On December 3, 2018, the Ninth Circuit ruled that EBay and Sotheby’s will be permitted to recoup attorneys’ fees from a group of artists who unsuccessfully sued the companies under California law.

Unfortunately for said visual artists, in July of 2018, the Ninth Circuit held that the 1976 California Resale Royalties Act (which allows artists to receive royalties when their works are resold) was preempted by the federal Copyright Act’s provisions allowing copyrighted works to be resold without having to pay royalties. In this latest ruling, the 9th Circuit held that companies that are sued under California’s royalties act, known as the CRRA, could seek attorneys’ fees under state law.

The decision on December 3, 2018, was the third time the Ninth Circuit has ruled on these cases since October 2011, when these visual artists first sued Christie’s Inc., Sotheby’s Inc. and eBay Inc., claiming the auctioneers owed them 5 percent on resales of their work under the CRRA.

In May 2012, a California federal judge struck down the royalties act as unconstitutional under the federal Commerce Clause; the plaintiffs then successfully urged the 9th Circuit to restore the law and revive their claims.

In 2015, the Ninth Circuit agreed to restore the law and revive the artists’ claims thereby reviving the CRRA with a restriction that it only applies to sales within California.

Then in April of 2016, a federal judge ruled that the CRRA was still in conflict with the federal Copyright Act’s first sale doctrine, which effectively allows copyrighted works to be resold without royalty restrictions.

In March of 2017, again at the Ninth Circuit, visual artists argued that the Copyright Act only extinguished a copyright holder’s right to control distribution after the first sale. However, the CRRA does not conflict with that doctrine because it only enforces a holder’s right to earn money from resales; not to prevent them.

The Ninth Circuit ultimately ruled that the CRRA had only a “short effective life” from when it was launched in January 1977 to when the federal Copyright Act took effect in January 1978.

On December 3, 2018, not only did the 9th Circuit strike a deadly blow to visual artists by (in this author’s opinion improperly) eviscerating the CRRA via the “copyright preemption doctrine” but even worse, the 9th Circuit does not preempt the provision of the state law that grants the right to recoup attorneys’ fees to prevailing parties in litigation brought under the CRRA.

Ultimately the visual artists were left empty-handed.

Circuit Judges Jay S. Bybee and Paul J. Watford, as well as Sixth Circuit Judge Danny J. Boggs, sitting by designation, were on the panel.

The artists are represented by Eric M. George and Ira Bibbero of Browne George Ross LLP.

EBay is represented by John C. Dwyer and Angela L. Dunning of Cooley LLP.

Sotheby’s is represented by Steven A. Reiss and Howard B. Comet of Weil Gotshal & Manges LLP, as well as Paul T. Friedman and Deanne E. Maynard of Morrison & Foerster LLP.

The case is Chuck Close et al. v. Sotheby’s Inc., case number 16-56234, in the U.S. Court of Appeals for the Ninth Circuit.

* Lowe & Associates (“The Firm”) is a boutique entertainment and business litigation firm located in Beverly Hills, California. The Firm has extensive experience handling cases involving entertainment law, having provided top quality legal services to its clients since 1991. The Firm is recognized in multiple publications for its many achievements and high ethical standards, including Martindale-Hubbell and Super Lawyers.

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