NEWS/COLUMN

Art Law Seminar Report：Present and Future of Artist’s Resale Right in Japan

Kodai Kimura

^{Yoshitomo Nara, Missing in Action, 1999
Source: Christie's Website[
 https://www.christies.com/lotfinder/Lot/yoshitomo-nara-b-1959-missing-in-5459677-details.aspx}

One of the predictable characteristics in the artworld is that the prices of works of art change rapidly and dramatically.
For example, Missing in Action (1999), by the Japanese contemporary artist Yoshitomo Nara, was sold for USD1,080,000 at a Christie's New York auction on May 10, 2006^[i], and then resold for USD1,459,810 (GBP914,850) at a Christie's London auction on June 28, 2011.

^{[i] https://www.christies.com/lotfinder/Lot/yoshitomo-nara-b-1959-missing-in-4705311-details.aspx}

Even if the price of the work significantly rises and is resold in a secondary market such as an auction, no money is paid to the artist. In Japan, the artist only gets compensation from the first sale of the work of art.
 
However, this actually varies from country to country. In some countries, artists are also paid a certain percentage of the money when their artworks are resold in a secondary market, and such artists' right is known as the “Artist’s Resale Right”.

What is the Artist’s Resale Right?

The Artist’s Resale Right is a statutory system whereby an artist is entitled to a percentage of the transaction amount when the original work is resold by an art professional such as an art dealer or auction house etc.
 
【Figure 1: The Mechanics of Artist’s Resale Right】



In the EU, the Resale Right Directive (Directive 2001/84/EC) has been introduced for the harmonization of resales in EU member states. As of 2017, more than 86 countries in Europe and elsewhere are said to have introduced such system.<sup>[i]

[i] Agency for Cultural Affairs, Material on Artist’s Resale Right, December 19, 2018, https://www.bunka.go.jp/seisaku/bunkashingikai/chosakuken/kokusai/h30_02/pdf/r1412245_01.pdf</sup>

Different Revenue Structures as Copyrighted Works

To understand why the Artist’s Resale Right is being introduced, in addition to the nature of changes in the prices of works, one must understand the different revenue structures as copyrighted works. I think the comparison with music is easy to understand.
 
As a work of music is created and distributed in the market, copies are distributed as equivalents of the original. Users can enjoy copyrighted musical works by buying music CDs or using subscription services such as Spotify, Apple Music to listen to the music.
 
In contrast, the value of the original work of art is much more important than any of the copies in the art market. Of course, this does not mean the copies of the artwork are without value. For example, the artwork may be licensed for various products, such as apparel, and it may generate some profit. However, such an amount would be far less money than could be gained from the sale of the original work.
 
【Figure 2: Comparison of Music and Fine Art】



Copyright is central to the right to control reproduction (copying), as it is known as copyright, but there is the perspective that this may not provide sufficient protection for works of art where the value of the original work is important.

Artist’s Resale Right in Japan under Contractual Schemes

As mentioned above, Japan has no statutory system for the Artist’s Resale Right at present. However, players in the artworld have attempted to achieve the Artist’s Resale Right under contractual schemes.

Kaikai Kiki and Est-Ouest Auctions Settlement Agreement

In March 2011, Kaikai Kiki Co., Ltd. (“Kaikai Kiki”), led by a Japanese contemporary artist Takashi Murakami, entered into a settlement agreement with Est-Ouest Auctions Co., Ltd. (“Est-Ouest”) over a copyright infringement litigation at the Intellectual Property High Court (2009 (ne) No. 10079). ^[i]
 
Four contemporary artists including Takashi Murakami sued Est-Ouest, seeking payment of damages based on copyright infringement caused by reproductions and public transmissions of their artwork images on an auction catalogue, websites, etc. without their permission for an auction held by Est-Ouest. 
 
On November 26, 2009, the Tokyo District Court held in favor of the plaintiffs, ordering the payment of damages (in the range of 90,000 JPY to 200,000JPY) against Est-Ouest.^[ii]
 
At the appeal phase at the Intellectual Property High Court, Kaikai Kiki published a press release saying that the plaintiffs had settled the case for Est-Ouest paying Kaikai Kiki in the range of 1-3% of the sales price for the works of art by artists represented by Kaikai Kiki if the works of art were sold at auctions, whereas artists grant a right for reproductions for an auction catalogue etc.
 
This was an attempt to achieve something similar to the Artist’s Resale Right through a settlement agreement between the parties. 
 
After this settlement, Takashi Murakami, Time bokan – Fatman Gold and Time bokan – Little Boy Silver, (2006 each) were sold for 2,400,000 JPY at an auction held by Est-Ouest in Tokyo on September 9, 2011, which was subject to this royalty.<sup>[iii]

[i] Press Release by Kaikai Kiki Co., Ltd., September 28, 2011, https://www.kaikaikiki.co.jp/importantnotification/44/
[ii] Tokyo District Court Judgment, November 26, 2009, 2008 (wa) No. 31480.
[iii] 1% of hammer price goes to Takashi Murakami – compensation for reproductions on auction catalogues, asahi.com, September 20, 2011</sup>

Creator Contribution Return by Startbahn, Inc.

A Japanese art-tech startup, Startbahn, Inc. (“Startbahn”) founded by a Japanese contemporary artist Taihei Shii, provides for a platform service, Startbahn Cert., to register a digital certificate for artworks on the blockchain network known as Startrail. 
 
One of the unique characteristics of the platform is that artists can set contractual terms on the certificate including the payment to an artist when the artwork is resold at a secondary market. This payment is known as Creator Contribution Return (CCR) on the White Paper.
 
If a Secondary sale Handler such as an auction house, art dealer resold an artwork set to such contractual conditions, a similar payment to the Artist’s Resale Royalty will be made through Startbahn’s platform.

^{Source: Startbahn, Inc., Startrail White Paper ver1.1, March 6, 2020, p.14
https://startrail.io/en/}
 
As mentioned above, this system created by Startbahn is also trying to achieve the Artist’s Resale Right through a contractual approach using a blockchain technology.

Future of Artist’s Resale Right

There is no Artist’s Resale Right in Japan at present. However, players like Startbahn in the art market are trying to achieve the same goal that the Artist’s Resale Right is pursuing but from a contractual and technological approach.
 
Under the different statutory regimes, each country has its own system. Also, there are still many countries not yet adopting this kind of resale royalty. 
 
However, the contractual and technological approach like Startbahn would create a unified system in the artworld if the service became widely accepted. 
 
This might be the future of the Artist’s Resale Right and the artworld.

Kodai Kimura
^{https://aura-asia-art-project.com/wp-admin/}