http://www.allianceofillustrators.org
s Association). Licensing is big business;it accounts for $175 billion in retail sales of licensed merchandiseworldwide, and over $105 billion in the United States.In 2006, the $3.3 billion in retail sales of products featuring alicensed piece of art brought licensors—artists and designers— royaltyrevenues of $182 million. These sales came from the followingcategories, affecting a wide range of American manufacturers:36% gifts and novelties15% home décor15% housewares10% paper products7% accessories5% apparel4% publishing3% food and beverage3% health and beauty2% infant productsHOW THE ART LICENSING INDUSTRY WORKSWhoever owns the rights to a 2-or 3-dimensional design or image(usually the artist/creator of the design) is the LICENSOR, andwhoever wants to acquire the rights to reproduce that design or imageis the LICENSEE. Artists/LICENSORS make money by licensing(essentially "renting") the right to reproduce their design or imageto different manufacturers (LICENSEES) to use on different sorts ofproducts. For example, a sailboat image can be licensed to company Afor a mug; company B for a coaster, and company C for an art print.Licensing is an interesting and complex business, and it is asuccessful and profitable business because our current copyright lawprotects the creator's rights and safeguards their ability to profitfrom their intellectual property. This $3+ billion art licensingindustry will no longer be able to function should the proposedlegislation be passed.RAMIFICATIONS OF THE PROPOSED LEGISLATIONWhen a manufacturer wants to feature an artist's work on one or moreof their products, it is important to them that they are the onlycompany who has the right to reproduce that design on that particularproduct. If other manufacturers are able to put the same design on thesame product then it hurts the licensee, especially if themanufacturer licensee has to factor the artist's royalty payment intotheir price structure while the infringing manufacturer does not andcan therefore bring the product to market at a lower price point. Infact, one of the great incentives NOT to infringe on an artist'scopyright, is that currently there is a stiff penalty—up to $150,000for each instance that infringement is proven. The proposed OrphanWorks bills removes the penalty for infringement, which will make iteasy for unscrupulous companies to infringe on someone's copyright andreceive nothing more than a `hand-slap' as punishment.Consider for a moment, that you are an artist, and imagine how youwould handle the following hypothetical situation:In the 1990's, you licensed a series of pictures for one-time use in acorporate annual report. As often happens in such cases, the copyrightnotice and artist credit were left off of the printed piece. As abusiness-savvy artist and studio owner, you naturally took the timeand trouble to register your copyright to the works. Because yourbrand is important to you, you make it a practice never to licenseyour work for inexpensive or distasteful products, but over the courseof the next decade, you did decide to license some of these images forexclusive use on upscale lines of dishes, wall décor, and jewelryboxes—product lines which enhance your brand's image.Fast forward to today; a t-shirt manufacturer is cleaning out hismother's attic and finds the annual report featuring your pictures,and decides that they would be hot sellers for his fall line. He callsthe company to try to find the artists name, but no one there knows.So he begins to manufacture and sell cheap t-shirts bearing your art.Thank goodness for our current copyright law, under which yourremedies would include statutory damages, attorney's fees, impoundmentand injunction for this flagrant infringement - because it's damagedyour ability to exclusively license your work only in high-endmarkets. And once your work is seen on lower-end products, the brandloses it caché resulting in many upper end manufacturers refusing tolicense it. Since this adversely affects your income, you hire alawyer to take your case on a contingency basis, and with theirassistance are able to prove infringement.But what would happen if this same scenario took place in 2014— underthe Orphan Works acts of 2008. Since, under the new (proposed)legislation you would only be entitled to `reasonable compensation'for the use of your designs, and even that would be limited towhatever maximum the court might set and would be constructed not todeprive the infringer of the profits he made "in reliance" on hisso-called failure to locate you, no attorney would take the case on acontingency basis. As a small business owner, you could not possiblyafford the costs of hiring an Intellectual Property attorney andtaking the case to Federal court, and so you would be unable toprotect your design. In the meantime, the high-end companies whichwere featuring your work on their products see the same images oncheap t-shirts, decide to drop your work from their line, and sue youfor breach of contract, since the contract you signed guaranteed themthe exclusive right to use that design. They also sue you for damagesfor the loss they take due to sharply reduced sales of products theyhave produced with your no longer fashionable design. All in all it isa very damaging situation—both from the visual artist's and the honestmanufacturer's standpoints.Without the deterrent of statutory damages and attorneys fees - andwithout a permanent injunction against repeat offenses by the samet-shirt seller, this experience would now act as an incentive for theinfringer to exploit other uncredited (and therefore, effectivelyorphaned) images by other artists. Worse, the t-shirt manufacturerwill discover that publishing `orphan works' is a rational, profitablebusiness decision, which could in turn inspire yet other infringers.It is bad enough we have to deal with infringement issues from Chinaand other countries—we shouldn't have to deal with it from our own soil.PRIMARY OBJECTONS TO THE PROPOSED "ORPHAN WORKS" AMENDMENTS FROM THOSE INVOLVED IN THE ART LICENSING INDUSTRY1. It changes the 1976 U.S. Copyright Act (enacted in 1978), and makesit virtually impossible for artists to protect their work. Itbasically allows anyone to use a design without the copyright holder'spermission.Under current law, you receive basic copyright protection even if youdon't register your work. Under Orphan Works law your work could bedeclared an orphan even if you have registered it. Congress, inenacting the Copyright Act of 1976, provided that copyright exists inthe creation of any work that is copyrightable subject matter,regardless of whether or not the owner has performed any legalformalities, such as registration, or copyright notices, or taken anysteps to protect or defend the copyright. Since 1978 (when it wasenacted) many creators have relied upon the Copyright Act of 1976, andemployed business practices based upon the protections it offered. Theproposed Orphan Works Acts of 2008 would have the effect of deprivingcertain creators of the ability to enforce their copyrights becausethey did not take steps that the Copyright Act of 1976 did not requirethem to take. In essence, it will give infringers the legal means touse a design without the copyright holder's permission.2. It requires artists to attempt to protect their work by registeringit with a digital data base system (presumably for a fee, in additionto the copyright filing fee)—when no such system exists!The proposed legislation is predicated on the establishment ofprivate, profit making registries that would establish databases ofdigital versions of artworks and provide a place for infringers to tryto locate the artist, BUT it will be enacted whether or not these databases ever come into existence. This will relieve the infringer ofliability if he simply attempts a search that cannot possibly beperformed successfully.In addition, the legislation places no limit on the number of theseregistries or the prices they would charge. The burden of paying fordigitization and depositing the digitized copy with the privateregistry would presumably fall entirely on the artist, and even if animage is contained in the registry, as long as the infringer "looks"without finding it, the infringement is allowed. There is no liabilityimposed for the failure of a database to find an image registered inthat database when it is searched, and no requirement that allavailable databases be searched, thus potentially requiring multipleregistrations (and multiple registration fees). There are also nosafeguards to prevent any person or company from fraudulentlyregistering work they do not own.3. It eliminates statutory damages wherever an infringer cansuccessfully claim an orphan works defense, thus eliminating the onlytool the law provides to prevent deliberate infringement.Current law almost certainly deters rampant infringement because thepresent remedies – damages of up to $150,000 per infringing article--make infringement risky. By "limiting remedies," the Orphan Worksamendments will effectively create a no-fault license to infringe.4. It allows for an infringer to create—and copyright—a derivativework from the original design.Under current law, the right to create a derivative work is one of anartist's exclusive rights. Section103 (a) says a user can't copyrighta derivative image that he's infringed. "Protection for a workemploying preexisting material in which copyright subsists does notextend to any part of the work in which such material has been usedunlawfully." Under the proposed new bills, since the entirety of aninfringed work can be included in a derivative use, then the copyrightof the derivative will amount to a copyright of the original. Thiswould be a de facto capture of new exclusive rights by the infringer.In other words, these bills allow infringers to make and copyrightderivatives—even if the copyright holder to the original work objects.If this legislation passes it would mean a return to pre-1976 U.S.Copyright Act when many artists' works fell into the public domainbecause they could not afford to comply with the formalities ofregistration as a condition of copyright protection. This violates thetrust under which American artists have worked for the last 30 years,and effectively nullifies our U.S. Copyright registrations. Further,it leaves infringing works (and products incorporating them) subjectto seizure in other countries under the Berne Convention for theProtection of Literary and Artistic Works (the international agreementgoverning copyrights to which the United States is a signatory), andinvites sanctions from around the world under the World TradeOrganization Agreement on Trade-Related Aspects of IntellectualProperty Rights (TRIPS), to which the Unites States is also asignatory, because international artists' works would be just asvulnerable to infringement within the U.S. under the terms of theOrphan Works Amendment.THE HEART OF THE ISSUEOne of the things that I do not understand about this legislation iswhy it applies to commercial applications. I truly believe that few inthe art licensing community would have major issues with thelegislation if it only affected non-commercial uses. Rather, we areextremely concerned about losing our ability to earn a living as smallbusinesspeople and entrepreneurs by licensing our work for commercialuse-- which is what we believe will happen if this legislation passes.I began my career over 25 years ago as a greeting card designer, and Iam still extremely active in the greeting card industry; I am on theBoard of Directors of the Greeting Card Association, an organizationwhose members (e.g., Hallmark and American Greetings) publish over 95%of the greeting cards sold in the United States. I am also the DesignEditor for Greetings etc. magazine, the major trade publication forthe greeting card industry. While the impact of this legislation willinitially be felt by the visual arts communities, I would like topoint out that it will also impact American manufacturers who utilizeartwork in their product lines.I strongly oppose this legislation, and respectfully request that youdo NOT pass it. If you would like any additional information regardingthe broad reaching implications this legislation has for our country,the art licensing community and visual artists both here and abroad,please do not hesitate to contact me.Sincerely yours,Joanne Fink, PresidentLakeside Design345 Eden TrailLake Mary, FL 32746www.lakeside-design.com