay resale royalties per the California Resale Royalties Act. The law generally allows an artist to collect a 5% royalty on any art that is sold for over $1000 if the sale takes place in California or the seller resides in California. The class action lawsuits were filed with the intention of compelling the auction houses to reveal if any sales fall under the specifications of the law. The cases are Estate of Robert Graham v. Sotheby’s, 11- 8604, and Sam Francis Foundation v. Christie’s, 11-08605 (C.D. Ca. 2011). The following week, in a spate of individual lawsuits, the Sam Francis Foundation sued nine California galleries under the same statute. Stay tuned.

He that Filches from Me My Good Name: In June a Canadian art expert, Peter Paul Biro, sued The New Yorker magazine and the author of an article that was critical of him. The lawsuit claims that, "[t]hrough selective omission, innuendo and malicious sarcasm, the article paints a portrait of plaintiff which has no basis in reality, and which has been highly damaging to his reputation." Biro is famous for asserting that he could authenticate a painting through the use of fingerprint analysis. In December, Biro expanded the suit to include news media who reported on the original case and included the allegations. The case is Peter Paul Biro v. Condé Nast, 1:11-cv-04442 (S.D. NY 2011).

Here Today, Gone in 165 years: In December, Knoedler Gallery abruptly shut its doors after being in business for 165 years. The gallery was the home of many great American artists including Homer, Bellows, Pollock and Stella. The owners claimed it was a "business decision," but the gallery was embroiled in one of the most high-profile forgery cases in years. The gallery had sold financier, Pierre Lagrange, a Jackson Pollock painting and Lagrange subsequently found that he was unable to sell the painting through either Sotheby's or Christie's because of doubts over its authenticity. It was then revealed that the FBI was investigating at least 16 other possible forgeries that had all been sold through Long Island dealer, Glafira Rosales, via Knoedler. The case is Lagrange v. Knoedler Gallery LLC, 11-cv-8757 (S.D. NY 2011).

A Can of Worms, A Bowl of Food: The U.S. District Court for the Central District of California ruled that a photograph of a bowl of food on the packaging of a Vietnamese culinary dish that translates roughly as “rice stick, egg roll, grilled meat,” was not sufficiently original, not fixed in a tangible medium, and thus the packaging would not be accorded protection under the Copyright Act. The Court also found that the bowl of food did not show sufficient evidence of distinctiveness to protect the photograph of the bowl as trade dress. This modest dish, er, case, may have significant implications for protection of 3-D sculptures and photographs. The case is Kim Seng Co. v. J&A Importers, Inc., CU10-742-CAS-MAN (C.D. Cal. 2011).

The 2012 edition of the Art Law Gallery will bring more news and views.

Happy New Year from Sheppard Mullin Richter & Hampton, LLP.