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    May
    01
    2016

    Contracts for Creative Works

    If your clients include individuals or businesses that create or use images and other types of creative works, then those clients need you to craft contracts so they can convey and use creative works legally.

    Elizabeth T. Russell

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    Quick. Name five lawyers who practice arts law.

    Did you put your own name on the list? Odds are, it belongs there.

    This article surveys key provisions in contracts surrounding the creation, ownership, and exploitation of works of visual art. Before diving in, though, it’s fair to ask, “Who actually does this?”

    Elizabeth T Russellcom beth erklaw Elizabeth T Russell, Pace 1986, is a solo practitioner in Middleton. Her primary practice areas are copyright, trademark, and arts law. She is a past chair of the State Bar of Wisconsin Sports and Entertainment Law Section and is admitted to practice in New York, Connecticut, and Wisconsin. She is the author of Arts Law Conversations: A Surprisingly Readable Guide for Arts Entrepreneurs (Ruly Press, 2014).

    “Arts Law” is a Palette of Many Hues

    There’s a difference between “art” law and “arts” law. Art law is a niche field of practice. Its focus is limited primarily to the category of copyrightable work known as “pictorial, graphic and sculptural work” under section 102 of the Copyright Act1 (see Figure 1). Usually, this is what we’re referring to when we talk about “visual art.”

    Art law practitioners provide counsel in transactions among visual artists, galleries, dealers, and collectors. They advise artists about moral rights, resale rights, constitutional issues, and, of course, copyright. They advise dealers and collectors about buying, selling, and transferring the physical media embodying an artist’s work. They counsel on international treaties, illicit trade, and the law of cultural patrimony. They become involved in matters requiring expertise in trusts and estates, taxation, marital property, and secured transactions.

    Arts law includes art law – plus a whole lot more. Take another look at Figure 1. Arts law involves all of those other categories of authorship, as well. Arts law includes “entertainment law,” which serves (for example) the music, film, television, theater, and publishing industries. And chances are, arts law plays a role in your practice.

    The creative industries employ millions of people and contribute significantly to our local and national economies.2 Representative sectors include museums, the performing arts, visual art and design, film, broadcasting, publishing, and arts schools. (And don’t forget tattoo artists.)3 If you provide any kind of legal services for these types of clients, you are practicing arts law.

    Figure 1

    Copyright Law of the United StatesTitle 17 of the United States Code

    § 102. Subject Matter of Copyright: In General

    (a) Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. Works of authorship include the following categories:

    (1) literary works;

    (2) musical works, including any accompanying words;

    (3) dramatic works, including any accompanying music;

    (4) pantomimes and choreographic works;

    (5) pictorial, graphic, and sculptural works;

    (6) motion pictures and other audiovisual works;

    (7) sound recordings; and

    (8) architectural works.

    (b) In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.

    Anyone Who Counsels a Business Practices Arts Law

    If our discussion thus far hasn’t convinced you to include yourself on that list of arts lawyers, consider this. In today’s world it’s nearly impossible to identify a business that doesn’t use (if not absolutely rely on) the copyrightable works of authorship. (Go ahead. Take a third look at Figure 1!) If you counsel a business, it’s not a question of “if.” These issues will arise. And when they do, you will be practicing arts law.

    Let’s get specific. Your client (Client) retains a graphic-design firm (Design Firm) to create a new logo. That logo, if sufficiently original, is copyrightable “pictorial, graphic [or] sculptural work.” Now take a look at Figure 2. Nobody can exercise any of those exclusive rights without 1) a license from the copyright owner, or 2) an applicable statutory exception. Client will need to exercise most of those rights, however, in connection with its own logo. Consider these scenarios:

    Client and Design Firm Do Not Have a Written Contract. Many clients assume, incorrectly, that they acquire copyright (that is, the entire “bundle of rights”) just by paying the artist to create the work. Not so. Copyright vests in the author (creator) of the work.4 By paying Design Firm, Client acquired tangible media embodying the logo (for example, digital files; pieces of paper). But unless Client obtained license(s) for the specific right(s) to be exercised or a proper transfer of copyright ownership, Client has no authority to exercise any of the rights from the copyright bundle.

    A “transfer of copyright ownership,” other than by operation of law, requires a written instrument of conveyance signed by the owner of the rights conveyed.5 Exclusive licenses are included within the definition of “transfer of copyright ownership,”6 so Client would need a signed, written conveyance not only for a complete transfer, but also for an exclusive license.

    Nonexclusive licenses do not require a writing, so under this scenario Client has – maybe – an implied nonexclusive license to use the new logo. As indicated, however, Client does not own the copyright nor can it claim even an exclusive license. So when the logo shows up on a competitor’s website without authority, copyright is not going to be in your arsenal. Furthermore, “use” is not a copyright term of art, so what the implied license does or does not permit Client to do is unclear.

    This is not a recommended scenario.

    Figure 2

    Copyright Law of the United States Title 17 of the United States Code

    § 106. Exclusive Rights in Copyrighted Works

    “Bundle of Rights”

    (1) to reproduce the copyrighted work in copies or phonorecords

    (2) to prepare derivative works based upon the copyrighted work

    (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending

    (4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly

    (5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly

    (6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission

    Client and Design Firm Have a Written “Work Made for Hire” Contract. Copyright law states the following: “In the case of a work made for hire, the employer or other person for whom the work was prepared is considered the author ... and ... owns all of the rights comprised in the copyright.”7 At first blush, the solution seems easy: just have a contract specifying that Design Firm will create the logo as work made for hire. Unfortunately, that’s not going to work.

    There are only two ways work can qualify as “work made for hire.” One is if the creator is an actual employee and creates the work within the scope of his or her employment. There is no employment relationship between Client and Design Firm, in our scenario, so that’s out. (If, in this context, the existence of an employer-employee relationship is in dispute, consult Community for Creative Non-Violence v. Reid).8

    The other way work can qualify as work made for hire is 1) if it is specially ordered or commissioned (Client did that); 2) there is a written agreement to that effect signed by both parties (got it); and 3)the work being created falls within one of nine special categories.9 The third requirement is the problem. The nine categories are extremely narrow, and it is likely none will apply to our Client-Design Firm transaction. That being the case, Client’s contract describing the work as “work made for hire” is ineffective, and copyright remains with Design Firm.

    Client and Design Firm Have a Written Contract Assigning Copyright to Client.The preferred approach (if you represent Client) is to have Design Firm assign all copyright rights to Client. Assignments are included inthe definition of “transfer of copyright ownership,”10 so this will require a signed, written conveyance. Design Firm probably will request a provision whereby the transfer does not occur until Client has paid in full; Design Firm might also wish to reserve licenses to reproduce and display the logo in its portfolio and marketing materials. Absent unusual circumstances, both requests are reasonable.

    But here’s another problem. How do you know that Design Firm holds copyright in the first place? If the individual who actually did the design work is not a Design Firm employee, and Design Firm does not have its own signed, written conveyance from that individual, it is possible the individual – and not Design Firm – is the real copyright owner. If that’s the case, Design Firm’s “conveyance” to Client is worthless. To guard against this possibility, Client should insist on Design Firm’s warranty that it owns or has properly acquired the copyright being transferred, and that the work does not infringe on the rights of others. Standard indemnification provisions should then support these warranties.

    Visual Art Commissioning Agreements

    All kinds of businesses commission works of visual art. So do towns, counties, and states. The first concept as to which you’ll need to educate commissioning parties is this: there’s a difference between the copyright to a work of authorship and the tangible medium in which the work is embodied.11 When someone purchases a tangible piece of art, the purchaser acquires ownership of that tangible “copy,”12 for example, the piece of canvas or the metal in the sculpture. Absent a signed, written conveyance specifically transferring copyright, however, the purchaser does not acquire the copyright. Accordingly, visual art commissioning agreements must address whether copyright will transfer at all, and if not, what licenses the artist grants to the commissioning party. This is a threshold issue that should be addressed as early as possible in the commissioning process because if the parties are unable to agree, the commission likely will not proceed.

    Another make-or-break issue involves the Visual Artists Rights Act (VARA).13 On a narrow statutory canvas, VARA recognizes certain moral rights for those who create “works of visual art.” (The definition of “work of visual art” is set forth in section 101 of the Copyright Act).14 Moral rights (from the French droit moral) involve an artist’s personal interest in receiving attribution for, and preserving the integrity of, his or her work.

    VARA grants three rights: the right of attribution; the right of integrity; and, for works of recognized stature, the right to prevent destruction of the work.15 With respect to works created on or after VARA’s effective date, VARA rights endure for the life of the author.16 Accordingly, long after title to a covered work has passed, the artist retains certain controls. VARA rights are at the center of highly publicized litigation involving real estate transactions in New York (search for: #5Pointz) and Detroit (search for: #KatherineCraig #TheIlluminatedMural). It’s also become an issue in Philadelphia (search for: #CosbyMural).

    How you approach VARA depends on which side you’re representing. The law permits artists to waive their VARA rights.17 The commissioning party will want the artist to do so; the artist will resist. Ideally, the solution will lie in a negotiated middle ground. The only real mistake is in not addressing it at all. Articles about the current disputes paint VARA as the enemy of free enterprise and property ownership. The reality, however, is that these disputes exist because artists and property owners alike routinely fail to address VARA, thoroughly, in their transaction documents. Look at it this way. If you practice commercial real estate, underground storage tanks are on your due-diligence checklist. VARA should be, too.

    Once you’ve handled VARA and copyright ownership, there’s still much to be done in your commissioning agreement. Attached exhibits typically address the artist’s scope of services; the project budget, timeline, and payment schedule; engineering reports; insurance; and maintenance requirements. If the commissioning party is a public entity there will be even more demands, and most of them will be nonnegotiable because they’ll reflect myriad state, local, and federal requirements the public entity cannot waive. If you represent the artist in a public art commission, try to put all nonnegotiable governmental provisions in separate exhibits; doing so will provide a clearer path for negotiating the points that can, in fact, be modified.

    In the body of the agreement, you should specify (for example) how many meetings the artist must attend, how much time can elapse between fabrication and installation, what the criteria are for final acceptance, the point at which title to the work passes to the commissioning party, and what happens if the artist dies. The agreement should contain artist warranties of originality, noninfringement, and workmanship; it also should require the artist to assign vendor warranties (for products used in manufacture of the work) to the commissioning party.

    “Art Law” or “Arts Law”? There Is a Difference

    “Arts Law” is a body of law, involving numerous disciplines,that protects, regulates, and facilitates the creation, use, and marketing of art. The variety of disciplines include intellectual property, contract, constitutional, tort, tax, commercial, and international law to protect clients’ interests. Some legal principles are national – even international – in scope, while others vary according to the development of state law. Increasingly, the creation, sale, collection, and display of art receive specialized legal treatment by statute, ordinance, regulation, treat, or case law.

    Although “art” in the broad sense of the term includes “the arts” (music, film, theater, literature, and so on), “art law” as traditionally defined concerns only works of fine art and the visual arts. Additionally, art law is closely related to, and often overlaps with, the area known as cultural property law.

    Source: Georgetown Art Law Research Guide (last visited April 19, 2016)

    Fine Art Contracts in Wisconsin

    Okay, be honest. Without looking, do you know the topic of Wis. Stat. chapter 129? It is titled “Consignments of Works of Fine Art.” It exists for the protection of artists, but most artists (and dealers) have no idea it exists.

    Artists often report that, when they ask galleries for written consignment agreements, the response is something along the lines of, “your handshake is good enough.” The artist knows this is not a good idea, but in most situations the artist has less bargaining power than the gallery and faces greater competition. So the artist shakes hands and hopes for the best.

    In that scenario, the gallery violates Wisconsin law. Wisconsin Statutes chapter 129 expressly provides:

    “(1) An art dealer may accept a work of fine art, on a fee, commission or other compensation basis, on consignment from the artist who created the work of fine art only if prior to or at the time of acceptance the art dealer enters into a written contract with the artist establishing

    (a) The value of the work of fine art;

    (b) The time within which the proceeds of the sale are to be paid to the artist, if the work of fine art is sold; and

    (c) The minimum price for the sale of the work of fine art.”18

    The penalties for violating chapter 129 are minimal, but the law does provide for the recovery of attorney fees.19

    In addition to the provisions that chapter 129 requires agreements to contain, parties to a gallery or consignment agreement should consider things such as apportionment of expenses, copyright notices, recordkeeping, and audit rights. The gallery should preserve its right to commission, in case the artist undertakes a private sale of the work. The artist might ask the gallery to waive VARA’s “public presentation” exception. That’s permissible. The gallery might ask the artist to waive his or her rights under Wis. Stat. chapter 129. That is not permissible!20

    Here’s another Wisconsin provision that must be on the radar, whether you’re representing an artist, an art dealer, or a buyer: chapter ATCP 117 of the Wisconsin Administrative Code. Titled “Art Prints and Multiple Art; Sales Practices,” this chapter applies to all sales of “multiple art” (defined as a work of visual art produced from a master in quantities of two or more)21 if any portion of the transaction occurs in Wisconsin.22 Among other provisions, it requires an art dealer to provide the buyer of any “work of investment art” (defined as a work of multiple art whose price exceeds $800)23 with a disclosure and warranty statement, the form for which is expressly prescribed in the body of the regulation.24

    Visual Art Licensing

    Think: licensing the artist’s work for use on greeting cards, wallpaper, or other merchandise. In this realm, practitioners will encounter two categories of contracts: 1) the agency agreement between artist and licensing agent; and 2) the licensing agreement itself, between artist and licensee.

    Not every artist will sign with an agent. Those who do, however, are well advised to seek counsel, as a bad agency agreement can have long-term, far-reaching consequences for the artist’s career. Key provisions in the agency agreement include limitations on the rights granted to the agent; the term of the agreement (the agent will want it to be lengthy, while the artist will want a readily accessible off-ramp); how the agent will be paid; and what rights survive termination.

    An artist’s counsel should consider carefully whether the agent is being retained merely to assist the artist or whether the agent will have power to exercise complete control over the artist’s licensing program. It is not uncommon for agents to propose agreements whereby the agent acquires power to contract directly with third-party licensees. This can create serious problems when the artist wishes to terminate the agent’s services. The preferred course, therefore, is for privity of contract to be, directly, between the artist and licensees.

    Trademark plays an important role in art licensing. Counseling an artist seeking to enter this arena thus requires proactive attention to selecting and protecting strong trademarks, in addition to registering copyrights and, sometimes, even patents. It’s important to remember, too, that in the field of licensing, the “artist” could be your business client with a hot property. And the universe of “licensees” is, essentially, unlimited.

    Conclusion

    Arts law is everywhere. Yes, it includes the niche practices of art and entertainment law. But its broad scope seeps into every category of practice, at one time or another.

    So, “who actually does this?”

    Very possibly: you.

    Endnotes

    1 17 U.S.C. § 102(a)(5).

    2 www.artsindexusa.org/local-arts-index.

    3 Solid Oak Sketches LLC v. Visual Concepts LLC, No. 1:16-cv-00724 (S.D.N.Y __).

    4 17 U.S.C. § 201(a).

    5 17 U.S.C. § 204(a).

    6 17 U.S.C. § 101.

    7 17 U.S.C. § 204(b).

    8 490 U.S. 730 (1989).

    9 17 U.S.C. § 101.

    10 Id.

    11 17 U.S.C. § 202.

    12 17 U.S.C. § 101.

    13 17 U.S.C. § 106A.

    14 17 U.S.C. § 101.

    15 17 U.S.C. § 106A(a).

    16 17 U.S.C. § 106A(d)(1).

    17 17 U.S.C. § 106A(e)(1).

    18 Wis. Stat. § 129.05.

    19 Wis. Stat. § 129.08.

    20 Wis. Stat. § 129.07.

    21 Wis. Admin. Code § ATCP 117.05(9).

    22 Wis. Admin. Code § ATCP 117.01.

    23 Wis. Admin. Code § ATCP 117.05(4).

    24 Wis. Admin. Code § ATCP 117.15.




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