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Sol LeWitt Robert Rauschenberg David Hockney Grant Wood Carl Andre The Appendix: A Dirt Painting, A Clay Painting, and a Pasta Sauna In Brief: Leslie Hindman Target Practice: Painting Under Attack 1949–78

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Everyone knows that selling art in today’s weak market is no piece of cake, but few realize that sellers in California face an additional burden: By law, they must fork over a healthy slice of their sales proceeds to a work’s creator.

This was distasteful news to our client Candy, a prominent Beverly Hills dentist who recently auctioned a painting in New York that she had owned for decades. Over the years, the value of the work had skyrocketed. A month after the successful auction, Candy received a certified letter from the artist’s gallery demanding 5 percent of the gross sale price. In support, the gallery cited the California Resale Royalty Act of 1977, which grants artists a royalty on resale (commonly known in Europe as droit de suite).

"They must be kidding!" Candy exclaimed sourly.

Without sugarcoating the law, we explained that California is the only state mandating that an artist share in the proceeds of a secondary-market sale of a work, provided that the resale price is higher than the original purchase price and that certain other conditions are met. The right to receive royalty payments applies to sales made during an artist’s lifetime and within 20 years of his or her death, in which case payments must be made to the artist’s estate. The law covers public and private sales of original paintings, sculptures, drawings and art glass, although it excludes the initial sale of a work by the artist and some (but not all) sales by an art dealer within 10 years of the work’s first sale by its creator.

Surprisingly, the Resale Royalty Act applies even if the transaction occurs outside California, as long as the seller happens to be a California resident and the artist is either a U.S. citizen or has been a California resident for two years. The latter provision is sometimes called the "David Hockney clause," in reference to the California-based British artist.

The California law establishes no central collection agency, so sellers must locate the artists and pay the royalties themselves. If a seller cannot find an artist, or the artist doesn’t first locate the seller, the seller must give the artist’s name and the money due to the California Arts Council, which tries to locate the artist. If the Arts Council can’t do so, the council may, according to its Web site, use the money for its Art in Public Buildings Program.

The Resale Royalty Act has teeth if a seller doesn’t comply with its terms. Under the statute, the artist can seek damages within three years of a secondary sale or one year of the discovery of the sale, whichever is longer, and — importantly — the artist may be entitled to actual damages and legal fees. In some cases, sellers might even have to pay punitive damages, which would go to a California charitable or educational organization.

The California statute has been attacked on various grounds. Among the objections are that it applies broadly to sales outside California, that it gives an artist 5 percent of the gross resale price instead of a percentage of the resale profit, and that it covers art that was acquired before the enactment of the law.

Many attorneys (including us) question whether this law violates the U.S. Constitution’s Commerce Clause, but to our knowledge that issue has not yet been addressed by the courts. The 1980 case Morseburg v. Balyon in the Ninth Circuit U.S. Court of Appeals addressed other constitutional issues with the law, and it upheld the statute. In that case, the art dealer Howard Morseburg refused to pay resale royalties on two paintings, arguing that the California law was preempted by the 1909 federal Copyright Act and violated the Constitution’s due-process and contracts clauses. The court rejected these arguments.

"Nothing about this droit de suite sounds sweet to me," said Candy tartly. "I thought American law was based on unfettered property rights. Who came up with this unpalatable concept anyway?"