Published in NY Times March 18, 2010

Less than two months before Christie’s will be selling one of Jasper Johns’s signature “Flag” paintings, the hedge fund billionaire Steven A. Cohen privately scooped up a larger and earlier example of that artist’s seminal image. He bought it from Jean-Christophe Castelli, son of Leo Castelli, Mr. Johns’s legendary dealer. The younger Mr. Castelli inherited the painting from his father, who died in 1999.

“I can confirm that Steve Cohen bought the ‘Flag’ painting,” said Sandy Heller, Mr. Cohen’s art adviser. Thomas C. Danziger, Mr. Castelli’s lawyer, also confirmed the sale, adding that the terms of the deal were “strictly confidential.”

While no one will discuss the price, art experts who have heard details of the transaction say Mr. Cohen paid about $110 million.

The painting was executed in 1958 and was so coveted by the dealer that he never sold it. It hung in his Manhattan home until his death. For years before the sale, the younger Mr. Castelli lent the work to the San Francisco Museum of Modern Art, where it was on view.

“It’s beautifully rendered,” said Brett Gorvy, a co-head of Christie’s postwar and contemporary art department and deputy chairman of Christie’s in America. Alongside other masterpieces that Mr. Cohen has purchased over the years — including Willem de Kooning’s “Woman III,” a 1952-53 canvas that he bought in 2006 from the entertainment mogul David Geffen, for roughly $137.5 million, and Andy Warhol’s 1964 “Turquoise Marilyn,” bought from the Chicago collector Stefan Edlis for around $80 million in 2007 — he now has what Mr. Gorvy described as “the most comprehensive collection of American postwar images in private hands.”

While the “Flag” that Christie’s is selling also comes with a pristine provenance — it had been owned by the writer Michael Crichton, who bought it directly from Mr. Johns in 1974 — it is half the size of the one Mr. Cohen bought. “This transaction propels the Crichton painting to a higher level,” Mr. Gorvy said, adding that the only other important “Flag” in private hands is owned by Mr. Geffen. The Cohen sale “only adds to its rarity.”

Our father used to say that people usually worry about the wrong things in life — so, to be safe, we advise our clients to worry about everything.

This turns out to be especially good advice for collectors of Chinese antiquities, who are now faced with controversial new U.S. Customs and Border Protection regulations ostensibly intended to curtail the looting of Chinese cultural patrimony. Our concern here: In trying to curb the illicit trade in Chinese artifacts — clearly a laudable goal — the U.S. government has inadvertently created a minefield for legitimate collectors, dealers and scholars.

The new restrictions stem from a memorandum of understanding (MOU) between the United States and China that became effective days before the end of President Bush’s term. The MOU is extremely broad, covering Chinese antiquities from the Paleolithic Period (75,000 B.C.) through the end of the Tang Dynasty (907 A.D.), together with wall art and monumental sculptures that are at least 250 years old. Such works may now be legally imported into the United States only if China issues a valid export certificate or if they left China before January 16, 2009, the effective date of the restrictions. The MOU does not apply to any antiquities that were exported from China before that date.

Clients who were worried about complying with the new regulations started calling us in mid-January. John, for instance, is a longtime collector and sometime art dealer living in New York. He faxed us a list of his recent purchases, and we responded by considering each work in turn.

The Tang horse that he bought in Paris last year, currently on loan to a European museum, could be legally imported into the United States because John had a clear paper trail showing that it had left China before January 16, 2009. Based on our discussions with U.S. Customs, we advised John that this type of paper trail should be “verifiable,” which generally means having appropriate documents on letterhead with good contact information in the event of questions by U.S. Customs officials. John was relieved to hear that the import restrictions are not retroactive — a fact that many collectors fail to realize.

The stainless-steel rock by contemporary artist Zhan Wang that was sitting in a Shanghai warehouse was also unaffected by the new regulations because it was less than 250 years old. But John’s Tang funerary pot posed a trickier problem, since it was currently with a Hong Kong dealer.

“Does U.S. Customs view Hong Kong as inside or outside China?” John asked.

The answer seems to be outside, and works may be imported into the U.S. if accompanied by a declaration that they were located outside mainland China — such as in Hong Kong — before January 16, 2009. Hong Kong’s status is especially important since it is still a center of the international trade in Chinese antiquities and a place where Sotheby’s and Christie’s have regularly held large auctions of antiquities. All indications are that these auctions will continue.

We next turned to a pre-Tang jade belt buckle. It happened to be in a Beijing warehouse, so it fell squarely within the new import restrictions and could not be legally imported into the United States without a Chinese export license.

“Where do I get this license?” asked John.

The answer, according to Dong Baohua, vice director general of China’s State Administration of Cultural Heritage, is one of 14 state-level agencies throughout China that were established to review applications for exports of cultural property and issue licenses. “These state agencies independently exercise their authority in reviewing and approving applications for import and export of cultural property in accordance with laws,” Baohua explains. “Signs will be marked on and licenses will be issued to items of cultural property permitted for export after review and approval procedures are completed.” Although this sounds reasonable in theory, in practice longtime dealers in the field are skeptical that such permits will be issued in accordance with the guidelines — if at all. Experienced buyers will continue to rely on reputable local mainland dealers to obtain the necessary export paperwork.

We advised John to get duplicates of his export permit and to keep one original. Otherwise, a Chinese or U.S. official could walk off with his only permit and leave him with no way to prove — perhaps years later when he wants to sell the piece — that his art had been properly exported from China or imported into the U.S.

One clear indication that Chinese export restrictions are connected to larger political issues comes in the wake of the controversial February 2009 auction at Christie’s Paris of two 18th-century animal fountain heads. The bronze heads were taken from Beijing’s Old Summer Palace in 1860 when allied British and French armies sacked the palace. (In an interesting historical sidelight, the troops were commanded by Lord Elgin, the son of the seventh Lord Elgin, who had removed important sculptures from the Parthenon, in Athens, which are now in the British Museum and which Greece wants back.)

Beijing strenuously objected to the sale of the bronze heads, but the consignor, Pierre Bergé (Yves Saint Laurent’s longtime partner), thumbed his nose at China — which turned out to be a mistake. The winning Chinese bidder for the pieces publicly reneged on the purchase in protest, and as further payback, China declared that it would single out “heritage items” bought at auction from Christie’s, or imported or exported by Christie’s personnel, for special inspection and detailed verification of ownership history. Clearly, these measures will not help the auction house’s efforts to do business in mainland China.

John’s next question was on the mark. “Assuming I import works not covered by the restrictions or somehow manage to get Chinese export licenses for works that are covered, what assurance do I have that U.S. Customs officials will know enough not to seize my art?”

We understood his concerns. The MOU states that the United States “shall use its best efforts to improve the ability of its Customs officers to recognize Chinese archaeological material,” but given that most people (including Customs officials) probably can’t tell a ceramic Tang horse from a glass of Tang orange drink, problems with imports are perhaps inevitable. Customs officials do seem committed to addressing this issue. Still, hiring an experienced international shipper for Chinese antiquities is now absolutely essential.

One approach we have recently — and successfully — used for clients is submitting detailed information to U.S. Customs on the provenance of Chinese antiquities (including supporting documentation) and obtaining unofficial government consent before even attempting to import the works. In this way, we have so far avoided any difficulty at the border.

The mou raises an even greater worry for those in the field: Given the cloud over Chinese antiquities created by the new restrictions, will scholars want to enter this area going forward, will museums want to acquire or display these works, and will dealers wish to continue the trade — even for art legally imported into the United States? And given that China itself is by far the world’s largest market for Chinese antiquities and other countries are not bound by the MOU, will U.S. import restrictions do anything at all to address the problem of pillaged art?

Many argue that the only beneficiaries of the Customs restrictions are the Chinese government and its army, which will even more tightly control the trade in antiquities — not to mention American lawyers who will be needed to unravel the regulations. And that is worrisome indeed.

Charles and Thomas Danziger are the lead partners in the New York firm Danziger, Danziger & Muro, specializing in art law.

“Of Particular Import” originally appeared in the June 2009 issue of Art+Auction.

DOWNLOAD THIS ARTICLE

In the art world, those who forget the past are destined to repeat it — often for the benefit of a bored court stenographer. This is especially true in the area of art restoration, where mistakes by prior owners can haunt those down the line.

Stuart was a prime example. His grandfather Charlie made the mistake of hiring Cromwell to restore a 17th-century portrait damaged in a great fire. Cromwell was unqualified as a restorer, a profession that remains unregulated in the U.S. and most of Europe, and he botched the job royally by painting over non-damaged areas of the work, thereby covering up the artist’s own brushwork. The crowning blow: Cromwell’s restoration technique was non-reversible, in violation of the Code of Ethics of the International Institute for Conservation of Historic and Artistic Works.

Charlie died and bequeathed the portrait to Stuart, who promptly decided to auction it off. The auction house advised Stuart that the shoddy restoration had greatly reduced the painting’s value — and that’s when he called us.

We suggested as a starting point that Cromwell and his firm may have liability based on professional malpractice. Typically, a court would decide to what extent Cromwell had owed his client a duty of care, skill and knowledge. Stuart would then need to show that Cromwell had breached this duty and that Stuart had suffered an actual loss or damage as a result of this breach.

Depending on where the case was brought, however, Stuart’s claim might be time-barred by the applicable statute of limitations for negligence, which varies from state to state. For instance, in the 1991 District of Columbia case O’Hearn v. Parsons, plaintiffs alleged that a conservator had committed negligence in 1971 by mounting a 15th-century Ming dynasty scroll painting on an unsupported frame rather than on solid backing or on a stretcher with a lattice center. When the painting split in 1983, the plaintiff sued for negligence, malpractice, breach of contract and breach of warranty.

The O’Hearn court reportedly reasoned that the statute of limitations would not begin upon the plaintiff’s discovery of the error, but rather from the date the conservation was performed, and was therefore time-barred by the District of Columbia’s three-year statute of limitations.

In our case Cromwell had signed a contract before beginning the restoration work — something we always advise our clients to do — so we thought that Stuart might be able to benefit from the longer statute of limitations for a breach of contract claim (six years in many states).

We reviewed Cromwell’s contract and found that he had promised to restore the painting to the “best condition possible.” Similar wording had been used in an agreement between the City of Amsterdam and the American conservator Daniel Goldreyer for restoration of Barnett Newman’s painting Who’s Afraid of Red, Yellow and Blue 111, which a vandal had slashed in 1986 while it was hanging in the Stedelijk Museum. Amsterdam alleged that Goldreyer had inappropriately overpainted the work (rather than using the “pinpointing method” of layering dots), thereby destroying its translucency, and had applied a sealer that that could not be removed without harming the painting. The dispute resulted in the famous 1995 New York district court case City of Amsterdam v. Daniel Goldreyer, Ltd. Goldreyer argued that the contract claim should be dismissed, since Amsterdam had signed releases when it received the painting. The court held for Amsterdam, reasoning that the validity of the releases was a question of fact to be resolved at trial, and the lawsuit was reportedly settled out of court in 1997.

Unfortunately for Stuart, his grandfather’s contract included two clauses favorable to Cromwell: one absolving him from any liability related to the restoration, and the other waiving all claims by Charlie and his successors. Such clauses are common in the restoration world, and are usually enforceable as long as the restorer has not engaged in willful misconduct or gross negligence — a high hurdle for a would-be plaintiff like Stuart.

One example of an allegation of gross negligence occurred in the 2001 Southern District of New York case Flack v. Friends of Queen Catherine, Inc. (discussed in Brothers in Law, March 2005). The artist Audrey Flack claimed that the non-profit organization Friends of Queen Catherine, Inc., which had commissioned her to create a statue of the 17th-century Queen Catherine of Braganza, and the foundry involved had been grossly negligent when they hired Flack’s assistant David Simon to restore the face on her sculpture. (The face had been damaged when the defendants placed it in what Flack termed a “garbage dump.”) Flack alleged that Simon was “a mere assistant who was not trained in conservation, [and] was not competent to perform work without supervision.” Flack further claimed that Simon had sculpted a “distorted, mutilated” work in which the nose, nostrils, eyes and lips were uneven and the wrong size.

Flack sued in part under the Visual Artists Rights Act of 1990 (VARA), a federal law which grants the authors of visual art of “recognized stature” the right to prevent any intentional distortion, mutilation or other modification of an author’s work of visual art that would be prejudicial to the artist’s honor or reputation. vara specifically states that “modification of a work of visual art” resulting from conservation does not constitute “destruction, distortion… [or] mutilation” unless the conservation was done with gross negligence. But Flack alleged that hiring the restorer rose to the level of gross negligence, and the Court found the allegation sufficient to deny defendants’ motion to dismiss. The case was ultimately settled.

We believed that vara was of little help to Stuart, however, since it protects the rights of the work’s artist, not its owner.

Stuart was still incensed, and wanted to denounce Cromwell in the press, but he was worried about inviting a costly defamation suit. Such cases do arise, as with the restorer Goldreyer’s 1995 libel action in New York State court against Time, International. Time had written that the Barnett Newman painting which Goldreyer had restored should be re-hung with a warning sign: “Newman according to Goldreyer.” Goldreyer lost that case. Similarly, the Columbia University art history professor James Beck was sued by an Italian restorer for “aggravated slander,” a crime carrying a three-year prison term in Italy, after Italian journalists had quoted Beck as remarking in 1991 that the restoration of a 15th-century sculpture by Quercia in Lucca looked “as if it had been treated with acid, cleaned with Spic and Span and polished with Johnson’s Wax.” Beck was acquitted.

We tried to console Stuart that his situation could be worse. For instance, in 1992 Paolo Veronese’s Renaissance masterpiece Marriage at Cana was not only spattered by water from a leaky air vent at the Louvre during a storm but during a restoration two days later was also dropped by workers and gashed in five places. Furthermore, in 2001 Leonardo da Vinci’s drawing of Orpheus being attacked by the Furies, a privately owned work that had been discovered by the Leonardo expert Carlos Pedretti in 1998, was reportedly destroyed when restorers tried to clean it by submerging it in alcohol and water but ended up washing away the ink. Pedretti was later quoted as saying that he was amazed that restorers had submerged the piece without conducting tests in advance. In addition, in 1999, after the restorer Pinin Brambilla spent 20 years working on Leonardo’s masterpiece The Last Supper, she was criticized for depriving the painting of its own history by removing the work of previous restorers, thereby creating The Lost Supper.

Stuart, however, was definitely not amused. After all, his was no Restoration Comedy.

Thomas and Charles Danziger are the lead partners in the New York firm Danziger, Danziger & Muro, specializing in art law. “Restoration Drama” originally appeared in the April 2009 issue of Art+Auction.

DOWNLOAD THIS ARTICLE

Ishmael’s troubles began in the wake of an evening sale that he hadn’t bothered to attend. On the strong advice of an auction house specialist, he had left the winning (and apparently only) bid on a sculpture given as collateral for a loan from the auction house to the consignor. Now the press was calling him “a sucker” who had greatly overpaid for the work. That’s when he phoned us.

“Don’t auction house specialists have to be straight with buyers?” Ishmael carped. “Mine totally filleted me!”

This very issue is currently being tested in a public legal tussle between Sotheby’s and the collector Halsey Minor (who is also legally entangled with Christie’s on an unrelated matter). Last October, the auction house sued Minor for $16.8 million because he allegedly failed to pay for three American paintings, including Edward Hicks’s The Peaceable Kingdom with the Leopard of Serenity, that he had bought in a May 2008 auction. In response, Minor filed a class-action countersuit in U.S. district court in San Francisco claiming that “Sotheby’s actively conceals information concerning its own significant economic interests in property that it places at auction.” Minor alleges that by failing to disclose that the Hicks painting secured a loan Sotheby’s had made to its consignor, Ralph Esmerian, the auction house “had disguised itself as a sincere and honest art adviser to plaintiff, while in reality acting as a self-profiteer.” At this time, neither the Sotheby’s claim nor the Minor countersuit has been heard by a court.

Until the 19th century an auction house was regarded primarily as the seller’s agent, with a fiduciary duty to act in his interest (see Brothers in Law, June 2003). In fact, it was the apparent breach of this responsibility in the famous case Cristallina, S.A. v. Christie, Manson & Woods that led New York to establish new auction regulations in 1987. In Cristallina, which was settled out of court during the appeal, the consignor accused Christie’s of, among other things, providing unrealistically high estimates for eight Impressionist paintings.

Today courts recognize that once a bidder becomes a buyer, the auctioneer becomes the agent of both purchaser and seller. As a practical matter, the relationship between the auction house and the seller is governed by a consignment agreement.

Consequently, we advise our clients to read this agreement carefully and, where possible, negotiate its terms. The relationship between the house and the buyer, by contrast, is governed by the auction catalogue’s Conditions of Sale, which include the house’s warranties and disclaimers. Unfortunately, few bother to read these conditions.

Some commentators have suggested that auctioneers have a greater obligation of fair dealing when a buyer with significantly less expertise than they have relies on their knowledge, but there is scant case law on the issue. Practically speaking, proving this disparity in knowledge is not easy.

For instance, in the 1993 case Kelly v. Brooks, paintings that the lawyer Peter Kelly and his wife purchased from R. M. Brooks’s auction house, State Line Auction, in Enfield, Connecticut, turned out to be fake. Kelly had signed a bill of sale containing a disclaimer that the property was sold “as is.” Asserting that they had relied on the auctioneer’s representation that the paintings were authentic, the Kellys sued for breach of warranty, fraud, reckless misrepresentation and breach of duty of honesty and fair dealing. The district court sitting in New York dismissed the complaint, finding the disclaimer “clear and unequivocal” and reasoning that the couple had not relied on the auctioneer’s expertise since they had done independent research before buying the paintings. The court also noted that even if the Kellys had relied on the auctioneer, that reliance would have been unreasonable because they did not know the auction house before making the purchase.

In the absence of fraud or similar fishy conduct, buyers who believe that they have overpaid at auction because of bad advice are swimming against the tide. For example, in the 1976 court of appeals of Arizona case Nataros v. Fine Arts Gallery of Scottsdale, Inc., the plaintiffs sued an auction house for fraud and negligent misrepresentation, claiming that its expert had given them inflated price ranges for works that they purchased. The court held for the house after finding that the sale was not rigged and that the estimated market values given by the expert were in the range established by free and open bidding at the auction.

Disclaimers were addressed in the famous 1971 case Weisz v. Parke-Bernet Galleries, Inc., in which a buyer sued Parke-Bernet (predecessor to Sotheby’s) in New York civil court on the grounds that the catalogue had misattributed two paintings to Raoul Dufy. The plaintiff won, despite the auction house’s argument that the catalogue disclaimed all warranties of attribution. However, in a decision three years later, a New York appellate court reversed the earlier decision and held for the auction house, suggesting that buyers at auction assume the risk of loss despite their lack of bargaining power and expertise.

“Given the auction house’s financial interest in the work, it’s no fluke that the specialist urged me to buy it,” Ishmael reasoned. “Doesn’t this interest have to be prominently disclosed?”

In New York the answer is yes. Section 122(h) of the city’s auction regulations says that when an auction house makes loans or advances money to consignors, “this fact must be conspicuously disclosed in the auctioneer’s catalogue or printed material.” Whether this disclosure must be made on a lot-by-lot basis rather than as a general statement is a trickier question, although the New York City Department of Consumer Affairs has reportedly taken the position that the latter satisfies the regulation.

Smart bidders should pay close attention to disclosure symbols in auction catalogues. According to published reports, Sotheby’s began using new icons in its fall 2008 Impressionist and modern art sales to indicate that certain works were subject to “irrevocable bids” (meaning they are essentially presold unless a higher bid is received during the auction), a refinement on the traditional third-party guaranty that some argue may actually hurt the value of a work.
“How about the auction house’s duty to act responsibly not just to the buyer and seller but also to the public at large?” Ishmael asked.

Good point. Some courts and commentators have suggested that given the dominant market position of Sotheby’s and Christie’s and the shift in their clientele from mainly art dealers to the general public, auction houses owe a duty to the public to act in a reasonable manner. Indeed, Halsey Minor’s complaint alleges “injury in fact to the general public.” Whereas the United States, Britain and other common-law countries (in contrast to civil-law countries, such as France) have traditionally viewed auction houses as private agents of sellers and buyers and thus not subject to regulation, today these nations are putting increased pressure on the houses to create a level playing field. In the U.S., some observers have even proposed holding auctioneers to the legal standards found in the 1933 Securities Act, suggesting that they meet the stringent disclosure requirements applicable to underwriters of financial instruments.

Although we couldn’t help Ishmael, his case raised at least two interesting questions: When is it legally and ethically acceptable for an auction house to withhold information from a buyer? And who were the real sharks in the salesroom the night that Ishmael left his bid?

“When Ishmael Called” originally appeared in the February 2009 issue of Art+Auction.

DOWNLOAD THIS ARTICLE NOW

Download This Article Now

At last year’s Art Basel Miami Beach, we learned an important lesson: In the game of conceptual art, it pays to listen to the dealer’s pitch. This point was brought home to us at Jeffrey’s booth, where the dealer was exhibiting Fair Ball, a pale green baseball resting on a simple plywood plinth. Jeffrey and his rookie artist, Barnaby “Babe” Woof, wanted to know if the work could be copyrighted, since they planned to make millions by selling thousands of balls. Or was it thousands selling millions of balls?

Because of the short shrift copyright law gives to contemporary art, we thought their plans wouldn’t fly. On the one hand, the law protects original works that demonstrate even a slight amount of originality. According to the Supreme Court in a case that denied copyright protection to a telephone directory, “The vast majority of works make the grade quite easily, as they possess some creative spark.” On the other hand, we questioned whether Fair Ball met even this low standard.

The dealer was indignant, insisting that Babe’s work was a commentary on the leisure class’s mindless flocking to Miami and that its color referred to the huge sums of money spent by big-league collectors. The catch, we explained, is that the law distinguishes between ideas, which no one can copyright, and expressions of ideas, which are copyrightable if they are original. The law’s intent is to encourage people to make original works without unreasonably restricting those who want to build on the creations of others.

In our case, we feared that the expression of the artist’s idea—a green ball—was not sufficiently original to be copyrightable. Similarly, an abstract piece, such as Kazimir Malevich’s White on White, 1918, a monochromatic white canvas, might not be copyrightable, even though the idea behind it—absolute purity of form and color—is creative. Minimalist art often fails the law’s idea/expression test, since typically it is the concept, rather than the creation, that is original.

American courts routinely deny copyright to simple shapes and colors. For instance, in the 1958 decision Bailie v. Fisher, the U.S. Court of Appeals for the District of Columbia denied copyright protection to a cardboard star that had been devised by two artists who considered it a true work of art. Although they sought to register only the star shape, it was actually part of a larger device: The star had a circular center showing the photograph of an entertainer. A transparent phonograph record was superimposed over the photograph and played the pictured person’s voice.

In a 1985 case, Arthur v. American Broadcasting Com­panies, Inc., an artist claimed that abc’s logo showing the Olympics’ interlocking rings imposed over the letters A, B and C was copied from images he had sent to the broadcaster. The court sitting in the Southern District of New York dismissed his claim on the grounds that conjoined circles are noncopyrightable ideas: “These bare outlines of five interlocking rings, the upper three of which have been modified to a lower case A, B and C, contain no more than the bare idea or concept of superimposing the two logos.” The court also noted that the International Olympic Committee has “exclusive rights to the interlocking rings.”

Artists may nonetheless copyright geometric shapes that are combined in a unique fashion. In Runstadler Studios, Inc. v. MCM Ltd. Partnership, the District Court for the Northern District of Illinois held in 1991 that Spiral Motion, which Runstadler Studios built of 39 glass rectangles arranged in a spiral, qualified as an original work that could be legally protected: “The choice of location, orientation and dimensions of the glass panes, and the degree of arc of the spiral, show far more than a trivial amount of intellectual labor and artistic expression.”

“Is the sculpture less copyrightable because it can be used as an ordinary ball?” Jeffrey asked smartly.

The answer is yes. If a court viewed the sculpture as a useful article, it would likely grant copyright protection only to the nonuseful elements of the design. This occurred in OddzOn Products, Inc. v. Oman, a 1991 decision in which the D.C. Circuit Court upheld the U.S. Copyright Office’s refusal to copyright a soft-sculpture ball called the Koosh. The court classified the ball as a useful article and determined that its artistic feature—its tactile quality—could not exist independently from its utilitarian aspects, so the ball itself was ineligible for copyright.

In our view, the green ball would have had a better chance of copyright protection if the artist had added some further expression of creativity. In a famous 1992 U.S. Court of Appeals decision, Atari Games Corp. v. Oman, Judge (later Supreme Court Justice) Ruth Bader Ginsburg reversed a lower court’s refusal to require copyright registration of the early video game Breakout, which involved a virtual paddle, ball and wall designed of simple, colored geometric shapes. Although Judge Ginsburg faulted the copyright office’s conclusions, she did seem to accept its position that if it were to examine “a painting consisting entirely of rectangles and find it copyrightable, it is important to understand that this decision would be based on creative elements such as depth, perspective, shading, texture of brushstroke, et cetera and not on the geometric shapes per se” and that “recalling the creativity of the work of Mondrian and Malevich, . . . the arrangement itself may be indicative of authorship.”

We observed that, even if Babe managed to register a copyright for Fair Ball, he would have difficulty right off the bat preventing others from making similar works, because his copyright would be very “thin,” existing only in the use of the particular shade of green applied to the ball.

According to the intellectual property attorney David S. Korzenik, of Miller Korzenik Sommers LLP, in New York City, “While minimalist art may well receive minimalist protection, the concept of copyrightability was never intended to double as a definition of art.”

Babe, who had been nervously pacing the booth, suddenly spat out his wad of chewing tobacco, scooped up Fair Ball and sidearmed it to Jeffrey. “If you ask me,” he griped, “all this legal gibberish is just an excuse for judges to deny protection to art that they don’t like or can’t understand.”

He wasn’t entirely out in left field. Although judges are not supposed to decide what is art and what merits protection (see the May 2006 Brothers in Law column), aesthetic prejudices inevitably play a role in their decision making. Contrast, for example, the 1976 Second Circuit case L. Batlin & Son, Inc. v. Snyder with the 1959 Southern District of New York case Alva Studios, Inc. v. Winninger. In the former, the court refused to protect a plastic copy of a cast-iron piggy bank in the public domain on the grounds that the plastic version showed only trivial variations from the original. In the latter case, involving a copy of Rodin’s famous Hand of God, the court found that an exact copy of the Rodin work satisfied copyright’s originality standard even though the only distinguishable difference was in size. The court did, however, note that the work must be “original in the sense that the author has created it by his own skill, labor and judgment without directly copying or evasively imitating the work of another.”

We advised Jeffrey and Babe to abandon their plans for Fair Ball, but, as it happened, our concerns were baseless. The dealer turned out to be a savvy marketer, and by the end of Art Basel he had hit a home run—selling Fair Ball, and the concept behind it, to a Scandinavian design chain for a mint.

As the lawyer and art consultant Virginia Rutledge points out, “Art and copyright are different games. A thin copyright isn’t worth much, but some highly original art has been made out of very minimal gestures. The value of Duchamp’s Fountain has nothing to do with its copyright.”

We’re keeping our day jobs. Clearly, we’d strike out as art dealers.

“The Shape of Things” originally appeared in the December 2008 issue of Art+Auction.

DOWNLOAD THIS ARTICLE NOW

Amanda’s problem was crystal clear: She had recently inherited veritable glass menagerie of expensive artworks from her aunt Laura and needed advice on fine-arts insurance.

Amanda was considering keeping the glass collection insured under her homeowners policy, but we advised against this, unless her carrier happened to be one that has special expertisein insuring art, like the Chubb Group, AXA or AIG. In our view, collections valued above, say, $200,000 should be covered by fine-arts insurance, which usually has no deductible and offers the option of appraising a loss at market value or at a stated amount (homeowners policies typically allow just the latter). In addition, fine-arts insurance generally has a greater breadth of coverage, including damage from floods and earthquakes.

Surprisingly, fine-arts coverage for sizable collections is often less expensive than homeowners insurance. Because the market for art insurance is still comparatively small (unlike that for auto insurance), companies are left competing for the same pool of potential clients. Collectors thus benefit from lower premiums and better terms.

Amanda came in a week later and fixed us with a glassy stare. “I just received a draft of my insurance policy and nearly fell asleep trying to read it,” she complained. According to LeConte Moore, the managing director and fine-art specialist at the insurance broker DeWitt Stern Group in New York, “If you’re going to read only one clause in your policy, make it the one on valuation, because that determines how your property will be valued in the event of a loss.”

We usually recommend that collections be covered at their market value, as opposed to a fixed figure, because in the event of a loss, owners receive the amount for which the works could have sold at market, rather than, say, the historical purchase price. To be doubly safe, collectors might wish to insure for market value but for no less than the purchase price. That way, if the value of the art falls, they will recover at least what they paid for it.

One cautionary note: It is sometimes harder to collect a full claim based on market value because it involves a subjective determination. However, since partial losses make up 90 percent of all claims, regardless of which value is given, collector swill probably have to deal with the same problem of subjectivity in proving loss.

Take the case of billionaire Steve Wynn, who famously made an insurance claim against Lloyd’s of London after jamming his elbow through Le rêve, Picasso’s 1932 portrait of Marie-Thérèse Walter. Wynn was fortunate in that he had effectively established the painting’s market value just before the accident when he agreed to sell it to the Greenwich collector Steve Cohen for $139 million. Nevertheless, after a reported $90,500 restoration, Wynn and Lloyd’s tussled over the postpoke value, which Wynn argued was $85 million. The matter ended up in U.S. District Court in Manhattan, and Lloyd’s ultimately settled for an undisclosed amount believed to be in the $40 million range.

The Wynn case notwithstanding, art-insurance claims rarely result in litigation. Most insurers try to keep collectors happy so that they won’t acquire a reputation among fine-art brokers for not settling claims well. When lawsuits do occur, they are often subrogation claims leveled by the insurance company against a potentially negligent party that has damaged the art of the insurer’s client. For instance, AXA Art Insurance is currently suing Aaronson Office Furnishings for $1.7 million,alleging that the movers backed into Jeff Koons’s Wall Relief with Bird—a piece owned by Steve Cohen—and negligently damaged the sculpture. AXA paid Cohen under his policy and is now trying to recover the sum from Aaronson.

In our case, Amanda was concerned because a local museum wanted to borrow several especially fragile pieces from her collection,and she was mindful of several recent high-profile incidents. This past July, a visitor to London’s Royal Academy slipped and fell into Christina, a nine-foot-tall ceramic totem by the Costa Rican artist Tatiana Echeverri Fernandez. The sculpture was smashed to bits. In 2006 a man tripped on the stairs of the Fitzwilliam Museum, in Cambridge, England, and shattered three 17th-century Qing Dynasty porcelain vases. Although the vases were eventually repaired, they reportedly lost up to three-quarters of their value. And closer to home, in Detroit, Gregory J. Reed’s Keeper of the Word Foundation sued the Charles H. Wright Museum of African American History in 2006 for allegedly damaging 15 pages from unpublished sections of the original manuscript of The Autobiography of Malcolm X by Alex Haley, which the foundation had lent to the museum. After being exhibited for about five years, the manuscript’s pages apparently had faded in color and also had taken on a white stripe from a band that held them down. The documents had been appraised at $285,000 before the loan, and Reed reportedly insisted that the museum reimburse him for $168,000, reflecting the loss in value.

Dorit Strauss, a vice president and worldwide specialty fine art manager at Chubb, cautions that when deciding whether to lend to a museum, a collector should first check whether it is accredited by the American Association of Museums, to ensure that it meets the organization’s standards, and even find out where the works will be displayed and under what conditions.

We suggested that Amanda’s pieces be insured under the policy of the borrowing museum, in addition to her own policy, since the borrower usually controls how the works are packed, shipped and exhibited. Moreover, in the event of damage, the borrower would indemnify her, and her premiums wouldn’t be affected by the loss. We also advised Amanda to obtain a certificate of insurance from the museum showing that the works are insured before they are shipped and—this is important—that she be listed as the “loss payee” under the museum’s insurance coverage. That way, the insurer would pay Amanda directly, and she wouldn’t have to fight with the museum to collect insurance proceeds down the line. Finally, we negotiated the terms of the insurance coverage in the museum’s loan form to bind the museum contractually.

Perhaps predictably, Amanda’s prized glass unicorn was badly chipped while on loan to the museum. She immediately contacted her insurance broker, who recommended that she not rely on the valuation provided by the museum’s insurance company; instead,she was advised to have the piece evaluated by her own independent specialist—or, better yet, by two specialists. Her broker suggested a dealer and an auction-house professional, both of whom would know the current value of the piece. Armed with information from these experts, Amanda was able to negotiate a handsome settlement with the museum’s insurer for the injured unicorn.

Insuring smartly can prevent disputes with people who may not treat you or your collection kindly. As Tennessee Williams might have put it, it’s best not to rely on the kindness of strangers.

“Crystal Clear” originally appeared in the October 2008 issue of Art+Auction.

DOWNLOAD THIS ARTICLE NOW

But you don’t want to leave it all to the tax man. Given today’s high art values, estate planning is more essential than ever.

After a few too many whiskeys, a wealthy English art collector recently confided to us the crux of his estate tax plan: Following his death, his children had standing instructions to lock up all the good paintings in their castle’s dungeon. Since most of our U.S. clients don’t have castles—and don’t want their heirs locked up in dungeons by the authorities—we advise them to do some thoughtful estate planning to maximize tax benefits and ensure that their art collections end up in the right hands. Here are several approaches to estate tax planning used by collectors today.

LETTING THE HEIRS PAY.
Surprisingly, this approach—also known as the “I’m dead and don’t care” strategy—is used, intentionally or not, by many sophisticated people. The IRS currently taxes estates at an effective rate of 45 percent, with no tax due on the first $2 million or on anything passing to a surviving spouse. The exemption will increase to $3.5 million in 2009, and in the unlikely event that Congress takes no action, the estate tax will expire in 2010 (Note to collectors: That’s a terrific year in which to die). Unfortunately for those who live into 2011, the exempted amount is currently set to return to $1 million that year. In addition, many states, including New York, New Jersey and Connecticut, impose their own estate taxes at effective rates of up to almost 9 percent.

Since art is an illiquid asset, executors often end up selling off works to pay estate taxes. This is apparently what happened with the billion-dollar-plus estate of the dealer Ileana Sonnabend, who died in October 2007 and whose daughter and adopted son reportedly covered the taxes by privately selling $600 million worth of sculptures and paintings.

A further complication for executors is that estate taxes are due no later than nine months after death. An auction is the preferred method of sale for many executors (who tend to view them, rightly or wrongly, as generating “fair market value”), but because the houses conduct only periodic sales, executors are occasionally forced to engage in quick private sales at below-market prices to raise cash to pay taxes. Alternatively, they might cover the tax obligation by selling other assets or by borrowing from a fine-art lender such as Emigrant Bank Fine Art Finance (formerly Fine Art Capital) or Citi Art Advisory Service.

Sophisticated collectors sometimes appoint special advisers in their wills to handle their art holdings. These specialists, who may be private dealers or even art attorneys, presumably have the necessary expertise to negotiate with auction houses, dealers and museums, all in accordance with the collector’s final wishes. However, trusts and estates attorney Herb Nass cautions that the executor of an estate is not bound by this type of appointment in a will and may freely disregard it.

Moreover, Nass advises collectors drawing up a will to “be sure that your executors don’t have conflicts of interest that may lead to decisions that aren’t in the best interests of your beneficiaries.” This was precisely the kind of situation involved in a famous 1977 New York Supreme Court case, In re Rothko. Shortly after the artist Mark Rothko died, his executors sold 798 of his paintings to Marlborough Gallery and a subsidiary at a price believed to be below market value, even though one of the executors, Bernard J. Reis, was an owner of Marlborough, and another executor, the artist Theodoros Stamos, wanted to exhibit at the gallery. Rothko’s children and the New York attorney general successfully sued to have the contracts canceled and the executors removed in light of their clear conflicts of interest.

LIFE INSURANCE.
A frequently used method of preserving an art collection after death is to fund the estate tax through a life insurance trust. The collector estimates the projected tax (not always easy, given the changing laws outlined above), establishes a trust that purchases a life insurance policy in that amount and funds the trust each year with a sum equal to the policy’s premiums. If the trust is structured correctly, the insurance proceeds are not part of the collector’s taxable estate, and at his death the trust’s beneficiaries can use the money to pay the estate tax.

GIFTS DURING LIFETIME TO FAMILY.
A very gratifying way to reduce estate tax is to bestow art on offspring during one’s lifetime. A significant drawback of such gifts is that, depending on their size, they may trigger a hefty gift tax—payable by the donor, not the recipient. This tax is intended to ensure that people don’t deprive the IRS of estate taxes by giving away all their property during their lifetimes, so it’s not surprising that gift tax rates are essentially the same as those of the estate tax. Trusts and estates expert T. Randolph Harris notes that any appreciation in value between the date of the gift and the donor’s death avoids estate and gift taxation (which is good), although the recipients of lifetime gifts must use the donor’s cost basis for a piece when they sell it (which may be bad). By contrast, appreciated assets bequeathed through an estate receive a stepped-up tax basis equal to their value at the time of the donor’s death.

GIFTS DURING LIFETIME TO CHARITY.
A more tax-friendly way to give away art during one’s lifetime is through donations to charitable organizations, such as museums or qualified not-forprofits. Donors receive income tax deductions while they are living, and upon their death, no estate tax is due on the donated objects, since they are no longer part of the estate. Such a donation may reap the added benefit of keeping an art collection together when the donor’s ownership ends.

Special technical rules apply to donations of art to charities, including the important “related use rule”: In order for a work to be deductible at its fair market value, as opposed to its original cost, the charity must use it in a way related to the organization’s tax-exempt purpose.

When artists donate their own works to charitable organizations, their deductions are limited to the cost of the materials they used to fabricate the pieces. If passed, the proposed Artist-Museum Partnership Act may change this to permit artists to deduct the fair market value of such donations. But the bill has so far died seven times in Congressional committee, with opponents arguing that artists should not be allowed to “paint themselves a tax deduction.”

Collectors should be realistic about the hurdles involved in trying to donate art to museums. Institutions will often decline such donations, not wanting to commit the funds needed to store, conserve and exhibit works that do not necessarily enhance their collections.

GIFTS DURING LIFETIME OF FRACTIONAL INTERESTS IN ART.

In the past, savvy collectors took advantage of an IRS provision permitting “fractional giving” of art to charity. A collector could give a stated portion—say, 10 percent—of a work each year and take a deduction for the corresponding percentage of its value at the time, even retaining possession of the piece for part of each year. Unfortunately for collectors and museums, a much-criticized law enacted last year created major disincentives for these fractional charitable gifts of art. A new patch to the law has to some degree corrected the problem, however, and there is hope that the proposed Promotion of Artistic Giving Act will do what its name suggests. One sign that fractional giving isn’t totally dead: Last December, Janice and Henri Lazarof made a fractional and promised gift of 130 Modernist works to the Los Angeles County Museum of Art that are estimated to be worth $100 million.

PRIVATE OPERATING FOUNDATIONS.
Art held in a private operating foundation is not subject to estate tax, but the foundation itself is subject to strict irs rules [see “Creating an Art Legacy,” August 2004]. For instance, the foundation must actively promote a charitable cause. It may be used to establish a privately funded museum accessible to the public, or for lending art to different public venues.

One example of the latter approach is the foundation established by the Los Angeles collector Eli Broad. He has decided to give his personal collection, which now comprises about 400 modern and contemporary works, to the Broad Art Foundation when he and his wife die. The decision was a blow to LACMA, which had received $56 million from the foundation for construction of the Broad Contemporary Art Museum on LACMA’s grounds and was hoping to be the recipient of the billionaire’s vast collection.

EUROPEAN APPROACH.
Britain allows heirs to pay its estate tax in art that is “preeminent for aesthetic merit or historical value,” and France routinely accepts artworks as payment for its succession taxes. For instance, death duties for Picasso, who left no will, were paid largely in the form of his works, which now make up the core of Paris’ Musée Picasso. The U.S., by contrast, generally does not accept in-kind payment of estate tax. It has done so only in very rare instances—each of which required special authorizing legislation—involving rare coins, historic photographic plates and land.

Collectors contemplating the cheerful topic of death and taxes—and mindful of the adage ars longa, vita brevis—should plan ahead. With solid professional advice and careful consideration, they may find ways of sparing their heirs a king’s ransom in estate taxes, even if their castles are only condos in Queens.

“You Can’t Take It With You” originally appeared in the August 2008 issue of Art+Auction.

DOWNLOAD THIS ARTICLE NOW

Although we tend to view professional conferences as occupational hazards (like long hours and short-tempered opposing counsel), the one on the sale of museum property sounded promising. Deaccessioning is a hot topic, thanks to the need for increasingly cash-strapped museums to find ways to balance their budgets while trying to stay out of the papers—or court. Depending on where one sits, deaccessioning is either the unethical removal and sale of public treasures or a useful means of refining a museum’s collection.

As it happened, we were sitting in the hot seats at the conference. To our right was Renée, a London ceramics collector; to our left was Joel, the director of a struggling local museum. The auditorium lights went down, and the first speaker observed that American museums, unlike their European counterparts, often improve their collections by selling some works to purchase others.

Renée leaned heavily across us and poked Joel’s shoulder: “Are any of your museum’s Victorian vases for sale?”

“Perhaps,” Joel whispered back, “if the transaction is quick and quiet.” Joel was so desperate to keep his museum afloat that he’d consider raffling a Raphael, but he didn’t want to draw attention to his institution’s plight.

“American museums can always freely sell their works,” he told Renée. Typically, a deaccessioning can proceed if a museum board approves it. Museums can end up in court, however, if the sale is questioned by the state’s attorney general. In most states, it’s the attorney general who represents the public interest and who may—but in practice almost never does—sue to block a museum sale that, say, violates a state statute or the institution’s own charter.

Another scenario in which a U.S. museum cannot divest itself of objects involves donations made on the condition that they not be sold. This issue was recently faced by the financially troubled Fisk University in Nashville, Tennessee. It wanted to sell two valuable paintings, Georgia O’Keeffe’s Radiator Building—Night, New York and Marsden Hartley’s Painting No. 3, from a collection of 101 works that had been donated in 1949 by Georgia O’Keeffe with the stipulation that they be made available to the public for study. But in February 2008, a Tennessee Chancery Court judge enjoined Fisk from selling the pictures, which had been kept in storage since late 2005.

As part of the legal battle, the Georgia O’Keeffe Museum, which represents the artist’s estate, tried to wrest the collection from Fisk, arguing that the attempted sale violated the terms of the gift. The court ruled that Fisk had indeed violated O’Keeffe’s wishes but could nonetheless keep the works if they came out of storage by October 6, 2008. Fisk says it will appeal the judge’s order.

Joel leaned back across us and quietly assured Renée that since his museum’s vases had been purchased through an unrestricted general fund, he could safely dispose of them. He added that the proceeds would “benefit the collection.”

“So the money from the sale will go only toward buying new objects?” we whispered helpfully. We reminded him that the American Association of Museums (AAM) prohibits the use of deaccessioning proceeds for “anything other than acquisition or direct care of collections” and that the Association of Art Museum Directors (AAMD) requires that the funds be “used only to acquire other works of art.”

Unfortunately, these ethical codes have no legal teeth, and selling objects to raise money for general operating expenses is not necessarily illegal. There is little case law on the legality of deaccessioning to generate operating funds, and courts have generally approved such transactions if they are in the “public interest.”

Moreover, there are many examples of museums selling works to fund operations—invariably to the dismay of the larger museum community, which views the works as held in trust for the public. Consider Virginia’s Randolph College, which last November sought to reduce a large operating deficit by consigning to Christie’s four pictures from its Maier Museum of Art, including an important George Bellows painting, Men of the Docks, estimated at $25 million to $35 million. A local group succeeded in temporarily blocking the sale, contending, among other things, that it was unethical and violated donor intent. The plaintiffs eventually withdrew the case because they couldn’t raise the $1 million bond required to keep the injunction in place. And since Randolph, unlike Fisk, is not legally restricted from disposing of works, it may soon decide to proceed with the sale.

“There’s no ethical restriction on using sale proceeds to conserve works in our collection, right?” Joel asked us, sotto voce.

Our response: This is a gray area, since some professional codes, such as that of the International Council of Museums (ICOM), seem to permit it. But we warned that the AAM and the AAMD strongly criticized Vermont’s Shelburne Museum for its 1996 sale of sculptures and pastels by Degas and Manet at Sotheby’s and its use of the $31.2 million in proceeds for conservation and security. Similarly, the Rose Art Museum of Brandeis University was lambasted in 1991 for auctioning at Christie’s 11 paintings by artists such as Renoir, Toulouse-Lautrec and Vuillard and using the $3.65 million in proceeds in part for conservation and to advance the museum’s “educational role.” Critics complained that the Rose had set a terrible precedent by converting a portion of its collection into cash—“selling one of your children to feed the others,” according to the director of another museum.

The next conference speaker noted that some institutions, including New York’s Metropolitan Museum of Art, will sell major works only through public auction. “Does that mean American museums are required to sell publicly?” Renée asked nervously before being shushed by the crone sitting directly behind us—who gave Thomas’s chair a hard kick for emphasis.

As it turns out, the Met’s was a special case. It voluntarily agreed to public sales after a New York state attorney general investigation into its controversial 1973 decision to quietly deaccession paintings that had been donated by the philanthropist Adelaide Milton de Groot. The Met needed the money to purchase Velázquez’s famous 1650 Portrait of Juan de Pareja. In her will, de Groot had inserted a “wish”—which the Met argued was nonbinding—that if the museum disposed of any of her works, it would give them to other institutions. Although the attorney general did not pursue legal action, the Met did change its policy by making deaccessioning more transparent.

The day’s final speaker suggested that deaccessioning is much less common in Europe because museums there, unlike in America, tend to be entirely state funded and therefore regard their holdings as inalienable public property. But we told Renée that times are changing, at least in the U.K. Just this past February the Museums Association, whose 1,500 members include most museums and galleries in the U.K., reversed its 30-year ban on deaccessioning and announced that institutions should make themselves more dynamic by disposing of works. The change was partly prompted by the efforts of the struggling Watts Gallery, in Surrey, to maintain itself by auctioning two important Victorian paintings at Christie’s London this month: Albert Joseph Moore’s Jasmine, estimated at £600,000 to £800,000 ($1.2–1.6 million), and Edward Coley Burne-Jones’s The Triumph of Love, estimated to bring £400,000 to £600,000 ($799,000–$1.2 million).

“In that case, I’m catching the next flight to London,” Renée said, climbing over us. “There’s a museum in Sussex with some darling decanters.”

Despite the many interruptions, we did learn at least one important lesson at the conference: No matter where you stand on deaccessioning, always sit on the aisle.

“Deal or No Deal?” originally appeared in the June 2008 issue of Art+Auction.

DOWNLOAD THIS ARTICLE NOW

What fools we were! We had read about the runway show Gagosian Gallery held during New York’s fall Fashion Week, which featured $4,000 jeans made by Levi Strauss & Co. and decorated with Damien Hirst’s famous skull pattern in Swarovski crystals. We had seen the Richard Prince exhibition at the Guggenheim Museum, where guests were given an opportunity to preorder hand-embroidered Louis Vuitton bags designed by the artist and Marc Jacobs. But we hadn’t yet realized how interwoven the worlds of art and fashion have become.

It took our client Mitch, an art dealer from L.A., to show us the light. Mitch had decided to jump on the fashion-meets-art bandwagon and used his gallery to exhibit apparel designed by well-known artists—think ugly sweaters at Old Master prices. To our amazement, the costly clothes were flying out of the gallery, but Mitch had a problem: A competitor was stealing his artists’ designs and manufacturing cheap knock-offs. What was our advice?

The Copyright Act of 1976 protects “pictorial, graphic and sculptural works,” which include “two-dimensional and three-dimensional works of fine, graphic and applied art.” It does little, however, to protect items with intrinsic utilitarian functions, such as clothing. The design of a so-called useful article is copyrightable only to the degree that its aesthetic aspects are separable from its utilitarian ones. So an original artistic design that is printed on clothing—say, Andy Warhol’s Mao on a T-shirt or a Chuck Close self-portrait on a dress—is protectable but not the “useful” parts of the clothing, such as the design of the sleeve or the neckline. The problem is that when it comes to fashion, decorative and utilitarian features can be hard to separate, leading to distinctions that are often arbitrary.

Consider the 1980 Second Circuit case Kieselstein-Cord v. Accessories by Pearl, Inc. The designer Barry Kieselstein-Cord had sold belt buckles that he described as both jewelry and sculpture and that were eventually accepted into the permanent collection of the Metropolitan Museum of Art, in New York. Kieselstein-Cord sued Accessories by Pearl when the New York belt manufacturer began selling copies of his buckles, some of which it even referred to as “Barry Kieselstein Knockoffs.” For its part, Accessories by Pearl argued that the buckles weren’t copyrightable because they were merely “useful articles,” with no pictorial, graphic or sculptural features that could be identified separately from, or exist independently of, the buckles’ utilitarian aspects. The court disagreed and allowed the beltbuckle designs to be copyrighted. It reasoned that the decorative or aesthetically pleasing aspect was primary and the utilitarian function secondary.

“So what are the chances of copyrighting this work?” Mitch asked, hauling out a three-piece ensemble composed of a coat cut in the shape of the old Soviet Union, a mask dripping with rubies and diamonds that resembled ketchup and mayonnaise, and slippers that looked like the paws of a Siberian tiger. The work, created by a rising Russian contemporary-art star, was titled Russian Dressing—and Charles looked sensational wearing it.

The leading cases in this area suggested that the coat would not be copyrightable because it would be considered a useful article. In the 1989 Second Circuit case Whimsicality, Inc. v. Rubie’s Costume Co., costume designer Whimsicality asserted that a competitor, Rubie’s, was making cheap copies of designs, such as the Pumpkin, Bee, Penguin and Spider, for which Whimsicality had already registered the copyright. The plaintiff insisted in its copyright application that the outfits were actually “soft sculpture,” thereby meriting protection. But the court determined that the outfits were clothing, not sculpture, and thus not copyrightable, holding that “the word sculpture implies a relatively firm form representing a particular concept. The costumes in question have no such form.”

“Since when is a judge qualified to decide what constitutes art?” Mitch asked. Since never, we replied, referring him to our article “But Is It Art?” [see Brothers in Law, Art+Auction, May 2006], which describes judicial determinations of essentially artistic matters.

In contrast to the coat, Mitch’s mask was copyrightable, we believed, because the United States Copyright Office had determined in 1991 that masks are nonutilitarian. The slippers might also be protectable, since a 1985 federal case, Animal Fair v. Amfesco Industries, had granted copyright protection to a particular novelty slipper resembling bears’ claws. The court reasoned that certain aspects of the slippers, such as the “impractical width and shape” of the sole, the particular combination of colors and the slippers’ profile and toes “are all sculptural features which comprise the artistic design and which are wholly unrelated to function.” In this decision, the court drew a distinction between design features and utilitarian aspects that—as with Hirst’s jeans or Prince’s handbags—seems murky at best.

We thought that a number of other pieces in Mitch’s exhibition were also protectable, starting with one of his artists’ handbags. It was painted with interesting variations on the logo of Mitch’s art gallery, reminiscent of Takashi Murakami’s use of a signature design element in his best-selling handbag line for Louis Vuitton in 2002. We were confident that copying the bag without permission would violate Mitch’s right of “trade dress,” a branch of trademark law that aims to prevent consumer confusion about the source or manufacturer of a product. “Trade dress can protect the shape or design of clothing,” observes intellectual-property-law expert Alexandre Montagu, “but only if the shape or design of the product has become sufficiently distinctive to indicate source. For example, Chanel’s interlocking-C design may be protectable under a theory of trade dress because consumers would likely associate those Cs with Chanel.”

Furthermore, knowing that Mitch’s exhibition was traveling to venues in France and the U.K., we reassured him that those countries actually afford fashion designers far greater protection than the U.S. does. British law protects registered and unregistered industrial designs for 10 to 15 years. Similarly, French copyright law applies to original fashion designs from the moment the work is created.

“So why isn’t anyone trying to change the law here in the U.S. to protect fashion designs?” Mitch demanded.

Actually, someone is. In 2006, Representative Bob Goodlatte of Virginia introduced a bill in Congress to allow fashion designers to secure short-term copyrights for fashion works. The Design Piracy Prohibition Act, as it is called, would modify the Copyright Act to protect clothing designs and accessories for three years, after which they may be freely copied. The bill has been referred to a House subcommittee but has not yet been voted on by the full House of Representatives.

By the end of our meeting, Mitch still couldn’t understand why U.S. law fails to treat fashion as true art, deserving of the same protection. After all, he declared, major museums have entire departments—and hugely popular exhibitions—devoted to fashion. Wasn’t it arbitrary to view fashion as “useful articles” rather than as art, especially since the two have now become so intertwined?

We agreed—and now have a $10,000 sweater from Mitch’s gallery to prove it.

“The Material World” originally appeared in the April 2008 issue of Art+Auction.

DOWNLOAD THIS ARTICLE NOW