The Art Law Review: USA

Introduction

The US art market is diverse in its composition, with stakeholders that include art dealers and galleries, advisers and appraisers, auction houses, museums, private collectors, foundations and artists. The laws that govern the art transactions and legal disputes among these market players comprise a varied combination of federal and state laws, differing in content and application depending on the jurisdiction and the matter involved.

On a global scale, the US art market is considered the largest in the world. In 2019, sales reached an estimated US$28.3 billion, with an estimated market share of 44 per cent of global sales.2 However, since the spring of 2020, the coronavirus pandemic has had a significant impact on the art market. With restrictions on travel and other covid-19 limitations in place, much of the art business is now being conducted online. For example, galleries report a rise of online sales from 10 per cent of total sales in 2019 to 37 per cent in the first half of 2020.3 Online auctions4 and online viewing rooms in place of in-person art fairs5 have also seen growth amid the pandemic. But this shift has not stopped the economic damage of covid-19. Although the long-term effect of covid-19 is still unknown, to date, it has severely affected certain sectors of the market, including art galleries6 and museums7 in the United States.

The year in review

Art fraud and financial crimes perpetrated by means of art transactions have been in the forefront of art news in the US. Unlike other markets in the US, the art market remains largely unregulated, making it the 'largest unregulated market in the world'.8 Indeed, there exists no regulatory agency in the United States overseeing art transactions that is equivalent to, for example, the Securities and Exchange Commission, which regulates the US securities market. This lack of regulation has created a lack of transparency in the art market that makes it vulnerable to fraud, money laundering and other financial crimes.

A recent example of the effects of this involves the now-disgraced art dealer, Inigo Philbrick, who has been accused of defrauding clients of over US$20 million and has been charged with wire fraud and aggravated identity theft. According to the government's complaint, Philbrick knowingly 'misrepresented' the true ownership of the artworks at issue, 'for example, by selling a total of more than 100 percent ownership in an artwork to multiple individuals and entities without their knowledge; and by selling artworks and/or using artworks as collateral on loans without the knowledge or permission of co-owners, and without disclosing the ownership interests of third parties to buyers and lenders'.9 If convicted, Philbrick could be sentenced to a maximum prison term of 20 years for wire fraud, and a mandatory prison sentence of two years for aggravated identity theft. At the same time, civil lawsuits have been filed in multiple jurisdictions by Philbrick's former clients and investors in connection with artworks affected by the fraud scheme.

Around the globe, jurisdictions outside the US have put in place laws to combat this type of opacity in the art market;10 and the US may also follow suit. In July 2020, the US Senate's Permanent Subcommittee on Investigations released a report documenting the lack of transparency in the US art market and recommending, among other things, that Congress amend the Bank Secrecy Act (BSA)11 to add art to the 'list of industries that must comply with BSA requirements'.12 According to the report, '[i]llegal activity, including money laundering, in the art market is made possible, in part, because the art market is generally not subject to the transparency requirements of the [BSA]'.13 The BSA, which is the primary anti-money laundering law in the US, currently applies to 'dealers in precious metals, stones and jewels, as well as sellers of automobiles, planes and boats, casinos, real estate professionals, travel agencies and pawnshops'14 – but not to dealers in art. Whether Congress will enact legislation to amend the BSA remains to be seen.

Art disputes

i Title in art

The Uniform Commercial Code (UCC), which has been adopted by every state in the United States, is a collection of laws governing commercial transactions in the US.15 Sales of tangible personal property, such as fine art, are governed by Article 2 of the UCC. Article 2 provides that title to artwork will generally pass from the seller to the buyer upon the physical delivery of an artwork.16 But, where the seller does not possess good title – such as when the artwork has been stolen or where some other defect in title exists – title may not transfer to the buyer, often leading to a title dispute.

A basic tenet of US law is that no one, not even a good-faith purchaser for value, can obtain good title to stolen property. This rule applies regardless of whether the purchaser acquired the artwork at auction or by private sale, or from a subsequent purchaser rather than directly from the thief. This is because title to stolen property is considered void.

In contrast, a good-faith purchaser for value may acquire title to an artwork where the transferor possesses voidable title.17 The UCC illustrates specific instances in which voidable title may arise, including, for example, when '(a) the transferor was deceived as to the identity of the purchaser, or (b) the delivery was in exchange for a check which is later dishonored . . .'18 The UCC also allows a merchant – such as an art dealer, gallery or auction house – to transfer good title to a buyer in the 'ordinary course of business', where the artwork was entrusted to that merchant. This provision is commonly referred to as the 'entrustment doctrine'.19

Recently, in Richmond v. F-40 Restoration, the US District Court for the District of Connecticut examined the relative ownership rights to an antique car, a rare 1934 Pierce Arrow coupé, analysing both the entrustment doctrine and the application of void, versus voidable, title.20 Although the property at issue in this case was an antique car, the Court's analysis would be equally applicable to a work of fine art or other art object. The claimant in Richmond had hired a restorer to inspect, negotiate for and purchase the Pierce Arrow on his behalf. Several years later, without consent from the claimant, the restorer sold the car to a third party. The Court first examined whether the entrustment doctrine applied. Since the restorer did not regularly engage in the sale of antique cars and had specifically disavowed having a dealer's licence or being in the business of selling vehicles, he was not a 'merchant' under the UCC; therefore, the doctrine did not apply. The Court then held that, in any event, any title the restorer had in the car was void, not merely voidable. Thus, 'even assuming arguendo that the [subsequent possessors] qualify as good faith purchasers for value', their title, which traced back to the restorer, remained 'void under Section 2-403(1)'.21

ii Nazi-looted art and cultural property

Nazi-looted art

In the United States, civil claims for the return of art misappropriated by the Nazis are determined by the courts or otherwise resolved through alternative dispute resolution (ADR). Unlike in many European countries, there is no restitution commission or committee that has been established by the US government for evaluating claims to artworks that were lost during the Nazi era. In part, this is due to the federal government's limited involvement in the operation of museums; the vast majority of US museums are privately owned or are owned by state and municipal authorities. Thus, restitution claims, whether against an individual or a museum, are decided under state law, which at times can vary widely from state to state.

In 1998, the US government convened the Washington Conference on Holocaust-Era Assets, held in Washington, DC, to consider the issues raised by the continuing discovery of Nazi-looted assets, including artworks. The Conference promulgated the Washington Conference Principles on Nazi-Confiscated Art (the Washington Principles), adopted by 44 nations. The Washington Principles invited Holocaust victims and their heirs to assert claims for the recovery of artworks and encouraged affected nations to develop processes to implement the principles and address disputes as to the artworks to achieve a 'just and fair' solution.22 At the subsequent Prague Holocaust Era Assets Conference in 2009, 46 nations, including the US, signed the Terezin Declaration on Holocaust Era Assets and Related Issues (the Terezin Declaration), which reaffirmed the core tenet of the Washington Principles that it is essential to 'facilitate just and fair solutions with regard to Nazi-confiscated and looted art . . .'23 The participating states urged, through the declaration, that all parties, including public and private institutions, adhere to its principles.

In 2019, an appellate court in New York affirmed a decision ordering two pieces of Nazi-looted art to be returned to the heirs of their original Jewish owner, Fritz Grunbaum, a prominent cabaret performer in 1930s Vienna and a prolific collector of art.24 The lower court, in applying the Holocaust Expropriated Art Recovery (HEAR) Act (discussed in Section III.iii) suggested that courts are obligated to apply the Holocaust policy of the US. The court ruled that the case must be viewed in light of the HEAR Act, and in so doing, underscored that one of the two purposes of the HEAR Act, as noted in the legislative history, was 'to ensure that laws governing claims to Nazi-confiscated art and other property further United States policy as set forth in the Washington Conference Principles . . . and the Terezin Declaration',25 and that, therefore, the HEAR Act 'compels us to help return Nazi looted art to its heirs . . .'26 On appeal, the court affirmed this point, emphasising that Congress, in relevant part, enacted the HEAR Act 'in an effort to “ensure that laws governing claims to Nazi-confiscated art and other property further United States policy”. . .'27

But this approach has not been uniformly applied by courts in the US. In a recent opinion issued by the United States Court of Appeals for the Ninth Circuit, Cassirer v. Thyssen-Bornemisza Collection,28 the Ninth Circuit noted that courts 'cannot order compliance with the Washington Principles or the Terezin Declaration'.29 Thus, other jurisdictions in the US consider both the Washington Principles and the Terezin Declaration to be non-binding international agreements.

Another recent development concerning art misappropriated during the Nazi era involves the Foreign Sovereign Immunities Act (FSIA).30 Under US law, foreign states and their agencies and instrumentalities are immune from jurisdiction in a US court unless certain exceptions apply, which are set forth in the FSIA. Since its enactment in 1976, these exceptions have been used as a basis for jurisdiction over foreign sovereigns being sued in the United States.

Of the enumerated exceptions, the 'expropriation exception' is most utilised in Nazi-era restitution cases. This exception provides that, where property has been taken in violation of international law, and either that property or any property exchanged for it is present in the US in connection with a commercial activity carried on in the US by the foreign state, or that property, or any property exchanged for it, is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the US, then that state will not be immune from suit where the rights to such property are at issue.31

Currently, there are two cases concerning the interpretation of the FSIA that are set to be heard by the US Supreme Court. The first, Federal Republic of Germany v. Philipp,32 involves a restitution claim by the heirs to a collection of medieval artworks known as the Guelph Treasure, which was sold in 1935 by a consortium of Jewish art dealers to the Nazi-controlled state of Prussia, allegedly as agents of Hermann Goering. The Guelph Treasure is currently in the possession of the Prussian Cultural Heritage Foundation, a German agency. In its petition for certiorari, Germany presented two questions to the Supreme Court: (1) whether the expropriation exception 'provides jurisdiction over claims that a foreign sovereign has violated international human-rights law when taking property from its own national within its own borders, even though such claims do not implicate the established international law governing states' responsibility for takings of property'; and (2) whether 'the doctrine of international comity is unavailable in cases against foreign sovereigns, even in cases of considerable historical and political significance to the foreign sovereign, and even where the foreign nation has a domestic frame-work for addressing the claims'.33

This petition sets forth issues of exceptional importance to Nazi-looted art cases brought in the US against foreign sovereigns and their agencies or instrumentalities. In particular, the parties dispute whether property taken by a foreign state from its own nationals during the course of genocide, in this case the Holocaust, constitutes a 'taking' for purposes of the FSIA. Germany argues that a violation of the 'international law of takings' only addresses when a state has taken property from another state's national. Respondents, on the other hand, argue that any 'genocidal thefts' violate international law.

In the second case, Republic of Hungary v. Simon,34 survivors of the Holocaust in Hungary filed suit against the Republic of Hungary and Magyar Államvasutak Zrt, Hungary's state-owned railway company, seeking compensation for the seizure of property that was allegedly taken as part of the Hungarian government's genocidal campaign. Before the Supreme Court is the question of whether the doctrine of international comity may apply where jurisdiction otherwise exists under the FSIA. Both cases were argued on 7 December 2020.

Cultural property

The US government combats trade in illicit antiquities using a variety of legal tools. The National Stolen Property Act (NSPA), which may also be employed in Nazi-looted art matters, is a statute that allows the government to both criminally prosecute those who knowingly possess, sell, receive or transport stolen goods valued at more than US$5,000 that have either crossed a state or United States boundary line or moved in interstate or foreign commerce, and to render such objects subject to forfeiture proceedings. To fall under the purview of the NSPA, an object must qualify as 'stolen'. As established by US jurisprudence, antiquities acquired in contravention of a foreign nation's valid patrimony law are considered stolen for purposes of the NSPA.35

One type of forfeiture proceeding that is commonly used in the context of looted cultural property is a civil action brought by the government pursuant to 19 USC Section 1595a. Section 1595a is a customs statute that authorises the forfeiture of any merchandise that is 'stolen, smuggled, or clandestinely imported or introduced' or attempted to be introduced into the United States 'contrary to law'.36 A violation of the NSPA often serves as the basis of the 'contrary to law' prong of the law.

A recent forfeiture claim illustrates the application of this statute. On 18 May 2020, the US government filed a complaint for the civil forfeiture of the Gilgamesh Dream Tablet, which was purchased by Hobby Lobby Stores, Inc (Hobby Lobby) for donation to or display at the Museum of the Bible.37 The government's complaint states that property is considered 'stolen' pursuant to 19 USC Section 1595a and the NSPA 'if it was taken without official authorisation from a foreign country whose laws establish state ownership of such cultural property'.38 In the case of the Tablet, it was alleged to have been removed from Iraq in contravention of the country's patrimony law; therefore, it would constitute stolen property subject to civil forfeiture.39

iii Limitation periods

In the United States, statutes of limitations often vary in content and application from state to state, and differ depending on the type of claim being pursued. For example, if a buyer acquires an artwork that is subsequently determined to be inauthentic, the buyer may bring an action for fraud against the seller. In New York, the statute of limitations governing fraud claims is either six years from the date of the fraud (i.e., the date of purchase of the artwork) or two years from the date the fraud was discovered, or with reasonable diligence, could have been discovered.40 In contrast, other states apply different limitation periods. For instance, under Florida law, a claim for fraud must be commenced within four years.41 Accrual for the claim begins 'from the time the facts giving rise to the cause of action were discovered or should have been discovered with the exercise of due diligence'; however, the action 'must be begun within 12 years after the date of the commission of the alleged fraud, regardless of the date the fraud was or should have been discovered'.42

Where the cause of action involves claims for replevin or conversion of art, accrual may depend on whether the possessor holds the art in good faith. In some states, including New York, a 'demand and refusal' rule applies, under which the three-year limitation period does not begin to run until the owner makes a demand for the return of the property and the possessor refuses. The majority of states, however, follow a 'discovery rule'. In these states, the limitation period, which differs depending on the state, begins to run when the plaintiff discovers or, after the exercise of reasonable diligence, should have discovered the whereabouts of the artwork.

For art recovery cases involving art lost during the Nazi era, a special statute of limitations applies – the HEAR Act of 2016.43 Under the terms of the Act, which establishes a uniform federal statute of limitations, the limitation period starts to run upon the actual discovery by the claimant of the identity and location of the artwork or other property and the claimant's possessory interest in that property. In the case of a possible misidentification, the Act provides that discovery is deemed to occur 'on the date on which there are facts sufficient to form a substantial basis to believe that the artwork or other property is the artwork or other property that was lost'.44 For those who had claims already pending in court, the law deemed such claimants to have had the requisite knowledge as of the date of enactment of the statute, unless the claimant was otherwise barred under an exception to the Act.45 The law is set to expire on 1 January 2027, although it will still apply to claims already pending at that time.

In addition to state and federal statutes of limitations, the equitable doctrine of laches may also bar otherwise timely art claims. To establish the defence, a possessor must show that the claimant unreasonably delayed in bringing the action to the prejudice of the possessor. A court may also weigh the relative equities between the parties in determining whether to apply the defence.

iv Alternative dispute resolution

In the United States, there are no specialised ADR organisations dealing specifically in art matters. Moreover, as a general matter, art disputes that are resolved by ADR are almost always subject to confidentiality provisions; indeed, confidentiality is one of the top reasons for parties to avoid litigation. Consequently, the prevalence of ADR in resolving art disputes in the US is difficult to quantify.

Fakes, forgeries and authentication

In August 2019, after more than eight years of numerous legal disputes, the final lawsuit arising from one of the most well-known art forgery scandals in the US came to a close. The case, Martin Hilti Family Trust v. Knoedler Gallery, LLC et al, which ultimately settled, involved a fake Mark Rothko painting that was sold for US$5.5 million through the now-closed Knoedler Gallery in New York.46 In 2011, after 165 years of operation, the Knoedler Gallery closed following the discovery that it had sold tens of millions of dollars' worth of paintings – including other supposed Rothko paintings, along with works purportedly by Jackson Pollock, Robert Motherwell and others – that turned out to be forgeries. In the civil litigations that followed, plaintiffs pursued various legal claims, including, inter alia, causes of action for fraud, mistake and breach of warranty.

As in the Knoedler Gallery litigations, where an artwork is discovered to be a fake, a forgery or otherwise inauthentic, claims based on fraud, mutual or unilateral mistake and breach of express or implied warranties are common. Under certain circumstances, an action for breach of warranty may be particularly useful because the buyer need not prove any fault by the seller. To establish a breach of a warranty, which can be either express or implied under the UCC,47 the buyer need only prove that a warranty existed, the goods failed to conform to that warranty and he or she suffered a loss as a result. A successful breach of warranty claim allows a buyer to recover the difference between the value of the defective artwork and the value of the artwork as it was warranted (i.e., an authentic artwork).48

Pursuant to the UCC, an express warranty may arise from: (1) '[a]ny affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain', and (2) '[a]ny description of the goods which is made part of the basis of the bargain'.49 An express warranty may also arise from representations made in materials such as advertisements or catalogues, or from a seller's oral statements to the buyer.

A buyer may also bring an action against a gallery, art dealer, auction house or other art merchant for breach of an implied warranty of merchantability.50 For art to be merchantable, it must, in relevant part, (1) be able to 'pass without objection in the trade under the contract description'; (2) be 'fit for the ordinary purposes' for which it is sold; and (3) 'conform' to the 'affirmations of fact' made in the sale catalogue or the bill of sale.51 A buyer may be able to claim a breach of implied warranty of merchantability if he or she is able to demonstrate, for example, that (1) a work of art does not conform to its description; or (2) his or her investment or aesthetic purposes are compromised because the work is a forgery.

Some states have enacted laws specifically addressing art warranties. Under NY Arts and Cultural Affairs Law Section 13.01–13.21, an art merchant that sells an artwork to a non-merchant buyer creates an express warranty if, in its written description of the artwork, the merchant identifies the artwork with a particular author or authorship. According to this Law, whenever an art merchant furnishes a certificate of authenticity to a non-merchant purchaser, authenticity is presumed to be a basis of the bargain and creates an express warranty. The art merchant can temper this warranty by making the attribution clear. The dealer can say the art is by the artist, 'attributed to' the artist or from the 'school of' the artist.52 To negate an express warranty of authenticity under this Law, a disclaimer must be conspicuously written and contained in a separate provision from the language creating the warranty. Words of 'general disclaimer' are not considered sufficient to 'negate or limit an express warranty'. To protect the buyer, however, a disclaimer of express warranty will be ineffectual if it is later shown that the work of art was counterfeit or if 'the information provided is proved to be, as of the date of sale or exchange, false, mistaken or erroneous'.53

Art transactions

i Private sales and auctions

The UCC generally governs most issues related to the sale of artwork. This includes not only express and implied warranties, but also warranty of title and against infringement,54 consignments and other requirements for agreements. Some provisions of the UCC apply only to auctions.55

Although the coronavirus pandemic, which began at the start of 2020, has caused a dip in art sales generally, it has caused a significant increase in online sales. Online-only auction sales by Christie's, Sotheby's and Phillips generated US$370 million in the first half of 2020, five times higher than the same period in 2019. For example, Sotheby's reports a 131 per cent increase in the number of lots sold online in the first half of the year (January to May 2020).56 Galleries have also increased their online sales − online shares rose from 10 per cent of total sales in 2019 to 37 per cent in the first half of 2020.57 In-person auctions, art fairs and other modes of traditional sale have been postponed or cancelled.

In many cases, physical vetting of artworks is not possible, with some purchasers forced to rely on digital vetting (e.g., digital photos or online viewing rooms to purchase artworks 'as is'). Accordingly, there are risks when purchasing artwork online. While the larger auction houses (e.g., Christie's and Sotheby's) tend to offer more information about the items they sell and more protection if there is an issue with an artwork after purchase than online-only platforms, the artworks are purchased 'as is'. These auction houses will most certainly have possession of the artwork being sold; other online-only platforms may not. If the purchaser is not able to view the work in person beforehand, they are forced to rely more heavily on condition reports and trust that the auction houses or sellers have done their due diligence.

Although online sales have increased, sales have decreased across the board and some galleries have remained closed or are in dire straits. For example, galleries in the first half of 2020 reported that the value of their sales fell by 36 per cent on average compared to the same period in 2019, with the majority of galleries believing sales will continue to decrease.58 Bankruptcies are sure to become more common.

When a gallery files for bankruptcy, under the UCC and bankruptcy law, repaying creditors may supersede returning the consigned artwork to its owner if the work is not properly protected. Most consignments are governed by UCC Article 9.59 Under this Article, consignors can protect their artworks by perfecting their security interest in the artwork and filing a UCC-1 financing statement – a legal notice filed by a creditor as a way to publicly declare its rights to seize property of a debtor, in this case the gallery, which may have defaulted on its loans. Many states also have enacted legislation to protect artists (although not collectors) who consign their works, and they receive priority of ownership ahead of a creditor's claim to it as an asset of the gallery.

ii Art loans

There are many reasons a private collector would want to loan a work of art to a museum. Museum loans present a philanthropic opportunity for lenders to share their works with the general public in a controlled and safe environment. Additionally, the borrowing museum may provide new scholarly information about the works. Inclusion in a museum exhibition could also bolster an artwork's provenance, potentially increasing the work's monetary value through public exposure. Many museums, however, frown upon the sale of a loaned work shortly after an exhibition. These museums often include a provision in their loan agreements that prohibits a sale within a specified period after the close of the exhibition. These periods can range from as short as three months to as long as two years after the conclusion of the loan.

Before loaning a work of art, a potential lender must first consider whether it is appropriate to lend a particular work, taking into account safety and damage concerns. Once these issues are addressed, the potential lender must then determine what should be included in the loan agreement once a work is approved for exhibition.

Lenders should also consider if the loan creates a use tax liability. This tax applies on account of a property's use within a taxing jurisdiction (in contrast to the sales tax, which applies on account of a property's sale within a taxing jurisdiction). For example, if a painting is purchased in state A, and five years later is loaned to a museum in state B, the use of that painting in state B (i.e., its exhibition at a state B museum) may subject it to a use tax. Generally, sales tax paid on a property will be credited against the owner's use tax liabilities, if any. The challenge, therefore, is mainly for works that were protected from sales tax, whether on account of happenstance or creative tax planning. The circumstances that create a sales tax exemption or discount tend to vary from state to state, and a work that has not been subject to sales tax might become subject to use tax on account of a loan to a museum situated in an inhospitable taxing jurisdiction. In those circumstances, a lender may face a use tax that is prohibitively expensive.

Another preliminary issue for the lender to consider is whether there are any provenance questions regarding the artwork. If there are competing claims to a work, these may open the artwork to the risk of judicial seizure. In the United States, the Immunity from Judicial Seizure Statute60 protects certain objects from seizure by the US government. Pursuant to the federal statute, any not-for-profit museum, cultural or educational institution may apply to the US Department of State for a determination that art to be loaned from abroad for exhibition is culturally significant and that the exhibition is in the national interest. If the application is granted, the art is immunised from judicial seizure by the federal government.

Unlike with individual collectors, where the lender is a cultural institution owned by a foreign state there are added issues to consider. Under the FSIA, a foreign state and its agencies and instrumentalities are immune from suit in US courts unless certain exceptions apply.61 One of these exceptions is where rights in property taken in violation of international law are in issue. The Foreign Cultural Exchange Jurisdictional Immunity Clarification Act of 2016 added Section 1605(h) to the FSIA, which made clear that activities of a foreign state associated with the temporary exhibition or display of art determined to be immune from seizure shall not be considered 'commercial activity' within the meaning of the FSIA's expropriation exception,62 which deals with cases in which rights in property taken in violation of international law are in issue.

Collectors lending to museums should also carefully consider the loan agreement with the museum. Although art loans raise legal concerns that touch on a variety of issues, the forms provided by the borrowing museum are often quite short and inadequate for purposes of the lender. To maximise protection, lenders should not hesitate to negotiate and add any terms reasonably necessary to protect their interests to the loan agreement. A few key areas to focus on include the following.

  1. Title: the loan agreement should make clear that the borrower does not have a right to sell or transfer title of the artwork.
  2. Insurance: the loan agreement should describe the insurance coverage for the artwork, including the work's insurance value. International loan agreements should also take into account whether any government insurance will be provided. In the US, if the exhibition is insured through the Arts and Artifacts Indemnity Act of 1975, the US government will pay insurance claims in addition to the insurance coverage provided by the borrowing museum. This insurance applies to artworks loaned to US exhibitions, where the artworks are of educational, cultural or scientific value, and are certified by the Secretary of State as being in the national interest.
  3. Taxes: for international loans, the loan agreement should take into account any tax considerations that are specific to the host country. For example, in the US, the Internal Revenue Code, Section 2105(c), provides that artworks loaned to a public gallery or museum in the US will not be subject to estate taxes if such works remain on loan at the time of the owner's death, as long as the owner is a non-resident who is not a US citizen.
  4. Copyright: the loan agreement may need to include copyright provisions. If the borrowing institution plans to photograph the artwork for publicity materials or commercial purposes, and the artwork is under an existing copyright, the borrower will have to obtain permission from both the owner and the copyright holder.
  5. Force majeure: the loan agreement should address the lender's concerns about circumstances beyond the parties' control, including war, natural disaster and political unrest. Many loan agreements excuse performance of certain provisions where events of this kind make performance of the contract dangerous.
  6. Term: the agreement should specify a term; this may help to avoid problems that would arise if the lender relocates or loses contact with the museum.

For every loan, there is a cost-benefit analysis that must be made. It is up to the lenders and borrowers to assess the risk and, if they decide to go forward with the loan, to ensure that steps are taken to maximise the safety and security of the artwork. This is even more important during the coronavirus pandemic where museums are closed and thus empty of patrons not only at night but during the day. Lenders should make sure that proper security measures are in place during this time.

iii Cross-border transactions

Countries whose borders encompass the rich culture of ancient lands have struggled for decades to prevent the unauthorised excavation and smuggling of their cultural artefacts, and to attempt to reclaim them after they are discovered in the possession of museums, auction houses, galleries and collectors. The United States is the top importer of art in the world and thus, although they may arguably be insufficient, it has laws in place to combat this issue.

Underlying any claim for the recovery of antiquities in the US is a single, fundamental rule: under US law, no one, not even a good-faith purchaser, may obtain good title to stolen property. When US law is applicable, a true owner always has the right to reclaim stolen property, unless barred by the statute of limitations or other technical defences. To exercise this right, a plaintiff must first establish that it owns the property in question.

First, the foreign government claimant must prove that the object in the defendant's hands is, in fact, the stolen item. A foreign government plaintiff must also demonstrate that at the time the objects were discovered in and removed from its territory, there were laws in place that clearly vested the government with ownership rights, or some other proprietary interest, in the objects. Virtually all 'art-rich' countries have enacted laws, mostly in the early twentieth century, declaring that anything found in or under the ground, even if not yet discovered, is owned by the government. These laws, called 'patrimony laws', are usually the key to establishing the foreign government's ownership. Export laws are considered part of a country's internal policing regulations, and generally are not enforced by the courts of other countries. Only foreign laws clearly establishing that the government owns everything found in or under the ground will be applied in US courts.

To avoid this distinction, however, several countries have entered into special bilateral agreements with the US government pursuant to the Cultural Property Implementation Act of 1983,63 which implements the international Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property.64 Pursuant to these agreements, the US agrees to enforce the export laws of these countries, and will therefore seize and return items brought into the US from these countries without an export permit, even without requiring proof that the government owns those items pursuant to patrimony laws. Twenty countries currently have such agreements with the US: Algeria, Belize, Bolivia, Bulgaria, Cambodia, Chile, China, Colombia, Cyprus, Ecuador, Egypt, El Salvador, Greece, Guatemala, Honduras, Italy, Jordan, Libya, Mali and Peru.65 The US State Department has also recently announced it is considering requests for import restrictions from Nigeria.66

The NSPA criminalises, among other activities, the knowing transfer or transport in interstate or international commerce of stolen property, or possession of stolen property thus transferred or transported. Property proven to have been so transferred, transported or possessed may be seized and the individual violating the NSPA may be prosecuted. The NSPA also serves the basis for civil forfeiture actions that permit the US government to bring a civil in rem action to have property that is the subject of criminal conduct forfeited to the US.67

US import laws also give US Immigration and Customs Enforcement and US Customs and Border Protection authority to seize cultural property and art that are stolen or otherwise brought into the United States illegally, and the persons involved in such violations may be subject to civil and criminal penalties.

iv Art finance

US private banks will make loans to their clients and receive fine art as collateral. In general, banks are reluctant to require these clients to relinquish possession of their art collections. Lenders will only finance a percentage of the appraised fair market value of the artwork, typically 40 per cent to 60 per cent. They will also typically require proof of ownership from potential borrowers. There are also specialist art lenders, boutique lenders and auction houses that provide this service. A lender can perfect a security interest by filing a UCC financing statement that puts others on notice that there is a lien on the artwork and be just as protected from other creditors' claims as it would be had it perfected by taking possession.

Deloitte estimates that in 2019, between US$21 billion and US$24 billion in loans was outstanding against art globally, with the majority held by the US Bank of America. Private owners and collectors accounted for between 90 per cent and 92 per cent of the overall lending market.68 On average, high-net-worth individuals have 6 per cent of their wealth in art. Since the covid-19 outbreak, wealthy clients and private business owners with existing credit lines against their art collections drew them down.69

An art fund, which is generally a privately offered investment fund that is managed by a professional investment manager, may be organised either in the United States or as an offshore vehicle, depending on where the fund's prospective investors reside. In the United States, art funds are typically structured as 'closed-end funds', more commonly known as private equity funds. In turn, private equity funds are usually organised as a limited partnership. The defining characteristics of a private equity fund are: (1) a fixed life, usually five to 10 years, with the option of a limited number of one-year extensions to permit the orderly liquidation of assets; (2) investments by limited partners of a fixed amount, called a 'capital commitment', that the investment manager 'draws down' from time to time over the fund's life to pay for the fund's investments, fees and expenses; and (3) limitations on investor withdrawals, except in extraordinary circumstances, prior to the end of a fund's life. What makes a private equity fund an 'art fund' is its strategy. Some art funds pursue a focused investment strategy (e.g., Old Masters or Chinese Imperial porcelain), while others seek a more diversified portfolio of artworks. While the individual strategies of art funds differ widely, at a basic level all art funds seek to generate financial gains through the acquisition and disposition of artworks.

An art fund seeks to wield its size to acquire a diversified portfolio of artworks at prices generally unattainable by individual investors. But, unlike other tangible assets held by many other types of private investment funds, art has no inherent value and, indeed, its valuation is highly subjective. Further, the art market can be extremely volatile with no certainty of liquidity. Thus, art funds rely on professional investment managers and art advisers to implement their strategies and realise investment returns. In light of the risks involved, it is important that investors consult with a professional adviser before investing in an art fund.

The US art market is not required by law to maintain anti-money laundering (AML) policies. While the large auction houses (Christie's, Sotheby's, Philips and Bonhams) do have written AML policies in place, on average, private art dealers do not.70

Artist rights

i Moral rights

Moral rights, which are rights applying to authors irrespective of their economic rights, receive limited recognition in the United States. The United States acceded to the Berne Convention for the Protection of Literary and Artistic Works, an international treaty that governs and protects these rights (among others), in 1988.71 In 1990, Congress enacted the Visual Artists Rights Act of 1990 (VARA).72

VARA offers an artist of a work of visual art73 the right of attribution, specifically the right (1) to claim authorship of that work, (2) to prevent the use of his or her name as the author of any work of visual art that he or she did not create, and (3) to prevent the use of his or her name as the author of the work of visual art in the event of a distortion, mutilation or other modification of the work that would be prejudicial to his or her honour or reputation.74

VARA also provides the right of integrity, specifically the right (1) to prevent any intentional distortion, mutilation or other modification of the work that would be prejudicial to his or her honour or reputation, and any intentional distortion, mutilation or modification of that work is a violation of that right, and (2) to prevent any destruction of a work of recognised stature, and any intentional or grossly negligent destruction of that work is a violation of that right.75

VARA rights extend for the life of the author for works created on or after its effective date, 1 June 1991, and for works created before 1 June 1991 to which the author still holds title on the same date, the life of the author plus 70 years.76 For joint works (two or more authors), VARA rights endure for the life of the last surviving author.77

Available remedies under VARA include injunctive relief, monetary damages, defendants' profits, statutory damages and, at the court's discretion, legal fees.

Recently, the United States Court of Appeals for the Second Circuit affirmed a decision to grant VARA rights to artists who created aerosol art on warehouse buildings at a site, well-known as 5Pointz. While some of the art at the site was more permanent, some of the works were painted over to make room for new work. Later, however, plans ensued to demolish the property to make way for luxury residential apartments, and after failing to secure cultural significance landmark status to prevent its destruction, the 5Pointz artists sued under VARA to prevent destruction of the site. Shortly after the District Court for the Eastern District of New York denied the plaintiffs' request for a preliminary injunction, the defendant building owner, in contravention of VARA's notice requirements that provided the artists an opportunity to salvage their work, destroyed almost all of the paintings by whitewashing them. Additional artists sued the defendant building owners and the lawsuits were consolidated for trial. Following the trial and verdict by an advisory jury, the District Court awarded the artists the maximum amount of statutory damages, totalling US$6.75 million (US$150,000 for each of the 45 works).78

The case was appealed and affirmed by the United States Court of Appeals for the Second Circuit. The Second Circuit held in its decision as amended on 21 February 2020 that:

  1. a work is of 'recognized stature' within the meaning of VARA when it is one of high quality, status or calibre that has been acknowledged as such by a relevant community;
  2. the District Court correctly determined that temporary artwork, including 'street art', may achieve recognised stature so as to be protected from destruction by VARA, and considered the well-known 5Pointz site itself as some evidence of recognised stature;
  3. the District Court correctly determined that the artists' works had achieved recognised stature;
  4. the District Court did not clearly err in finding owners' violations of VARA to be wilful where the defendant owner admitted he knew of VARA's notice provisions but decided not to wait before destroying the works; and
  5. the District Court's award of statutory damages was not an abuse of discretion where the Court carefully considered the six factors79 relevant to such a determination, and found that the defendant owner acted in revenge when it whitewashed the artwork.80

The defendants' petition for certiorari filed in the United States Supreme Court was denied.81

17 USC Section 1202 of the Digital Millennium Copyright Act (DMCA) protects artists from the illegal use of their images on the internet. Specifically, the DMCA, in part, imposes criminal and civil penalties on anyone who (1) prohibits the knowing provision or distribution of false 'copyright management information' (CMI)82 or (2) intentionally removes or alters CMI without authority, or disseminates CMI, knowing that the CMI has been removed or altered without authority.83

ii Resale rights

Resale royalty rights (or droit de suite, as they are known in Europe) grant artists a percentage of the proceeds from the resale of the original works of art. Although efforts have been made over several years to enact legislation, the United States does not recognise resale royalty rights. Under US copyright law's first sale doctrine, as codified in Section 109 of the Copyright Act, once an original copyright-protected work of authorship is sold, the buyer and all subsequent purchasers are free to resell that work (but not any underlying copyright rights in the work) without having to provide any compensation to the original artist or author.84 Artists may contract for resale royalty rights, which has recently become a more popular practice.

iii Economic rights

Artists in the United States have economic rights provided by copyright law, which allow them to derive certain financial benefits from the use of their works by others. The United States Constitution Article 1, Section 8, Clause 8 is the origin for copyright law in the United States:

The Congress shall have Power . . . To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

Enacted by Congress on 19 October 1976, the Copyright Act of 1976 provides the basic framework for the current copyright law and provides copyright protection for works created on or after 1 January 1978.85 The Copyright Act and all subsequent amendments to copyright law are contained in Title 17 of the United States Code.

Copyright, a form of intellectual property, protects original works of an author fixed in any tangible medium of expression, including 'pictorial, graphic and sculptural works'.86 Published and unpublished works are both protected (with only some differences). Copyright protection, however, does not extend to 'any idea, procedure, process, system, method of operation, concept, principle, or discovery'.87 The requirement for originality is minimal. To be original, artwork must be created independently and must have at least a 'modicum of creativity'.88

Copyright in a work generally extends from creation of the work and endures for a term consisting of the life of the author and 70 years after the author's death.89 Copyright of artwork does not automatically transfer with transfer of ownership of the artwork itself and vice versa. Transfers of copyright require an instrument in writing signed by the owner of the rights conveyed (or the owner's authorised agent).90 A copyright holder may assign one or more of the exclusive rights or license its copyright interest.

Copyright protection is not international but protection outside of the United States can be extended depending on international conventions, treaties (e.g., the Berne Convention for the Protection of Literary and Artistic Works), other bilateral instruments of the United States with other countries, and the laws of that country.91

An owner of copyrighted artwork (with some limitations) has the exclusive rights to: (1) reproduce the copyrighted work in copies; (2) prepare works derived from the copyrighted work; (3) distribute copies of the copyrighted work; and (4) display the copyrighted work publicly.92 While the copyright owner has the exclusive right to display a work publicly and the right of reproduction, copyright law carves out a special limited exception (tied to the first sale doctrine) for the display of a copy of a work rightfully owned without the authority of the copyright owner, to display that copy publicly, either directly or by the projection of no more than one image at a time, to viewers present at the place where the copy is located.93 This exception permits all displays of copyright-protected art by auction houses, galleries and museums.

If one or more of the artist's exclusive rights are violated, an artist may bring a lawsuit in a federal court, which has exclusive jurisdiction.94 Criminal proceedings have a five-year statute of limitations and civil actions have a three-year statute of limitations. To establish copyright infringement, an artist must prove: (1) ownership of a valid copyright and (2) copying by the defendant of constituent elements of the work that are original.95 A copyright registration certificate is presumptive evidence in favour of the plaintiff.96 The second element can be demonstrated by direct evidence or indirect evidence. Direct evidence can be through a witness of the act of copying or an admission of actual copying.97 While the former is rarer, copying is more frequently proven by proof that the defendant had access and substantial similarity between the copyrighted work and the claimed infringing work.98

Remedies for copyright infringement generally consist of injunction, impoundment of infringing articles, actual damages, profits or statutory damages, and attorneys' fees and costs.99

The fair use doctrine, which may provide a defence to copyright infringement, and is codified in the Copyright Act, seeks to strike a balance between a copyright owner's property rights in his or her creative works, and the ability of authors, artists and others to reference those copyrighted works as a means of expression.100 Under the Act, a court must consider the following four non-exclusive factors in assessing fair use:

  1. the purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes;
  2. the nature of the copyrighted work;
  3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
  4. the effect of the use upon the potential market for or value of the copyrighted work.101

Particularly, the issue of fair use is most prevalent in cases concerning 'appropriation art' or art in which an artist uses another artist's work to create something new. In a July 2019 decision, the United States District Court for the Southern District of New York held that the Andy Warhol Foundation for the Visual Arts was entitled to a declaration that Warhol's use of Lynn Goldsmith's photograph of the late musician Prince to create a series of silkscreen paintings, screen prints on paper and drawings (the Prince Series) was a non-infringing fair use. In 1984, Lynn Goldsmith licensed her black-and-white photograph of Prince to Vanity Fair for the limited use as an artist's reference in connection with an article to be published in the magazine. She later learned the artist to be Andy Warhol, who created his series of works based on the Goldsmith photograph. In 2016, after Prince's death, Condé Nast issued a magazine commemorating Prince and used one of Warhol's silkscreens for its cover.102

The Court determined that the first fair use factor weighed in the Foundation's favour − that although the Prince Series was commercial in nature, they were 'transformative' of Goldsmith's photograph because, while Goldsmith's photo illustrated that Prince was 'not a comfortable person' and that he was a 'vulnerable human being', the loud, unnatural colours or rough sketching of Warhol's work transformed Prince into an 'iconic, larger-than-life figure'. The Court found that the Prince Series was immediately recognisable as a 'Warhol' and not a photograph of Prince.103

In weighing the second factor, the Court found that although the photograph was a creative work and unpublished, which usually would weigh in Goldsmith's favour, the Court limited the importance of this factor because Goldsmith's photograph was licensed for an artist's reference and because the Prince Series was transformative.104

The third factor weighed in favour of the Foundation because the Court found that Warhol removed nearly all of the photograph's protectable elements; for example, the lighting, selection of film and camera, and evoking the desired expression, when creating the Prince Series.105

The Court held with respect to the fourth factor that the licensing market for Warhol prints is for 'Warhols', which is a market distinct from the licensing market for photographs like Goldsmith's, and thus this factor favoured the Foundation.106

The case was appealed to the United States Court of Appeals for the Second Circuit, and, after briefing was complete, argument was heard on 15 September 2020. The case has yet to be decided by the Court.

Trusts, foundations and estates

The importance of valuing artwork for US federal tax purposes and estate planning is apparent in three common scenarios: (1) when an owner donates artwork to a charitable organisation and wishes to claim a charitable contribution deduction; (2) when a donor's gift of artwork is subject to the gift tax; and (3) when a decedent's gross estate, which includes art, is valued for the purpose of calculating the estate tax. In each instance, the determination of 'fair market value' is critical. 'Fair market value' is the 'price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts'.107 In determining the fair market value of art, an appraisal is typically sought; but, even with an appraisal, challenges to valuation may arise.

The issue of fair market value was at the forefront of a recent decision by the United States Court of Appeals for the Ninth Circuit. In Estate of Eva Franzen Kollsman v. Commissioner of Internal Revenue, the Court affirmed a tax court's rejection of an appraisal for estate tax purposes, resulting in a tax deficiency for the estate in the amount of US$585,836.108 Central to the tax court's opinion in Kollsman was the importance of selecting an appraiser without conflicts of interests, such as 'financial incentive[s]' in providing 'fair market value estimates' that may benefit the interests of the estate or its beneficiaries.109 In addition, the appraiser's failure to provide any 'comparables' to support his valuation meant it lacked 'any objective support'.110

In an effort to, inter alia, provide assistance to taxpayers in valuing artworks – and avoid the type of deficiency affirmed in Kollsman – the Internal Revenue Service (IRS) established what is known as Art Appraisal Services (AAS). Prior to submitting an income, gift or estate tax return, a taxpayer may request a Statement of Value from AAS to review an appraisal of an object, which the taxpayer may then use to substantiate the value of an artwork included in the return.111

Under certain circumstances, a tax return must be referred to AAS. This occurs when a return selected for audit includes an art appraisal of a single artwork with a claimed value of US$50,000 or more; the local IRS office will then refer the case to AAS, which may submit the matter to the Commissioner of Internal Revenue's Art Advisory Panel (the Panel) for additional review. The Panel, which is made up of art dealers, scholars and museum curators, assists AAS in appraising works of art valued at US$50,000 or more. The Panel's recommendations are advisory and become the position of the IRS only with AAS's concurrence. In fiscal year 2019, AAS adopted 62 per cent of the Panel's recommendations.112

Outlook and conclusions

Covid-19 has rapidly transitioned the art world to a mostly digital marketplace. Digital sales rooms, online auctions and digital art fairs have become commonplace. With this rapid online growth, the art world faces unknown territory and a changing legal landscape. Perhaps, even after the covid-19 crisis subsides or ends, the art market may be disposed to maintain its current digital presence or at least a stronger one than pre-covid-19, but only time will tell the legal implications of the shift.

Footnotes

Footnotes

1 Lawrence M Kaye and Howard N Spiegler are partners, and Yael M Weitz and Gabrielle C Wilson are associates, at Herrick, Feinstein LLP.

2 See Clare McAndrew, The Art Market 2020, Art Basel & UBS Report, available for download at www.artbasel.com/signin?redirect=/theartmarket2020. Although sales in 2019 declined by 5 per cent as compared to 2018, the market in 2019 was at its second-highest level in history.

3 See Clare McAndrew, The Impact of COVID-19 on the Gallery Sector, Art Basel & UBS Report, https://d2u3kfwd92fzu7.cloudfront.net/The_Art_Market_Mid_Year_Survey_2020-1.pdf.

4 See, e.g., Abby Schultz, 'Online-Only Auction Sales Rise 255% in 2020', Barron's (14 September 2020), www.barrons.com/articles/online-only-auction-sales-rise-255-in-2020-01600113303.

5 See, e.g., Melanie Gerlis, 'Art fairs in the virtual world', Financial Times (16 September 2020), www.ft.com/content/b08ff88f-0e4e-42da-8ab7-d57c8cabeaad.

6 See Clare McAndrew, footnote 3.

7 See, e.g., Letter to members of Congress from the American Alliance of Museums, www.aam-us.org/wp-content/uploads/2020/03/3.18.2020-Museum-Community-Economic-Relief-Request-Letter-FINAL.pdf.

8 The Financial Crimes Task Force, 'Reframing U.S. Policy on the Art Market, Recommendations for Combatting Financial Crimes' (September 2020), https://theantiquitiescoalition.org/developing-implementing-solutions/financial-crimes-task-force/#report.

9 Complaint at 1–2, U.S. v. Inigo Philbrick, No. 1:20-mj-04507 (S.D.N.Y. 30 April 2020).

10 See The Financial Crimes Task Force, Global Anti-Money Laundering Legislation ('[O]ther major market jurisdictions – including the United Kingdom, Switzerland, and the European Union – have already taken similar action to fight money laundering and terrorist financing in their art markets . . .'), https://theantiquitiescoalition.org/developing-implementing-solutions/financial-crimes-task-force/.

11 Bank Secrecy Act of 1982, Pub. L. No. 97-258, codified at 31 U.S.C. § 5304.

12 United States Senate Permanent Subcommittee on Investigations, Committee on Homeland Security and Governmental Affairs, Staff Report, 'The Art Industry and U.S. Policies That Undermine Sanctions', www.hsgac.senate.gov/download/majority-and-minority-staff-report_-the-art-industry-and-us-policies-that-undermine-sanctions.

13 id.

14 The Financial Crimes Task Force, footnote 8.

16 U.C.C. §۲-۴۰۱(۲) ('Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place . . .').

17 U.C.C. § ۲-۴۰۳(۱).

18 id.

19 U.C.C. § 2-403(2).

20 Richmond v. F-40 Restoration, LLC, No. 3:18-CV-01409 (KAD), 2020 WL 3316052 (D. Conn. 18 June 2020).

21 id.

24 Reif v. Nagy, 175 A.D.3d 107 (1st Dep't 2019).

25 Reif v. Nagy, 61 Misc. 3d 319, 323 (Sup. Ct. Cnty. 2018).

26 id., at 324.

27 Reif v. Nagy, 175 A.D.3d 107, 131 (1st Dep't 2019).

28 No. 19-55616 (9th Cir. 17 August 2020). At issue in the case was a painting by Camille Pissarro, which was stolen from the claimants' ancestors by the Nazi regime in 1939. The Ninth Circuit affirmed that the possessor acquired title to the painting, which in that case was decided 'pursuant to Spain's law of prescriptive acquisition. . .' Cassirer v. Thyssen-Bornemisza Collection Found., No. 19-55616, 2020 WL 4746626, at *1 (9th Cir. 17 August 2020).

29 Cassirer v. Thyssen-Bornemisza Collection Found., No. 19-55616, 2020 WL 4746626, at *3 n.3 (9th Cir. 17 August 2020).

30 28 U.S.C. §§ 1605 (a)–(e).

31 28 U.S.C. § 1605(a)(3).

32 Supreme Court Docket No. 19-351, available at www.supremecourt.gov/docket/docketfiles/html/public/19-351.html.

33 Petition for Writ of Certiorari, Fed. Republic of Germany v. Philipp, Supreme Court Docket No. 19-351, available at www.supremecourt.gov/docket/docketfiles/html/public/19-351.html.

34 Supreme Court Docket No. 18-1447, available at www.supremecourt.gov/docket/docketfiles/html/public/18-1447.html.

35 See, e.g., United States v. Schultz, 333 F.3d 393, 410 (2d Cir. 2003) (holding that 'the NSPA applies to property that is stolen in violation of a foreign patrimony law').

36 19 U.S.C. § 1595a(c)(1).

37 United States v. One Cuneiform Tablet Known As The 'Gilgamesh Dream Tablet', No. 20-02222 (E.D.N.Y. 18 May 2020).

38 id.

39 One day after the government's filing, Hobby Lobby initiated a separate civil claim against Christie's and the unknown consignor of the tablet to Christie's. See Hobby Lobby Stores, Inc. v. Christie's Inc. and John Doe #1, No. 20-CV-2239 (E.D.N.Y. 19 May 2020). Thereafter, it was reported in August 2020 that Iraq entered negotiations with Hobby Lobby concerning the return to Iraq of thousands of antiquities purchased for the Museum of the Bible. See www.npr.org/2020/08/20/886540260/in-iraq-authorities-continue-to-fight-uphill-battle-against-antiquities-plunder. This agreement, if reached, may ultimately include return of the Tablet.

40 See N.Y. C.P.L.R. § 213(1), § 213(8), § 203(g).

41 See Florida Statutes § 95.11(3)(j).

42 id., § 95.031(2)(a)

43 Pub. L. No. 114-308 (2016).

44 id., at Section 5(b).

45 The exception limits the application of the Act from applying to 'any civil claim or cause of action barred on the day before the date of enactment. . . by a Federal or State statute of limitations if – (1) the claimant or a predecessor-in-interest of the claimant had knowledge of the elements set forth in subsection (a) on or after January 1, 1999; and (2) not less than 6 years have passed from the date such claimant or predecessor-in-interest acquired such knowledge and during which time the civil claim or cause of action was not barred by a Federal or State statute of limitation'. id., at Section 5(e).

46 See Docket No. 13-cv-00657-PGG-HBP (S.D.N.Y.).

47 See, generally, U.C.C. §§ 2-313-16.

48 U.C.C. § 2-714(2).

49 U.C.C. § 2-313.

50 U.C.C. § 2-314.

51 U.C.C. § 2-314(2).

52 N.Y. Arts & Cult. Affairs Law § 13.01.

53 id.

54 U.C.C. § 2-312.

55 See U.C.C. § 2-328.

57 Clare McAndrew, footnote 3.

58 id.

59 U.C.C. § 2-326 or bailment law may also apply.

60 22 U.S.C. Section 2459.

61 See 23 U.S.C. §§ 1602, et seq.

62 28 U.S.C. § 1605(a)(3).

63 Convention on Cultural Property Implementation Act, 19 U.S.C. §§ 2601–2613.

64 Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property, 14 November 1970, 823 U.N.T.S. 231.

67 See Section III.ii.

69 Carol Ryan, 'A Bad Year for Art Is Looking Like a Good Year for Art-Backed Loans' (17 July 2020), available at www.wsj.com/articles/a-bad-year-for-art-is-looking-like-a-good-year-for-art-backed-loans-11594978201.

70 United States Senate Permanent Subcommittee on Investigations, Committee on Homeland Security and Governmental Affairs, Staff Report, 'The Art Industry and U.S. Policies That Undermine Sanctions', www.hsgac.senate.gov/download/majority-and-minority-staff-report_-the-art-industry-and-us-policies-that-undermine-sanctions.

71 Berne Notification No. 121: Berne Convention for the Protection of Literary and Artistic Works: Accession by the United States of America, World Intellectual Property Organization (17 November 1988), available at www.wipo.int/treaties/en/notifications/berne/treaty_berne_121.html. In particular, the Berne Convention's Article 6 bis provides: 'Independently of the author's economic rights, and even after the transfer of the said rights, the author shall have the right to claim authorship of the work and to object to any distortion, mutilation or other modification of, or other derogatory action in relation to, the said work, which would be prejudicial to his honor or reputation.' Berne Convention for the Protection of Literary and Artistic Works, Paris Act of 24 July 1971, as amended on 28 September 1979, available at www.wipo.int/edocs/lexdocs/treaties/en/berne/trt_berne_001en.pdf.

72 Pub L. No. 101-650, Title VI, 104 Stat. 5128 (1990).

73 A 'work of visual art' is: '(1) a painting, drawing, print, or sculpture, existing in a single copy, in a limited edition of 200 copies or fewer that are signed and consecutively numbered by the author, or, in the case of a sculpture, in multiple cast, carved, or fabricated sculptures of 200 or fewer that are consecutively numbered by the author and bear the signature or other identifying mark of the author; or (2) a still photographic image produced for exhibition purposes only, existing in a single copy that is signed by the author, or in a limited edition of 200 copies or fewer that are signed and consecutively numbered by the author. A work of visual art does not include: (A)(i) any poster, map, globe, chart, technical drawing, diagram, model, applied art, motion picture or other audiovisual work, book, magazine, newspaper, periodical, data base, electronic information service, electronic publication, or similar publication; (ii) any merchandising item or advertising, promotional, descriptive, covering, or packaging material or container; (iii) any portion or part of any item described in clause (i) or (ii); (B) any work made for hire; or (C) any work not subject to copyright protection under this title.' 17 U.S.C. § 101.

74 17 U.S.C. §§ 106A(a)(1)–(2).

75 17 U.S.C. § 106A(a)(3).

76 17 U.S.C. §§ 106A(d)(1)–(2).

77 17 U.S.C. § 106A(d)(3).

78 Castillo v. G&M Realty L.P., 950 F.3d 155, 162–165 (2d Cir. 2020).

79 The six factors are: (1) the infringer's state of mind; (2) the expenses saved, and profits earned, by the infringer; (3) the revenue lost by the copyright holder; (4) the deterrent effect on the infringer and third parties; (5) the infringer's cooperation in providing evidence concerning the value of the infringing material; and (6) the conduct and attitude of the parties. Castillo v. G&M Realty L.P., 950 F.3d 155, 171–72 (2d Cir. 2020).

80 Castillo v. G&M Realty L.P., 950 F.3d 155 (2d Cir. 2020).

81 G&M Realty L.P., et al., Petitioners v. Maria Castillo, et al., U.S. Supreme Court, No. 20-66, available at www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/20-66.html&mc_cid=276c203025&mc_eid=0b402b442a.

82 Such information includes '[t]he title and other information identifying the work', '[t]he name of, and other identifying information about, the author of a work', '[t]he name of, and other identifying information about, the copyright owner of the work', 'the name of, and other identifying information about, a performer whose performance is fixed in a work other than an audiovisual work', 'the name of, and other identifying information about, a writer, performer, or director who is credited in the audiovisual work', '[t]erms and conditions for use of the work', '[i]dentifying numbers or symbols referring to such information or links to such information' and '[s]uch other information as the Register of Copyrights may prescribe by regulation'. 17 U.S.C. § 1202(c).

83 17 U.S.C. §§ 1202–1204.

84 17 U.S.C. § 109.

85 The earlier Copyright Act of 1909 applies to works created before 1 January 1978.

86 17 U.S.C. § 102(a). '“Pictorial, graphic and sculptural works” include two-dimensional and three-dimensional works of fine, graphic and applied art, photographs, prints and art reproductions, maps, globes, charts, diagrams, models, and technical drawings, including architectural plans. Such works shall include works of artistic craftsmanship insofar as their form but not their mechanical or utilitarian aspects are concerned; the design of a useful article, as defined in this section, shall be considered a pictorial, graphic, or sculptural work only if, and only to the extent that, such design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.' 17 U.S.C. § 101. 'Architectural works' are also protected by copyright law (see 17 U.S.C. § 102(a)) but are outside the scope of this chapter.

87 17 U.S.C. § 102(b).

88 Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 346, 111 S. Ct. 1282, 1288 (1991).

89 17 U.S.C. § 302.

90 17 U.S.C. § 204(a).

92 17 U.S.C. § 106.

93 17 U.S.C. § 109(c).

94 28 U.S.C. § 1338.

95 Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 361, 111 S. Ct. 1282, 1296 (1991).

96 Nimmer on Copyright § 13.01[A], 13-8.

97 Nimmer on Copyright § 13.01[A], 13-12.

98 Nimmer on Copyright § 13.01[A], 13-13.

99 17 U.S.C. §§ 502–505.

100 17 U.S.C. § 107.

101 id.

102 Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith, 382 F. Supp. 3d 312, 317–22, 331 (S.D.N.Y. 2019).

103 id., at 325–26.

104 id., at 326–27.

105 id., at 327–30.

106 id., at 330–31.

107 See 26 CFR § 1.170A-1(c)(2) (for charitable contributions); 26 CFR § 20.2031-1(b) (for estate tax purposes); and 26 CFR § 25.2512-1 (for gift tax purposes).

108 Estate of Kollsman v. Comm'r of Internal Revenue, 777 F. App'x 870 (9th Cir. 2019).

109 The court noted that the appraisal had been presented to the estate's residual beneficiary simultaneously with a pitch for exclusive rights to auction the artworks at issue.

110 Estate of Kollsman v. Comm'r of Internal Revenue, T.C. Memo. 2017-40 (2017).

111 Rev. Proc. 96-15. The reviewed appraisals most generally exceed US$50,000 in value.

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