RESEARCH ON THE EFFECTS OF DROIT DE SUITE ON THE FIRST SALE DOCTRINE: AN ECONOMIC ANALYSIS OF LAW

RESEARCH ON THE EFFECTS OF DROIT DE SUITE ON THE FIRST SALE DOCTRINE: AN ECONOMIC ANALYSIS OF LAW

Copyright Act of China (hereafter, the Copyright Act Amendment of China) on July 6, 2012, and Clause 1, Article 12, of the Copyright Act Amendment of China regulated that authors, their successors, or the legatees of artistic, photographic, and musical works or drafts are eligible to obtain the rights of benefit sharing after their works or drafts are auctioned. From this amendment, we can understand the Chinese government’s attempts to ensure healthy auctions and factor in European laws. In fact, Droit de Suite initially emerged from a special law in France in 1920; it was formally ruled in Article 14ter of the 1948 Brussels Amendment of Berne Convention for the Protection of Literary and Artistic Works in 1886. Droit de Suite is designed to protect the interest of authors of artistic works so that they can obtain a certain percentage of the rewards from the proceeds of the auction of their works. However, the “First Sale Doctrine,” which is a primary part of the “Right of Distribution” in copyright laws, indicates that authors exhaust their control and rights of distribution over their original and later reproduced works after the initial sale or transfer of ownership of these works. The “First Sale Doctrine” aims to ensure free exchange of works and flow of information to reduce the search costs within the transaction costs. Because, “Moral Rights” (including Droit de Suite) cannot be transferred or inherited by successors, they occupy a dominant status when they conflict with “Economic Rights.” Hence, it follows that Moral Rights this manner, Droit de Suite blocks the maximum use of copyrighted works, thereby narrowing down the application of the “First Sale Doctrine” using economic analyses. Although Droit de Suite protects the personal benefits gained by authors from auction rewards internally, courts and auction winners bear high external transaction costs, including the high enforcement and control costs of Droit de Suite. Consequently, this study evaluates whether Droit de Suite added under Moral Rights is viable from legal and economic perspectives. In addition, it suggests restricted approaches for Droit de Suite by considering contracts and limited terms in order to internalize its external costs in case states plan to add it within the ambit of Moral Rights in copyright laws.