Willie MoralesProfessor JepsenLaw and EconomicsGraduate Paper

Intellectual Property and Fine ArtsIntroduction

This paper will look at the relationship between the fine arts and intellectual property (IP) laws.

Economic theory will be used to analyze the bundle of laws that make up IP laws; Copyrights, Patents, and

Trademarks. I will trace the historical development of IP laws and demonstrate how they were catalyzed by

the United States’ economic interests. This paper will also touch upon the development of Moral rights

laws that led to the development of Visual Artists Rights Act of 1990 (VARA) in comparison to traditional IP

laws. A discussion of the broadening in scope of IP laws as they pertain to Australia’s Aboriginal art

cultures will illuminate the risks associated to abusing IP laws. This paper will address the optimal structure

of IP laws so as to best foster creativity amongst artistic populations. The last section of this paper will

address the real world occurrences of art crimes and how not only IP laws, but the criminal and civil laws

are addressing art criminality.

History of Intellectual Property

Arguably the most important copy right convention in the history of IP on the international scale

took place in 1886 in Berne Switzerland. The U.S. did not initially have sufficient economic incentive to

participate in the Berne convention. The founding father’s legacy which wanted to part ways with the

traditions of the old world did not fundamentally believe in granting artists moral rights which was a

standard of the convention. When the way the nation did business changed from an import to an export

economy, U.S. revenues became susceptible to piracy costing the U.S. great economic losses. This

change in the export/import structure for the U.S. economy led to U.S. participation in the Berne convention

more than a hundred years later in 1990. This meant that the U.S. would have to adhere to the Berne

convention’s moral rights clause, leading to the creation of the Visual Artists Rights Act of 1990 (VARA)

(Tang, 2012).

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An Economic Analysis of Intellectual Property Laws

IP law confronts an innovation-dissemination tradeoff via patents, copyrights, and trademarks. IP

law developed without the consultation of scientific theory. Only recently has IP law come under the formal

analysis of a scientific methodology through economics. Cooter and Ulen (2012) state that economics is

not a sufficient avenue by which to evaluate IP law. Because economics evaluates changes to variables

using static equilibrium analysis, the changes and innovations of IP law are a violation to said fixed

equilibrium models (Cooter and Ulen, 2012). Economics is further limited in its expression of IP functions

because legislators respond to powerful political groups and lobbyists. Thus, IP’s potential to be analyzed

using economics is diminished in terms of economic efficiency (Cooter and Ulen, 2012). That said, even if

economic analysis will fail to completely express the dynamics of IP law, it can still provide a more concise

understanding.

“Article I, section 8 of the U.S. constitution gives Congress the power to promote the progress of

science and useful arts, by securing for limited time to authors and inventors the exclusive right to their

respective writings and discoveries” (Cooter and Ulen 2012, 118). From an economic perspective patents

and copyrights are monopolies granted to inventors/creators, “The successful applicant now receives a 20-

year monopoly…No one can use the invention except with owner’s consent…Others…must purchase the

right to do so from the patent holder…for the licensee’s payment of a fee known as a royalty” (Cooter and

Ulen 2012, 119). This monopoly is protected by the duration and breadth of the copyright or patent.

Duration refers to the number of years between a copyright or patent’s registration and its expiration

whereas breadth refers to how similar another invention can be without infringing on the copyrights or

patent of the original invention (Cooter and Ulen, 2012). Broadly defined copyrights and patents grant an

inventor exclusive rights over an invention and its derivatives securing all profits for the inventor. Broad

patents encourage fast duplicative research whereas narrowly defined patents require separate patents for

subsequently related inventions. Narrow patents encourage slower complementary research (Cooter and

Ulen, 2012).

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There are instances where a pioneering invention does not yield a market value until an application

of the invention is brought to market by another inventor’s patent. In these cases the law binds both

inventor’s patents together, almost forcing them into a Normative Coase (NC) and Normative Hobbes (NH)

Theorem arrangement requiring them to bargain and agree with each other before deriving any profits from

either patent. From an economic perspective deciding on whether or not a copyright or patent should be

broad or narrow would be a function of whether society values investments in research or investment in

development more highly. The law instead relies on the doctrine of equivalents which refers to how nearly

equivalent two inventions must be before finding patent infringement (Cooter and Ulen, 2012). The law has

departed from the teachings of efficiency, “Courts have sometimes reasoned that an improvement with

great commercial value should not be interpreted as infringing on a pioneering invention with little stand-

alone value” (Cooter and Ulen 2012, 121). This legal practice provides inefficient incentives to pioneering

inventors. According to economist-lawyer Howard Chang, without the pioneering invention the commercial

application would not exists. Thus, he identifies that the sum of the pioneering invention and its commercial

value are joint products which the inventor must be compensated for in order to efficiently incentivize future

investment in pioneering inventions (Cooter and Ulen, 2012). The law treats fundamental research and its

application as separate functions despite the economic argument of both being joint products. “If

transaction costs were zero, then the Coase Theorem would apply: breadth of a patent does not matter to

economic efficiency so long as inventors can bargain with each other costlessly and make efficient

contracts” (Cooter and Ulen 2012, 121).

In the real world however, people might not be able to reach an agreement. We can imagine the

anger an inventor or author might feel towards individuals whom are granted patents over commercial

applications of pioneering inventions or granted copyrights for a derivative novel! The law has remedies

that are based upon the economic principles of NC and NH. NC is a guidance to law makers on how to

facilitate private bargaining that will allocate legal rights efficiently. Under NC the law can lubricate

bargaining by lowering transaction costs. In order to lubricate bargaining the law should seek to be as

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clearly and simply defined as possible (Cooter and Ulan, 2012). Blind anger and jealously can sometimes

prevent bargaining between parties. Under NH “When the parties fail to reach a private agreement where

one is, in fact, possible, they lose the surplus from exchange. To minimize the resulting harm, the law

should allocate property rights to the party who values them the most” (Cooter and Ulen 2012, 93). In

essence the parties are punished in the interests of individuals in society. Thus, the surpluses that could

have been gained by bargaining might then be transferred to cover the costs society incurs by having to go

through the court systems, and property rights are then allocated by the courts to the party who values said

rights the most. Economic principle suggests that if a pioneering invention has little stand-alone value, then

the commercial application value should be transferred to the pioneering inventor in order to incentivize

future inventions. Conversely, pioneering inventions with high stand-alone value would already reward the

pioneering inventor even if they do not receive any shares from the commercial profits. Thus, in the case of

the former copyrights and patents should be broadly defined for pioneering inventions, and in the case for

the latter copyrights and patents should be narrowly defined (Cooter and Ulen, 2012).

As stated before duration of a copyright or patent really means the amount of time that the inventor

can legally have hers/his monopoly. In the U.S. regardless of product details or market specific impacts

that an invention might have, the patent is generally twenty years in duration. Economics examines the

optimal life (duration) of a patent in which a balance (hypothetical equilibrium) between creativity and

dissemination is reached. In terms of innovation, the longer the duration the more society enjoys the

benefits of innovations. The rate at which innovations occur however decreases, and marginal benefits

from innovations decrease as patent duration increases. This means that in terms of dissemination, or the

benefits society would experience from dissemination: lower prices for any products that use the patented

inventions, causes a loss to society as the duration for a patent increases. Society will respond to long

patents by looking for substitutes, the longer society has to look for substitutes the more substitutes it will

find. Presumably, the patent holder at some point will begin to experience losses in terms of the benefits of

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having a patent given that the market adjust to substitutes. Thus, the marginal costs from less

dissemination decreases as the patent duration increases (Cooter and Ulen, 2012).

Some economists suggests that patents should be granted in market and invention specific ways

so that the optimal life of a copyright or patent can be determined. In other words they are suggesting the

replacing of regulatory governance for market efficiency. If the market is allowed to efficiently allocate

copyrights or patent durations, then the optimal life could be expressed in terms of supply and demand.

Cooter and Ulen (2012) mention the tiered German patent system which extends either major patents or

petty patents. In the German system major patent holders pay a fee that increases as the duration gets

longer. The German system is Kaldor-Hicks efficiency stratagem that makes sense from the perspective of

individual’s in society who stand to lose; patent holders are monopolists, and because monopolies are

inefficient the monopolists should compensate those who stand to lose. This is a fine and just idea but it is

functioning under the assumption that patent holders are only profiting from tangible commodities. The

German patent system pays no attention to the incentives created by incommensurables and intangibles

like Pride. Also, from the perspective of individuals in society the transaction costs of creating a

mechanism to keep track of the thousands of potential petty patents, together with the lack of innovation

due to losses in incentive could be potentially catastrophic for the American Capitalist way of life!

In terms of economics trademarks do not concern themselves with innovations, limited monopolies,

or dissemination. What trademarks do is “reduce the cost to consumers of searching for a product with

specific qualities. The principal economic justification for granting property rights to trademarks are that

they lower the consumer search costs and create an incentive for producers to supply goods of high

quality” (Cooter and Ulen 2012, 132). Cooter and Ulen (2012) explain that trademarks are granted

because economics recognizes that reputational aspects of branding create value, much like it does for the

fine arts as expressed by Xiyin Tang (2012) and Joseph C. Gioconda (2008). Trademarks do not generally

create monopolies, prevent innovation, or prevent dissemination which is why in terms of duration, a

trademark can be maintained in perpetuity (Cooter and Ulen, 2012). Trademarks are recognizable symbols

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of success and because they are recognizable, producers are incentivized to produce high quality products.

There is nothing less productive than a firm whose trademark is associated to poor quality. All we need do

is consider the American auto industry to learn the power of poorly associated trademarks, American auto

manufacturers could not keep up with Honda and Toyota. It is not until American companies worked hard

to re-establish trust in their trademarks/products that these companies started making up some of their

losses (Federal bailout funds did not hurt either)! From the perspective of individuals in society, easily

recognizable trademarks lower transaction cost of consumers. In essence this is another example of NC

lubricating bargaining by lowering transaction costs. In terms of breadth, trademarks cannot be extended

to producers for generically identifiable items like a “camera” for example. There are instances in which a

company is so successful that their products becomes the generic identification for a type of product; for

example Scotch tape has become the American lexicon’s identification for cellophane tape. In these cases

a trademark has in fact created a monopoly through hard work and trademark owners may sue to protect

their property (Cooter and Ulen, 2012).

Intellectual Property Laws vs. Moral Rights Laws

IP laws are not sufficient to attenuate the losses that fine artist’s experience. Trademark and

copyright laws are fundamentally structured to redistribute the value of illegal copies to the creating artists.

In the case of fine arts however, “Almost all the market value for their work resides within the original”

(Tang 2012, 251). IP laws have been successfully circumvented by the first sale doctrine, “the Supreme

court in the 1924 case Prestonettes, Inc. v. Coty…held that the defendant…had the right to compound or

change what it bought, to divide either the original or the modified product, and to sell it so divided” (Tang

2012, 242). Clearly IP does not always succeed in protecting the originator of a creation. This can lead to

after markets that would confuse consumers, traditional IP law created the Lanham Act of 1946 in response

to such confusion. Under section 43 (a) of the Lanham Act, “The standard requires that an infringer causes

confusion, mistake, or deception with regard to the affiliation, connection, or association of such person

with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or

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commercial activities by another person” (Tang 2012, 245). This places the burden of proof on the artists

to demonstrate that an infringement has even occurred in the first place. The Lanham Act prevents

association with a plaintiff’s trademark because it might affect the distinctiveness of the trademark. In an

age where reproducing copies or derivative works is possible, VARA moral rights supplement the holes in

traditional IP law. VARA moral rights stipulations include the right of artistic integrity which prohibits the

alteration, mutilation, or modification of a work that might adversely affect the artist’s reputation, and the

right of attribution which grants the artist the ability to claim authorship of a work and prevent their

authorship from being unknowingly applied to another work that they did not create. Lastly, VARA gives

the artist the right to protect their work from being intentionally destroyed (Tang, 2012). In essence when

an individual purchases a BMW, what they have bought is a vehicle that has been trademarked by the

BMW corporation, the individual does not in fact purchase rights to the trade mark or any other IP rights.

VARA laws are moral but they protect the artist’s economic interest with as much efficiency as

traditional IP laws. While some may argue that VARA’s moral foundation are too steeply founded in

personhood ideologies, a closer look reveals intimate consideration for how valuation of the fine arts is

structured. VARA protects the rights of the artists that are directly linked to the derivation of the demand

function for the artist’s brand and works of art. It is in the public’s interests for artists to protect their rights

because doing so protects the value of the art pieces/commodities purchased by the public (Tang, 20012).

VARA’s laws use words like authorship, reputation, and source identification to contextualize what is being

protected, but they serve a similar purpose to traditional IP laws:

A trademark owner’s right to enjoin use of its trademark in connection with a substantial alteration of its original product is very similar to an artist’s right to prevent the distortion, mutilation, or modification of his work that would subsequently be prejudicial to his honor or reputation. (243)

An artist’s brand and reputation is what informs the value of their pieces, in the case of abstract post

modern art, the value is not derived by a criterion of the artist’s virtuosity. Value is derived by the

uniqueness of their style and brand (TANG, 2012). The artist is supposed to be compensated for the work

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in establishing their uniquely recognizable brand and style, “a fabricated construction, a deliberate posing

by the artist to actively engage in public identity-making” (Tang 2012, 235), style is an economic facet for

attributing value to fine art. Like any other commodity/resource, fine art’s value is a function of its scarcity

in terms of supply. If we are allowed to sell the art we purchase piece by piece we would be affecting the

value of the artist’s brand. Piecemeal selling of an artist’s work steals value from the brand by creating an

after market that is inefficient because it does not compensate the original artists, and it diminishes the

value of other consumers whom have purchased said artist’s brand. The more rare the commodity and the

more excludable it is, the better it retains its value. Allowing owners of an Andy Warhol original painting to

cut it into pieces and sell those pieces, would dilute the value of the overall market for that artist’s work and

his consumers. VARA moral rights laws can do for the fine arts what IP law does for other commodities.

Some of the positive outcomes are that reputational intent incentivizes artists to police their brand and by

doing so they protect their customer’s property value.

Moral Rights laws and the Broadening of Intellectual Property Laws

Art and culture from the aboriginal tribes in Australia are a very popular art form in need of

protection for its artists given how easily the art work is imitated (Van den Bosch and Rentschler, 2009). As

identified by Xiyin Tang (2012), moral rights protect the artists’ reputation which is associated to the

creation of value for the artist’s products. In Australia with the emergence of Aboriginal artists, intellectual

property does not exclusively belong to one individual, the aboriginal tribes have communal ownership over

an entire genre of art (Aboriginal art) (Van den Bosch and Rentschler, 2009). This is a major departure

from western concepts of intellectual property, stated frankly some might see this as an abuse of moral

laws. As per moral laws, it is expected that an artist has authorship over their brand, reputation, and art

products. However, extending those rights to a group of people over an entire genre can be problematic.

One of the immediate outcomes is that these rights can protect an individual artist’s depictions of commonly

available stories from Aboriginal culture:

Yanggarriny Wunungmurra, with the support of the recently formed Aboriginal Artists Association, took legal action against Peter Stripes Fabrics over the reproduction of Wunungmurra’s work on a

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t-shirt. The unreported decision in Yanggarriny Wunungmurra v. Peter Stripes Fabrics was that the originality of Wunungmurra’s work, which he had learned from a senior member of his clan, was based upon the distinctive features of his depiction of tortoises in the work…In other words, the individual artist’s depiction of a known story or traditional imagery could be used to argue the case for individual copyright and to support a claim to an original artistic treatment of a commonly held motif. (123-124)

Not only do Aboriginal applications of IP allow protections of available cultural lore depicted by individual

artists, “Milpurrurru and Ors v. Indofurn Pty. Ltd. (1994) established that an unauthorized reproduction need

not be identical to or a complete reproduction of the original to infringe copyright. Minor alterations to the

plaintiff’s artworks to make the designs “less busy” by utilizing fewer colors and removing or simplifying

borders did not prevent the works from constituting a substantial reproduction” (Van den Bosch and

Rentschler 2009, 124). This is unduly broad, it basically says that Aboriginal art communes by default get

to determine whether or not an art work is infringing upon their style. This places the burden of proof upon

whomever is challenging the Aboriginal art commune. One of the most concerning outcomes is the hyper-

policing of Aboriginal artist’s works which can lead to censorship:

In the case of Milpurrurru and Ors v. Indofurn Pty. Ltd. (1994), for example, a work by an Aboriginal artist, Banduk Marika, depicting a Dreamtime story, was reproduced with minor aesthetic amendments and without authorization on floor coverings manufactured overseas…The carpets were then imported for retail in Australia by the defendant. Upon discovering the unauthorized reproduction, the artist’s community was deeply upset, as the reproduction of this story by a person outside of the community is forbidden. Furthermore, its reproduction onto floor coverings was offensive. Under Aboriginal law, the artist’s community held the artist responsible for the reproduction and revoked her right to depict this important Dreamtime story in her future work. (124)

“As collective owners of the story depicted in the artwork, the community has an interest and responsibility

under Aboriginal law for its ongoing maintenance and integrity. In accordance with Aboriginal law, the

Dreamtime story is owned collectively by the artist’s community and administered by the community’s

elders” (Van den Bosch and Rentschler 2009, 125). IP is supposed to transfer the profits from

unauthorized copies to the creating artist, and moral law tries to protect the value of the original work for the

artist. This however seems like a willful broadening of both IP and moral laws to finance aboriginal tribe

people’s lives! The art will suffer for this and will not reflect the social changes within that community, it will

only reflect the financial interests of the community. The artist’s utility was forcibly diminished in that she

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was forbidden to use her childhood story because it is “owned” by the elders. What if that artist’s work

signified an artistic rebellion against the accepted aesthetic for Aboriginal arts, what if through her work a

new generation of Aboriginal artists could have emerged much like American post-modern art developed in

rebellion to European concepts of high art during the Coldwar. IP laws when abused can be very

dangerous to the arts. While it is not an ideal facilitator to the Aboriginal arts market or any arts market, the

legal issues that led to the creation of Aboriginal arts associations and broadened the scope IP and moral

rights laws helped to legitimize Aboriginal art in the international scene (Van den Bosch and Rentschler,

2009).

As the literature mentions, IP in the U.S. was hesitant to assign moral or personhood protections

for artist’s works. The argument being that traditional applications of IP rights were sufficient to protect

artists. Xiyin Tang (2012) demonstrated instances in which IP rights were not enough to protect the artist’s

interests. Instances where staple IP laws like the Lanham Act of 1946 have been successfully

circumvented. Tang identified that the fundamental structure of IP laws, which attempt to compensate an

artist’s losses for illegal copying, pay little attention for the value of the original art work and thus the need

for moral rights via VARA are necessary in the U.S. Conversely, the pervasive broadening of IP laws,

which in my opinion were due to abuses of moral laws within the Aboriginal arts market, paint a different

picture altogether. The heavy moral influence on IP law within Australia’s Aboriginal arts communities,

grants a group of people too much power, and leads to financially driven art works not creative

expressions. With such polarity in the interpretation of IP laws, how do artists create, how can the law

protect creativity without suffocating it at the same time.

The Creative Process and the Optimal Structure for Intellectual Property Laws

Copyright laws are supposed to protect the interests of creative artists so that they maintain the

incentive to create. Some argue that if the objective of IP law is to ensure that creative works are continued

to be produced, then the current system is flawed because it limits art works by volume due to copyright

and patent constraints. These arguments stem from the belief that certain IP laws; copyrights and patents,

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are too top heavy. Meaning that they protect the interests of the original artists while limiting other artists

who might use their works as inspiration or raw materials as stated by Joseph Fishman (2015):

Copyright protections exist primarily in order to promote creativity. Because creativity is a cumulative process, entitling upstream creators to control downstream use has traditionally been justified as a necessary evil, socially valuable only to the extent that it stimulates upstream creation in the first place. Many believe that this value has been overstated. Our copyright system, the argument goes, ends up stifling more downstream creativity than is offset by the marginal upstream creativity that the system incentivizes. Upstream creators would have sufficient motivation to invest in creating even without control of downstream use. Granting them this control raises downstream creators’ costs to the point where copyright suppresses more marginal creativity than it encourages. If the necessary evil is not really necessary, then our intellectual property system — an instrument intended to be “subservient to the value of creativity” — has become perverse. (1335)

Paradoxically, copyrights and patents are constraints that can promote creativity and innovation. While the

original intent of these laws was not to be creatively generative, findings in psychology provide some

explanation. Motivation studies, specifically goal setting theory states that so long as a task is specific and

difficult, the task will provide motivational energy and completion of objectives (Fishman, 2015). The issue

is in determining what the appropriate level of constraint should be, “Psychologists describe a curvilinear

relationship between creativity and constraint: increasing constraint up to a point increases creative output,

but past that point, any further increases will cause that output to drop off” (Fishman 2015, 1339).

Creativity must satisfy two main criteria; originality and appropriateness. The former refers to how new the

product or idea is, whereas the latter determines whether it is valued by society or not (Fishman, 2015).

Many people exhibit different scales of creativity, that creativity some say is developed by an operant

conditioning. Operant conditioning is the process by which an individual learns how to adapt efficiently to

an environment. If we were to view copyrights as the environmental constraint, then being creative is the

process of learning how to adapt to that environment. This process will produce necessary outcomes in

order for the fine arts to survive. In essence, despite copyright constraints, if a product is affecting your

business you will learn how to produce a competing product or you will go out of business!

Copyright laws produce constraints to other artists mainly because of two rights; the right to

reproduce a copyrighted work, and the right to prepare derivative works (Fishman, 2015). Copyright

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protections are broad and they protect the copyright holder against more than just having their work exactly

copied. Similar to VARA and moral rights clauses, copyright laws protect against nonverbatim copying that

identifies a work as being “substantially similar.” Thus, copying of plots, narratives, television, music, or

even a face mask may possibly infringe upon a copyright (Fishman, 2015). The protection against

derivative works is more of a catch all, it simply functions to further encapsulate the IP holder’s rights. Most

infringements occur on the copyright side of these bundle of laws and infringements that do not occur on

copyright grounds will likely be caught by the derivative side of these laws. In most cases, if the

infringement occurs on the grounds of derivative rights, then it is naturally going to also be a copyright

infringement as well (Fishman, 2015). One of the arguments in support of these laws is that they provide

the originating artist’s incentive to invest in continued works through revenues from the derivative’s

markets. An opposing argument is that the creative process and the output from just one artist takes too

long, “Without an exclusive adaptation right, perhaps the author of an original work would rush adaptations

to market, even though society would be better off if she waited and gauged demand for the original”

(Fishman 2015, 1349). Thus, many believe that giving originating artists that much power is a lopsided

trade off in terms of the benefits to society when available creativity in terms of art works remains low as a

result (Fishman, 2015). I contend that from the perspective of individual’s in society, given what Xiyin Tang

(2012) expressed about how supply elasticity and artistic reputation/brand protects the value of arts

products already purchased, limiting the availability of arts products in the market through copyright laws is

economically justified and thereby a benefit to society. There are those who believe that the licensing

process is too taxing and places a type of ceiling in the supply and demand functions of art markets

creating a loss to society in terms of arts products.

Patent theory is more optimistic in that it views the constraints placed upon derivative artists as

generative of competition and innovation (Fishman, 2015). In James P. Marsh Corp. v. U.S. Gauge Co.

Judge Evan Alfred Evans reversed a lower court’s decision of patent infringement because, “The accused

device successfully performed the patented invention’s function while omitting one of the elements

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disclosed in the patent claims” (Fishman 2015, 1351). This type of marginal change spurs competition that

maybe important for society. Imagine if the law were unreasonably static and interpretation was fixed, that

would mean that one producer for can openers would hold patents and have a monopoly which would

affect pricing diminishing the utility of members of society who need to open cans! Patent law holds that

“circumvention effort often absorbs as much creative energy as the conception or development of invention

itself” (Fishman 2015, 1351). Is that competition spurred equally in all markets, do marginal changes in art

inspire artist to “create around” works of arts? The danger in the application of patent law is that one size

or situation does not fit all:

These analyses are the optimistic exceptions to the rule. None of them, however, has asked whether constraint can aid creativity. Answering that question moves beyond rational actor models that suppose if we only ratchet up the disincentives to copy, then downstream creators will find some other way to solve the problem, or maybe some better problem to solve. Such models run right back into the constraint critique. Supply and demand curves, critics have stressed, do not describe how creativity works. According to those critics, copyright’s disincentives don’t redirect creativity. They kill it. If that much is true, copyright maximalists interested in promoting a creative culture are on a fool’s errand. So long as creativity withers under copyright constraint and thrives when set free, focusing on monetary incentives misses the mark. (1357)

The creative process is not rationally expressed by the laws of supply and demand. Creating around a

patent may not cause incentive to creative similar products that the market will respond to favorably. In the

arts creating a similar work is considered a cheap vulgarity and it distills the value of the original should the

market start to prefer the knockoffs. Thus, market specific constraints must be carefully considered and to

do so we must examine the parameters of the market in question.

“The constraints that are best structured to generate creativity within a given population will be

those whose characteristics collectively satisfy two criteria. First, they should promote variability, that is,

differentiation from an existing corpus of exemplars…Second, because intrinsic motivation matters,

constraints should also promote engagement” (Fishman 2015, 1376). The constraints in order to be

generative must consider the source, target, scope, clarity, timing, severity, and polarity of its impact

(Fishman, 2015). The source of a constraint refers to identifying the type of constraint the artist

experiences; invented, chosen, or imposed. Schoenberg’s dodecaphony is an example of an invented

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constraint, Schoenberg could have simply composed his music using established western harmonic

musical theory. Instead he designed a twelve tone musical row technique in which he used every note in

the scale for his compositions challenging western concepts for what is and what is not consonant or

dissonant harmony while at the same time establishing his brand. The target of a constraint refers to where

the constraint takes place, on the process side which limits how a task maybe completed or on the product

side which limits the possible solutions regardless of the process (Fishman, 2015). The law tries to protect

rights on both the process and product side, “Product constraint is copyright’s most easily recognizable

restriction on creative choice…processes can be patented” (Fishman 2015, 1381). The scope of a

constraint refers to how many options/choices within a given artistic genre or other domain the constraint

prevents. This constraint dimension is particularly dangerous because the law is essentially playing God

with non-rational creative processes.

The “invisible hand” will not necessarily return an art market to equilibrium, and so these constraint

dimensions must not be too broad. Had the Australian government considered this dimension before

granting the Aboriginal arts councils so much control, perhaps that market would be better off in terms on

IP clarity (Van den Bosch and Rentschler, 2009). The clarity of a constraint refers to how well defined the

parameters of a constraint are. Fishman (2015) argues that ambiguous parameters deter risk taking

defeating the need for “creating around” the constraints eluded to by Judge Evan Alfred Evans. I contend

that defining the parameters of a constraints may limit the interpretability of the law, and by doing so the

power of the judicial process, which at its root is to challenge public policies with the strength of the law in

defense of the public’s interests, is weakened. If for example legal statutes existed that precluded Judge

Evan Alfred Evans from challenging patents on the basis of strictly defined copyright/patent constraints,

then the law would be allowing monopolistic inefficiencies to persist.

Timing constraints refer to early, middle, and late constraints that may affect an artist’s process and

output. When an artistic creation takes place, the environmental constraints available at that time are

considered early time constraints. When a gate keeper like a publishing company refuses to distribute a

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piece of literature until editing occurs this is called middle time constraints. Late time constraints refer to

post distribution occurrences, if for example a publishing company releases a book, but due to copyright

infringement or government policies is forced to remove the book, that occurrence would be a late time

constraint. Severity of punishment for not complying with constraint lies along a continuum, “A constraint’s

impact on creativity will depend somewhat on its location along a severity spectrum that measures the

stakes of noncompliance” (Fishman 2015, 1389). The optimal level of deterrence for noncompliance is also

genres specific. In the case of artists for example, noncompliance can be equal to not being accepted by a

particular discourse community of artists or not being able to sell out your opening night at the Metropolitan

opera. For legal and economic scholars those punishments fall short of pecuniary/compensatory

measures, but if you consider that audiences are in fact an allied market that provide a unit of

measurement for an artist’s value, then it is more relatable in terms of supply and demand. The polarity of

a constraint refers to whether a constraint is mandatory or prohibitory. Simply stated constraints are “either

a positive rule, instructing what must be done, or a negative rule, instructing what must not be done”

(Fishman 2015, 1391).

What then are constraints that foster creativity, what is the ideal structure for protecting artists and

promoting innovation at the same time? Fishman (2015) believes that the wheel must not be reinvented

because our current system is not that bad, but he suggest a couple of marginal changes:

Start with what copyright gets right. Copyright law assigns the ability to prepare derivative works exclusively to the copyright owner. Others who prepare a derivative work without authorization are not only infringers, but are also denied any copyright protection in the original expression that they contribute to the existing work. One could, however, imagine an alternative system in which the creator of an unauthorized derivative work would receive copyright protection in the new incremental expression, but nevertheless remain unable to exploit the derivative work without the original owner’s permission. That way, downstream and upstream creators would have leverage over each other in bargaining. The downstream creator could not use the old material without permission, but neither could the upstream creator use the new material without permission. (1394)

From the perspective of downstream/derivative artists the benefits of this type of suggestion is appealing,

but from the perspective of all individuals in society the suggestions are a bit redundant and costly. This

suggestion is assuming that the upstream/original artists are logistically close or willing to work with the

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downstream artists. It is a very real possibility that in today’s modern world a seventy year old artist may

live in Rome where they serve as a curator for the Vatican museum and they may not have the time to

entertain every upstart that wishes to expand upon their work. Furthermore, since downstream artists are

not generally established, the upstream artist will have to investigate the neophytes’ trajectory and

credibility in an effort to protect their own work’s value and artistic legacy, all of which represent transaction

costs to the upstream artist. Fishman’s suggestion that downstream artists by receiving incremental

copyright protections would not exploit the upstream artist’s works without permission might be impossible

to enforce in our modern age given the level of technological advancement. I would argue that because of

how value in the fine arts markets are established, a downstream artist’s association to an already

established work in anyway would already constitute exploitation, especially if they were to defile the art

work affecting the upstream artist’s reputation. IP is not perfect and has fallen short with respect to the

needs of specific markets like the fine arts for example. It is clear that in application some incorporation of

moral laws and the entertainment of generative constraints like source, target, scope, clarity, timing,

severity, and polarity should be considered but not at the costs of affecting the utility and value of upstream

artists.

How can Civil, Criminal, and Intellectual Property Law Attenuate Artistic Criminality?

The art world is experiencing a record high degree of art forgeries, these types of crimes persist in

large part because the art market is lucrative and creating forgeries is not very costly to the criminal. Also,

deterrence is not optimal because the likelihood of persecution remains low (Gioconda, 2008). Originally

the market for fine arts was relatively small and elite in terms of high costs and sophistication of clientele.

As the former obstacle was surmounted by the increased wealth amongst American consumers,

sophistication remained the only restrictor of the market for fine arts. Conspicuous consumption has fluxed

in and out of fashion, and more people are purchasing fine art catapulting that markets revenues upwards

of six billion dollars (Gioconda, 2008).

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Money can buy many things, but intelligence and cultural sophistication remains elusive even to

those within the highest of income brackets. This disparity between informed consumerism and wealth is a

harvest ground for counterfeiting criminals that has spurred the search for legal means by which to

attenuate this type of criminality. The rational criminal will not be deterred by current legal remedies

because punishment occurs with very low probability. “A rational decision maker takes the probability of

punishment into account when contemplating the commission of any crime” (Cooter and Ulen 2012, 465).

Due to the relatively low legal priority of counterfeiting and forgery with respect to the arts on behalf of law

enforcement agencies, “the market for counterfeiting goods demand little investment capital, carries a low

risks of prosecution, and generates extraordinary economic returns” (Gioconda 2008, 3). It is impossible

for agencies without proper curatorial training to keep track of how many fake goods make it into the U.S.

It is estimated that on the international level, six hundred and fifty billion dollars’ worth of fake merchandise

enters the market (Gioconda, 2008). This has an effect on insurance markets that complement the higher

end fine arts markets.

As expressed by Xiyin Tang (2012), aesthetic virtuosity does not define value for the fine arts,

rather reputational establishment and recognition of style, or as Gioconda (2008) calls it “aura” of the piece

creates the value for a work of art. Some economist view the process of establishing value for the arts as

“the quintessential example of commodity fetishism” (Gioconda 2008, 3). This view comes about because

the process of establishing value for fine arts is volatile. The supply and demand curves for specific artist’s

works are arbitrary and inconsistent over time, that value is also exaggerated due to the auction based

environment in which value is generally determined (Gioconda, 2008). Insurance markets which

complement the fine arts markets by securitizing values are subject to the exaggerated values of fine arts,

and in the case of forgeries experience high transaction costs. The law has responded by recognizing that

“art forgeries present a mutual mistake of fact” (Gioconda 2008, 4).

When both parties in a contract have a mutual mistake about a fundamental fact, in this case the

assumption that an art work is authentic, the law assigns liability to the party who could bear the costs of

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taking care at the least costs (Cooter and Ulen, 2012). In these cases, unilateral rescission of the

insurance contract is allowed and the insurance company generally does not have to return the high

insurance premiums (Gioconda, 2008). In my opinion this application of the legal theory of mutual mistake

about facts could result in turning a victim into a rational criminal. Some may argue that because the owner

of a forgery is most likely going to be at a loss given that they have paid the high price for the forgery and

the insurance premiums, if they were to learn of the counterfeit nature of the art work before the insurance

company, then they would have incentive to have the piece “stolen” and file a claim before the insurance

company has time to determine the art work’s true value. Mutual mistake about fact must allocate liability

to the party who can bear the responsibility to take care at least costs. The insurance company would have

subject matter expertise in order to appraise an art work and as such has the ability to take care more

easily, this application of the legal theory is incongruous in my opinion and a likely result of lobbying by

powerful insurance companies. Criminal prosecution for art forgeries are highly unlikely explains Gioconda:

Criminal prosecutions against arts forgery are seldom brought, in part due to high evidentiary burdens and law enforcement disinterest. However, in an attempt to combat the threat that fake art poses, various governmental agencies are empowered by statute to prosecute suspected art forgers. While prosecutions are rare, they are occasionally brought in extreme cases. (5)

At the Federal level the law has been successful in bringing up criminal art forgery charges in conjunction

with Racketeering Influenced and Corrupt Organizations Act (RICO), but not as a standalone criminal

charge. Additionally, the Federal Trade Commission authorized under the FTC Act can bring independent

charges against forgers which they did in FTC v. Magui Publishers, Inc. (Gioconda, 2008). Under state

laws criminal prosecution for forgery is possible via prohibitions against criminal fraud or against simulation

of signatures, but the state has to prove intent. Because the standard of proof is so high prosecution for

these crimes at the state level is low. Due to the difficult nature of prosecuting on a criminal basis, many

forgery cases are addressed in civil suits as breach of contract and or tort law (Gioconda, 2008).

The predominant strategy employed to combat forgery however is to sue on the grounds of civil

fraud. The plaintiff has the burden to “prove that the defendant falsely represented a material fact, that this

representation was made with intent to deceive” (Gioconda, 2008). Further complicating the situation,

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when an art work is purchased through auction houses or galleries, if the consumer has signed a

standardized contract which limits the claims that the consumer may assert against the auction house, that

contract will limit what the law can do to help the victim. Given that criminal law falls short of substantively

addressing counterfeiting and forgery, and because as expressed above deterrence has fallen to civil and

tort legal remedies, IP is now being considered as an alternative option for dealing with counterfeiting and

forgery. IP through copyrights has components that can serve in the identification and ex-ante market

protection if the art work is not public domain. Copyright laws can combat certain types of forgery because

it enjoins the forger and triggers civil liability through the Copyright Act (Gioconda, 2008). This is great for

the identification of the criminal act but it does nothing to deter the individual rational criminal because the

standard of proof is too high in a civil, tort, and criminal arenas. Gioconda (2008) identifies that copyright

law have an underutilized component through U.S. customs which can seize and destroy forged or

counterfeited works. This is a powerful tool from the perspective of individuals in society. It prevents the

market from being flooded with fakes that dilute the value of artist’s brands and the goods that have already

been purchased by consumers. The problem is that it is a voluntary copyright recordation process at

customs, and that agency would then have to absorb the costs of training their employees in the processing

of copyright claims or detecting counterfeits or forgeries.

Intellectual Property and Fine Arts Conclusion

We have looked at the relationship between the fine arts and intellectual property laws. The

literature has revealed that U.S. interests in the protection of artistic endeavors in terms of IP, developed as

a result of wanting to protect its economic interests after its import/export structure changed. We have

examined and compared the moral strings attached to VARA with traditional IP laws. Looking at the

Aboriginal arts market and how that market has influence and expanded Australia’s IP laws, I have made

an argument against the unnecessarily broadening in the interpretation of IP laws. Additionally, we have

looked at what IP does to the creative process and examined how to best structure our laws so that their

constraints are creatively generative. Finally, we have reviewed the criminality of counterfeiting and forgery

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finding that attenuating said crimes is difficult under all legal doctrines. Looking to IP as a method by which

to address crimes against fine arts is also limited in its potential to address criminality. Copyright law

through customs can address some aspect of the problem ex-ante by preventing counterfeit or illegal items

from entering the country. Overall IP law is not equipped to deter said criminal offenses at the individual

level, but if the crimes are committed by corporate bodies, then the bundle of laws that make up IP;

copyright, patent, and trademark can create optimal deterrence due to legal costs regardless of whether the

state’s cases are successful in convicting corporate criminals.

Works Cited

Cooter, Robert, and Thomas Ulen. Law & Economics. 6th ed. Boston: Prentice Hall, 2012.

Fishman, Joseph P. 2015. "Creating around copyright." Harvard Law Review 128, no. 5: 1333-1404. Business Source Elite, EBSCOhost (accessed May 6, 2015).

Joseph C. Gioconda, Can intellectual property laws stem the rising tide of art forgeries , 31 Hastings Comm. & Ent. L.J. 47 (2008)

Tang, Xiyin. 2012. "The artist as brand: toward a trademark conception of moral rights." Yale Law Journal 122, no. 1: 218-257. EconLit, EBSCOhost (accessed May 6, 2015).

Van den Bosch, Annette, and Ruth Rentschler. 2009. "Authorship, authenticity, and intellectual property in Australian aboriginal art." Journal of Arts Management, Law & Society 39, no. 2: 117-131. Corporate ResourceNet, EBSCOhost (accessed May 6, 2015).

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