Author: Simon Stokes
Background to the case
Successful visual artists often operate through limited companies. This can have tax advantages. One such example was the leading British sculptor Lynn Chadwick, who died in 2003. From July 1973 he changed his status from a sole trader to becoming a director and employee of a company he and his wife owned and transferred his stock and trading business to the company at that time. However no written agreement dealing with the transfer of the (physical) property and copyright in his art works was executed. On the artist’s death a dispute arose as to where title to the property and copyright lay in his works of art created both pre and post 1973 – with the artist’s estate or with the company? His Will made no mention of the artist’s artworks or copyright in them. It should be noted that selling or transferring physical title to a work of art does not by itself transfer the copyright in it – so often physical title in a work and the copyright in it are in separate ownership.
These facts gave rise a dispute over who owned Lynn Chadwick's art works (both physical property and copyright) – the artist's Estate or the company? This dispute was recently considered by the High Court, with judgement on 31 July 2018. Based on the evidence before him the judge concluded that in 1973 physical property and copyright in works extant at that time and part of the artist’s trading business were transferred to the company and going forward from 1973 as the artist was an employee of the company the physical property and copyright in his works vested in the company by operation of law. It did not matter that the formalities to transfer legal title to the copyright from the Estate to the company were not complied with – the company owned the copyright in equity (to the extent it did not already have full title by virtue of the artist’s employment) and so could call upon the Estate to transfer the formal, legal title to the copyright to it.
Lessons from the case
The obvious lesson is that property in their artworks and copyright (and related rights such as moral rights and ARR discussed below) must not be forgotten about when artists structure their businesses or draft their wills. Doing so may help to avoid future disputes. It is fair to say that back in 1973 there was a lot less interest in copyright and works of art than there is now – in addition to copyright (which deals with how art works may be copied, reproduced and distributed both physically and digitally) from 1989 artists have also had moral rights which ensure they are given credit as "author" for their works and also control over modifications to and the uses made of their works. Then from 2006 they have also been entitled to artist’s resale right (ARR) – a royalty payment - when their works are resold at auction or through a dealer or gallery. Artists are also a lot more protective of their rights and have collecting societies such as DACS and ACS to assist them both with copyright and also with other rights and in particular ARR. All this means that lawyers and tax advisers who advocate an employee/corporate approach to managing an artist’s rights do need to think about the effect this will have on the artist’s ARR and moral rights and not just copyright – the interrelationship between these rights and the law that applies to works created by artist-employees is not straightforward.
Simon is a partner specialising in IP and commercial law and is a noted authority on artist's rights, advising artists, their estates, publishers and art market professionals on this area. He is the author of two leading law books on artist's rights and also teaches on the Art, Business and Law LLM programme at Queen Mary University of London run in partnership with the Institute of Art and Law, where Simon also lectures.