Digested: Dentons Link Legal Art Law E-Book

The E-Book was published in 2024. Find the full E-Book here.


Introduction

Art has always been central to human civilization, shaping cultural heritage and driving social and political change. Today, it is recognized as an emerging and highly valued asset class. Art law examines the intersection of art and legal principles, particularly as the value of art and its presentation continue to evolve.

While the definition of "art" can be subjective, legally it refers to the use of skill and imagination in creating aesthetic objects, environments, or experiences that can be shared. Black's Law Dictionary defines "art" as the methodical application of knowledge or skill in creating something, emphasizing that human imagination and creativity are essential.

Art is categorized into different forms:

  • Visual Art: A broad spectrum including traditional forms like sculpture, painting, sketches, and photography, as well as contemporary forms like architecture and applied arts (graphic design, industrial design, fashion design).
    • Fine Art: A subset of visual art, valued both as an investment and a luxury statement. This includes paintings, sculptures, sketches, and photographs, as defined under "artistic works" in the Copyright Act, 1957.
  • Literary Art: Art in traditional literary forms such as poetry, scripts, novels, and essays that use language to express an artist's thoughts.
  • Performing Arts: Live presentations like music, dance, theatre, and acting that express themselves through performance.
  • Commercial Art: Artistic works created under a contract of employment or service, typically for commercial purposes like advertising, product branding, logos, websites, and applications. Tattoo art is also a popular form of commercial art.
  • Digital Art: Art created via technology, which can be interactive, real-time, and generative. It has a higher reach than physical art, owing to the ease of online sharing. Popular forms include:
    • Animation: Evolved from traditional 2D to realistic 3D visuals, popular in cinematography, television, and gaming.
    • Augmented and Virtual Reality (AR/VR): Creates real-life artistic experiences by blending interactive 3D visuals onto existing spaces, like the Van Gogh 360°™ exhibit.
    • Blockchain and Metaverse: Blockchain technology acts as a certification mechanism to authenticate art, create records of provenance (chain of ownership), and automate royalty flows. The metaverse offers artists platforms to own, create, and exhibit digital art and virtual galleries. Digital artworks are often tokenized on the blockchain as Non-Fungible Tokens (NFTs).
    • Generative Art: Art created by autonomous computer-scripted algorithms, often trained on existing art data, but refined by human prompts. An example is "The Next Rembrandt," generated by AI analyzing Rembrandt's works.

Historically, artists were undoubtedly seen as artisans, but the Renaissance elevated their status, recognizing art as an intellectual pursuit. Art became celebrated as an expression of humanism, with its value linked to the artist's unique persona.

The value of art can also be influenced by political and social events, as seen during the Realist Art era (1850s to the 1870s) and the Bengal School of Art (1900s to the 1940s). Modernism in India (late 1800s to 1950s), sparked by the nationalist movement, led to experimentation and blended Western techniques with Indian themes. Contemporary art in the 21st century (1950s onwards) incorporates global influences and technology.


Economics

Art has become an effective investment vehicle, with major financial institutions (JP Morgan Chase, UBS, Bank of America, Morgan Stanley to name a few) holding tens of thousands of artworks. The Indian art market is also growing, with Indian artists gaining prominence globally. While the art market can be volatile, data analysis shows a secular uptrend, with the Indian art market witnessing a significant growth rate of 23% over 31 years, from 1992 to 2023.

However, investing in art involves risks similar to other illiquid assets, such as vulnerability to damage, and costs for insurance, storage, and transportation. Unique risks for art include:

  • Risk of fraudulent copies: Experts can fail to identify fakes and trace provenance.
  • Market risk: Unpredictable and adverse conditions can block invested amounts for long durations.


Value Chain

The art industry operates through primary and secondary markets.

1. The Creation (Step 1): As an artist, you are at the heart of this ecosystem, creating original works that set the value chain in motion.

  • Non-Commissioned Works: Most visual art pieces are created independently by the artist without a specific directive. Their value depends on factors like your reputation, prevailing prices for the genre, scarcity, and market sentiment.
  • Commissioned Works: These are pieces created specifically for an individual, gallery, NGO, or corporate entity under an employment or contract.
    • Your creative discretion might be limited to the client's specifications.
    • Commissioned works offer clients a custom yet original piece tailored to their needs (size, color, aesthetic). Famous examples include Picasso's Guernica and Da Vinci's Mona Lisa, which were commissioned.
    • If you create commissioned artwork under an employment arrangement, the works are typically bound by exclusivity in favor of the employer, meaning ownership often rests with the employer. Examples include designs by advertising company employees, graphic designs, UI designs, and even custom tattoo designs.
    • If you engage with a studio:
      • Employment arrangement: You are employed to create specific works ("work-made-for-hire"), and all rights and ownership rest with the studio unless otherwise agreed. 
      • Real-estate licensing arrangement: You rent the studio space and retain complete autonomy and rights over your artwork.

2. Acquisition in the Primary Art Market (Step 2): This is where art is sold for the first time, usually directly from you, the artist, to a collector or consumption buyer.

  • Direct Sales: You might directly approach buyers or list your work on digital platforms or social media. The price can be offered by you or negotiated.
  • Agency Agreement: You can engage agents to represent you before galleries, auction houses, and potential buyers. They help with identifying suitable galleries, strategizing pricing, marketing, and publicity. Agents typically draw a commission.
  • Exhibition or Consignment: You enter an agreement with a gallery to curate your collection, host an exhibition, and manage sales. You retain ownership of the artworks until they are sold. The gallery charges a service fee or a commission.

Key Components of Agreements for Commissioned Art: If you create commissioned art, pay close attention to these clauses in your contract:

  • Rights Management: Upon agreement execution, ownership of the work typically transfers to the commissioning entity or employer. However, as the author, you always retain certain inalienable moral rights under Section 57 of the Indian Copyright Act:
    • Right to Paternity: The right to be credited as the author at all times and in all instances where your artwork is displayed.
    • Right of Integrity: The right to ensure your work is never mutilated or modified by the owner or assignee in a way that would harm your reputation. Courts in India have upheld this right, even against destruction of artwork.
  • Representation of Originality and Indemnity: The agreement should include your promise that the artwork is original, does not infringe on anyone else's intellectual property, and that you have all rights to create and sell it. An indemnification clause protects the employer/client if a third party claims infringement.
  • Consideration: This is the payment you receive for creating the artwork (fixed fee, salary, or statutory grant). It can be paid in advance, in tranches, or after delivery. The agreement might also cover post-sale services like restoration or maintenance.
  • Exclusivity: You might agree not to create similar works for other clients or for commercial exploitation during your employment.

3. Acquisition in the Secondary Art Market (Step 3): This market deals with the resale of artworks post the first sale. The demand for these works comes from the appreciation of an artist's unique style, and their value increases with rarity.

  • Auction Houses: These are primary players, like Christie's and Sotheby's, providing platforms for competitive bidding. They play a crucial role in verifying provenance (history of ownership) and authenticating artworks through experts. They also help in price discovery by appraising collections and issuing certificates of authenticity (often with caveats).
  • Private Transactions: Previously owned artworks can also be resold privately through dealers or galleries, provided the seller can furnish authentication certificates and purchase invoices to trace provenance.
  • Resale agreements are typically based on a commission model for the facilitating auction house, agent, or gallery. Reputable galleries and auction houses also take measures to ensure the preservation of artworks while in their custody, including climate-controlled storage and proper packing for transport.
Resale rights allow the artist or their legal heirs to receive a share of the resale price when a work is resold for a price exceeding Rs. 10,000. This right is enshrined in Section 53A of the Indian Copyright Act. The share is capped at 10% of the resale price and is determined by the Copyright Board. 


Financing

Art is recognized as a valuable appreciating asset, and financing options are emerging.

  • Fractional Art Ownership: This is a model of shared ownership where multiple individuals own a definite segment of an artwork, often trading digital shares on a platform. While this increases accessibility to art investment, the cultural significance of owning the original artwork is lost, as it remains with the platform. This is an emerging market in India.
  • Art Funds: Similar to mutual funds, these pool resources from multiple investors to acquire artworks for potential financial returns. In India, art funds have faced challenges due to high costs and lack of transparency, leading SEBI (Securities and Exchange Board of India) to regulate them as Collective Investment Schemes (CIS).
  • Art Price Index (API): These are mathematical indexes, like the IIMA-AuraArt Indian Art Index (IAIAI), that help determine a fair value of an artwork by analyzing prices of similar pieces and market factors. They assist stakeholders in analyzing risk data and historical performance for investment strategies.
  • Art Insurance: Given the high value of art, collectors increasingly insure their collections against physical and market risks like theft, damage, fire, and natural disasters. As an artist, knowing that your buyers might consider insurance highlights the recognized value and risk associated with fine art.


Certification

Certification is crucial because the originality of an artwork is the core determinant of its value. Collectors need to conduct due diligence to ensure authenticity and trace provenance.

  • Traditional Authentication: Certified experts from auction houses and galleries assess authenticity using chemical analysis of pigments and radiographic techniques to evaluate paint layers and composition.
  • Provenance Record: A complete record includes:
    • Your biographical information (name, dates, nationality, influences).
    • The chain of ownership and custody, including dates of completion and first publication, exhibitions, previous owners, and transaction records (price, auction dates, dealers).
    • Details of any restoration or conservation work performed on the piece.
  • Technology in Certification:
    • Artificial Intelligence (AI): AI algorithms can be trained on historical data to identify patterns in an artist's style, detect anomalies, and scientifically identify forged artworks with high precision. For example, Hephaestus' AI uses "scattering transform" technology to create a 100-dimensional "fingerprint" of an artwork to determine its attribution likelihood.
    • Tokenization (NFTs): Once authenticity is established, physical artworks can be tokenized on the blockchain by attaching an NFT. Each NFT is a unique digital asset that records transactions on an immutable, decentralized ledger. This means every transaction is recorded, enhancing the artwork's credibility and provenance.


Legal Framework

Understanding key Indian legislations is essential for you as an artist, as they influence ownership, authenticity, and transfer of artworks.

1. The Copyright Act, 1957: This Act protects the rights of artists and creative persons, allowing them to monetize their works fairly.

  • "Artistic work" includes paintings, sculptures, drawings, engravings, photographs, works of architecture, and works of artistic craftsmanship.
  • Originality of creative expression is a necessary prerequisite for copyright. Mechanically reproduced designs often lack originality for copyright protection.
  • The artist is deemed the first owner of the work, unless ownership is proactively transferred through assignment or license.
  • Important Caveat for Commissioned/Employment Works: If a work is created under employment or commission, the first ownership generally lies with the employer or commissioning entity. However, if a work was created prior to employment, you might retain ownership even if used by an employer during your tenure.
  • Authorship for Digital Art and AI: The Copyright Act attributes authorship exclusively to natural persons (humans). This is a critical point for generative art created using AI, where the proportion of human effort in generating the output needs to be assessed. While one AI tool, 'RAGHAV,' was briefly recognized as a joint author, this was later redacted.
  • Your Rights as a Copyright Owner: These include:
    • The right to publish your work (in 2D or 3D formats).
    • The right to store it electronically and issue copies.
    • Economic rights: Selling your work for monetary gain, incorporating it into a cinematographic film, or creating an adaptation.
  • Inalienable "Special Rights" (Moral Rights) of the Artist: These rights always remain with you, the author, independent of copyright ownership:
    • Right to Paternity: The right to be credited (claim authorship) for your work at all times.
    • Right of Integrity: The right to ensure your work is not distorted, mutilated, or modified in a way that would cause disrepute to you. The Delhi High Court has upheld this, even extending "mutilation" to destruction if it adversely affects the artist's reputation.
  • Duration of Copyright: Copyright generally lasts for sixty years following the year in which the author dies.
  • Copyright Infringement: Any unauthorized use of your copyrighted work without a legitimate license or transfer is infringement. This can lead to civil remedies (compensation and restraints) and criminal penalties, including imprisonment (6 months to 3 years) and fines (Rs. 50,000 to Rs. 2 lakhs) if proven intentional.

2. Antiquities and Art Treasures Act, 1972: This Act focuses on regulating the export and trade of historical and aesthetically valuable artworks to prevent smuggling and fraud.

  • "Antiquities" are defined as works of art or craftsmanship, objects of historical interest, or other items that have been in existence for not less than one hundred years.
  • "Art Treasure" refers to any human work of art, not being an antiquity, declared by the Central Government to be an art treasure based on its artistic or aesthetic value. Crucially, no such declaration can be made while the author is alive.
  • Mandatory Registration: If your artwork becomes an antiquity or art treasure, its registration with the Central Government is mandatory for owners, exporters, and sellers.
  • Export Restrictions: To export antiquities or art treasures, you must procure a license from the Central Government or an authorized agency. Violating this mandate can lead to imprisonment and fines.
  • "Nine Gems" or Navaratnas: The artworks of the following nine artists have been declared "national treasures" and are prohibited from being exported outside India:
    • Rabindranath Tagore
    • Amrita Sher-Gil
    • Jamini Roy
    • Nandalal Bose
    • Raja Ravi Varma
    • Gaganendranath Tagore
    • Abanindranath Tagore
    • Sailoz Mookerjee
    • Nicholas Roerich

3. Trademarks Act, 1999: While copyright protects the artistic content, the Trademarks Act protects elements that create brand recognition.

  • Your unique portrayal of elements (like Jamini Roy's eyes), your signature, or any distinctive style that recurs across your works and becomes associated with you or your "brand" in the public's perception, could potentially be registered as a trademark.
  • It's possible for the same piece of work to be registered as both a trademark and a copyright.

4. Indian Penal Code, 1860 (IPC) and Bhartiya Nyaya Sanhita, 2023 (BNS): These laws deal with criminal culpability related to art content and transactions.

  • Obscenity: A work is generally considered obscene if it contains sexually explicit content that is "lascivious or appeals to prurient interest" or could deprave or corrupt the mind of its audience.
    • Crucially, there is an exception for works created while imparting education, or in the interest of art, literature, or science.
    • Courts emphasize balancing freedom of expression with decency and morality, often requiring expert opinions to avoid subjective biases when judging artistic content.
  • Forgery: This offense penalizes the creation of a false document or electronic record with malicious or fraudulent intent to cause harm, claim property, or induce someone to part with property.
    • It's widely believed that a significant proportion of works sold in the Indian art market are fake, particularly those of deceased masters.
  • Criminal Breach of Trust & Cheating:
    • Criminal breach of trust involves dishonest misappropriation of property entrusted to someone, or its conversion/disposal in violation of law or contract.
    • Cheating is an act of fraud or deception that induces someone to deliver property or act/omit in a way they wouldn't have otherwise.
    • There have been high-profile cases involving the criminal misappropriation of paintings and the sale of fake artworks, leading to investigations by authorities like the Enforcement Directorate.

5. Indian Contract Act, 1872 & The Sale of Goods Act, 1930: Any transaction involving your art is essentially a contract governed by the Contract Act and a sale of movable goods under the Sale of Goods Act.

  • A contract must have a valid offer, acceptance, fair consideration, legitimate objective, and mutual consent.
  • If a transaction is induced by fraud, coercion, misrepresentation, or undue influence, the contract can be voidable, allowing the affected party to claim compensation. This means if your art is misrepresented as to its originality, the purchaser can claim damages.
  • The Sale of Goods Act governs conditions like time and delivery. It allows a purchaser to repudiate (cancel) a contract if a contractual condition is breached.

6. The Consumer Protection Act, 2019: This Act protects consumers from substandard goods, deficient services, or unfair trade practices.

  • If a counterfeit work is passed off as original and sold, or if a work is sold without proper title, it could be considered a defective product under this Act.
  • Similarly, a negligently or fraudulently conducted certification procedure would be considered a deficient service. Such acts can lead to fines or imprisonment. This mainly impacts you as an artist if you are directly involved in such misrepresentation or provide negligent services.

7. Information Technology Act, 2000 (IT Act): In the digital age, auction houses and galleries record and store data related to sales and artworks electronically. This Act plays a role, especially concerning freedom of expression in digital art. Courts have upheld the fundamental right to freedom of expression, noting that obscenity provisions under the IT Act and IPC must be read in light of contemporary standards applied to art.


Taxation

When you sell or transfer your artwork, certain taxes may apply:

  • Capital Gains Tax (under Income Tax Act, 1961):
    • Short-term capital gain (STCG): Applies if your artwork is sold within 24 months of acquisition.
    • Long-term capital gain (LTCG): Applies if your artwork is sold after 24 months, taxed at 12.5%.
  • TDS (Tax Deducted at Source): 10% TDS is applicable on royalty income you receive as an artist.
  • Goods and Services Tax (GST) Act, 2017:
    • Sale of art by a registered dealer in India attracts 12% GST (Integrated Goods and Services Tax on inter-state supply), typically borne by the buyer.
    • If art is imported into India, an effective duty of 22% is levied on the buyer (including 10% Customs Duty and 12% IGST).
    • Ancillary services like framing and valuation also attract 18% GST.


As an artist, being aware of these aspects can help you navigate the art market more effectively, protect your rights, and ensure compliance with legal and financial obligations. 

This post is for educational purposes and constitutes fair use under Section 52 of the Indian Copyright Act. Original document linked above.