eBay, Auction Houses Say California Art Law Is Unconstitutional


Art sellers are challenging a California law that forces them to collect a five percent royalty fee every time a piece of art is resold. The move comes after artists sued eBay (NSDQ: EBAY) and auction houses Christie’s and Sotheby’s for failing to collect the royalty.

The law is intended to give artists who sell their art cheaply early in their careers a chance to share in the wealth if their work is resold for big bucks later on. California is the only state that has such a “droit-de-suite” law which are common in Europe but not in English speaking countries.

California says the law applies to any resale that takes place in the state. To prevent sellers from dodging the fee by selling outside of California, the law also says the royalty applies in other places too if the seller is a California resident.

In October, artists and their heirs filed a class action suit in federal court in Los Angeles. They claim the auction houses and e-Bay — acting as middlemen for art sellers — deliberately avoided collecting the payments on many occasions, in some cases by failing to disclose that the sellers lived in California. The artists are looking to collect up to three decades of unpaid royalties plus punitive damages.

On Thursday, the defendants struck back by asking the court to declare that the entire California law is unconstitutional. Their primary argument is that the law interferes with interstate commerce by imposing a burden on out of state business activity. They also say California is intruding on federal copyright powers.

A copy of the motion to dismiss is below.

Motion to Dismiss
http://viewer.docstoc.com/var docstoc_docid=”110847131″;var docstoc_title=”Motion to Dismiss”;var docstoc_urltitle=”Motion to Dismiss”;

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