Art Case Update - August 2024
Kirsha Kaechele painting faux 'Picassos', Ladies Lounge. Photo Credit: Jesse Hunniford, image courtesy the artist.
Guest Work Agency is your go-to source for art-related legal cases and law reform in Australia, as well as select cases internationally.
In this update, our Director and Founder, Alana Kushnir and Paralegal Eve Rayner report on the anti-discrimination case regarding MONA’s “Ladies Lounge”, including the introduction of reciprocal resale royalties for Australian artists.
Australia
MONA artist reveals fake Picasso stunt
Artist Kirsha Kaechele revealed in July that her now-closed Ladies Lounge installation at The Museum of Old and New Art (MONA) featured replicas of Pablo Picasso paintings. Kaechele said in a blog post entitled ‘“Art is Not Truth”: Pablo Picasso’ that she “made the artworks, quite painstakingly, with [her] own hands”, only revealing the truth when prompted by a journalist and the Picasso Administration (the managers of Picasso’s Estate). The Picasso Administration told The Guardian Newspaper “while we can only regret this situation and the current overexposure, we believe that this matter is now closed”.
Kaechele explained that she intended for the Ladies Lounge to be filled with “invaluable objects”, to spark discussions surrounding power structures and gender. It built a “fantasy for those who are afforded the experience of the Lounge, and, importantly, those who are excluded.”
Alana Kushnir provided comments to Australia’s national broadcaster, the ABC, regarding the legal implications of displaying replicas at MONA.
In our May Art Case Update, Guest Work Agency reported on an anti-discrimination case involving the Ladies Lounge. MONA has since submitted their appeal application to the Supreme Court of Tasmania.
Federal Court rules on government exception to copyright infringement
In a matter brought by the Australian News Channel Pty Ltd (ANC), owners of Sky News Australia and part of News Corporation, Justice Burley of the Federal Court of Australia has considered the scope of section 183(1) of the Copyright Act 1968. He determined that the Commonwealth or State, or someone authorised by them, does not infringe on the copyright of various works if the acts are done for the services of the government. Justice Burley’s judgment has significant implications for businesses and government entities that are providing services to the Commonwealth or a State, as it clarifies the application of this exception to copyright infringement.
For context, in 2021, the ANC, sought a declaration against media monitoring company Insentia Pty Ltd (Isentia). Insentia’s work includes extracting parts of media items that are pertinent to their clients, and dispensing the content to them.
The ANC sought a declaration from the Federal Court stating that Isentia’s reproduction of ANC’s news content for its government clients did not fall within the scope of “Crown use” for the purposes of section 183(1). This section allows the government and its authorised agents to perform certain copyright acts without being considered an infringement. Isentia disagreed, arguing that its activities, including copying news content, was authorised by government clients and aimed to support governmental functions.
Justice Burley found that section 183(1) has a broad, facilitative purpose, allowing government entities and their service providers to utilise copyright material for government services. The ruling clarifies that government-related media monitoring and similar services fall within section 183(1), provided they are authorised and serve government functions, including accessing media reports.
While Justice Burley found that the exemption from infringement under section 183(1) is broad, the provision still mandates "equitable remuneration" for the use of copyright materials. As Justice Burley states in the judgment, there was a legislative intention to compensate copyright owners for the Crown’s use, shown “by the imposition of an ex post facto scheme for payment which obviates the need for the Crown to seek permission to use the works in advance of that use.” Read the full judgement here.
IP Australia releases final report on Indigenous Knowledge legislation
In July, IP Australia - the Commonwealth government agency responsible for administering intellectual property rights and legislation relating to patents, designs and trade marks in Australia - released the final report of their Scoping Study on Stand-Alone Legislation for Indigenous Knowledge. This Final Report completes a scoping study overseen by the cross-department Indigenous Knowledge Working Group (IKWG). It outlines the possible elements of stand-alone legislation which seeks to protect and commercialise Indigenous Knowledge (IK).
The report includes seven recommendations for the future protection of the cultural knowledge of Aboriginal and Torres Strait Islander peoples. These recommendations include the creation of a new intellectual property right specific to Indigenous knowledge and cultural practices, as well as enacting stand-alone legislation which supports the implementation of this right.
The recommendations also call for enacting legislation that include the protection and respect of First Nations genetic material. IP Australia’s recommendation for the protection and respect of First Nations genetic material is based on the Nagoya Protocol – Convention for Biological Diversity. This international agreement focuses on sharing benefits that arise from the utilisation of genetic resources in a fair and equitable way. The ratification of the Nagoya Protocol by Australia is also a listed recommendation within the report.
Importantly, the report calls for the consultation and collaboration with First Nations peoples on each recommendation. The scoping study is another step forward in the process of implementing standalone Indigenous Cultural and Intellectual Property legislation in Australia. Guest Work Agency previously reported on this legislation in our May iteration of the Art Case update. Click here to read the full report.
PepsiCo successful on appeal for IP licencing and tax matter
In this case, the Federal Court of Australia considered the commercial arrangement between multinational food and beverage company PepsiCo, and Schweppes Australia Pty Ltd, an Australian company owned by Asahi Breweries.
Schweppes Australia was previously the sole distributor and bottler of Pepsi. The manufacturing agreement between PepsiCo and Schweppes allowed Schweppes to use trade marks and other intellectual property in Australia to manufacture, sell and distribute the non-alcoholic beverages in PepsiCo’s branding. However, the agreement did not expressly provide royalty payments for the use of PepsiCo’s intellectual property (IP).
The ATO argued that the arrangement included an embedded royalty for an intellectual property licence which Schweppes could use, contravening the Part IVA of the Income Tax Assessment Act 1936 (Cth) embedded royalty provisions.
On appeal however, the Full Federal Court found that none of the payments between the companies could be characterised as a royalty for using PepsiCo’s IP. It was determined that the payments were for promoting and sustaining PepsiCo’s goodwill in Australia, not for an IP royalty, and thus were not subject to royalty withholding tax.
The ATO is yet to provide a statement as to whether they will challenge the decision in the High Court. The Full Federal Court judgement is likely to alter the definition of ‘royalties’ for the purpose of calculating royalty withholding tax, and also provide useful commentary on the nature of implied licenses of intellectual property. Read the full judgement here.
Historic 27th WIPO Treaty: WIPO Treaty on Intellectual Property, Genetic Resources and Associated Traditional Knowledge
The World Intellectual Property Organisation (WIPO) member states, which includes Australia, have adopted their first Treaty in over a decade. The 27th WIPO treaty (Treaty) relates to intellectual property, genetic resources and associated traditional knowledge.
The Treaty stipulates that when applying for a patent, the applicant must disclose the country of origin or source of the genetic resources. It should also cite the Indigenous Peoples who provided the traditional knowledge. This would be a significant step in reconciling the Australian patent system with Indigenous customary laws and collective principles.
Additionally, users of genetic resources need to obtain prior informed consent before access. The Treaty also mandates that mutually agreed terms should be upheld regarding the terms of access to the genetic material or knowledge. Read the 27th WIPO treaty here.
International
Class action against AI image generators to progress in Californian Courts
A group of artists, including Sarah Anderson and Karla Ortiz, who have brought an action against Stablity A.I., Midjourney, DeviantArt and Runway A.I., have been successful in progressing their copyright infringement claims to the next stage of proceedings. In dismissing Stability A.I, Midjourney and DeviantArts motions to dismiss the claims, Justice Orrick observed:
this is a case where plaintiffs allege that Stable Diffusion is built to a significant extent on copyrighted works and that the way the product operates necessarily invokes copies or protected elements of those works. The plausible inferences at this juncture are that Stable Diffusion by operation by end users creates copyright infringement and was created to facilitate that infringement by design.
The case will now progress to the discovery stage of proceedings. Guest Work Agency previously reported on this case in our November 2023 iteration of the Art Case Update. Read the Court Order here.
Photographer initiates copyright infringement action against AI data training non-profit
German photographer Robert Kneschke has commenced proceedings in Hamburg, Germany regarding the allegedly unlawful use of his photographs by LAION e.V (Large-scale artificial Intelligence Open Network), a not-for-profit which collects data used to train A.I. models. Mr Kneschke’s photo was available for free on bigstock.com. He contends that the use of his photograph in ‘LAION 5B’, a large dataset which trained A.I. generator Stable Diffusion, is not permissible.
LAION argues that its use of data (including metadata, text and URLs) falls within the exceptions outlined in the EU Directive on Copyright in the Digital Single Market in 2021. Under Article 4, reproductions are able to be stored for the purposes of text and data mining (TDM), which would allow LAION to train A.I using the data. If the Court will agree with LAION, the storage of data and its training capabilities would be allowed under the Article 4 exception.
The Court noted that the terms of service on bigstock.com’s website included an opt-out from TDM under Article 4, as the terms included the following wording:
YOU MAY NOT […] Use automated programs, applets, bots or the like to access the Bigstock.com website or any content thereon for any purpose, including, by way of example only, downloading Content, indexing, scraping or caching any content on the website.
If the Court does find that the exclusion clause successfully prevents LAION’s use, it will raise questions as to whether the use of broad, general statements is sufficient for a person to reserve rights under Article 4(3).
A related question that the Court considered was whether the opt-out in the terms of service was sufficiently machine-readable, being in English text formatted on a HTML website. LAION argued that the TDM opt-out should be written in a way that machines, crawlers and bots are able to understand the information and consequently not download any data. Mr Kneschke argues that most website owners do not have the technological capacity to do this, and therefore would be unable to protect their work if this machine readability was required.
The decision will be handed down on 27 September by the District Court of Hamburg. Read more here.
Dolce & Gabbana sued over NFT mismanagement
In May this year, renowned international fashion house Dolce & Gabbana were the subject of a class action complaint filed in the District Court of the Southern District of New York. Court documents filed allege fraud, breaches of contract, negligence and various transgressions of the Securities Act of 1933 and the Securities Exchange Act of 1934. This follows the company’s mismanagement of an NFT delivery, resulting in a financial loss of approximately USD $6,000.
The NFTs were launched by Dolce & Gabbana as a series of digital collectables entitled ‘DGFamily NFT’s’, promising user access to virtual fashion items and rewards that can be used in reality.
The lead plaintiff, Luke Brown alleges that the significant delay in product delivery coincided with a decline in the value of NFTs by 97%. The delay involved only two of eight guaranteed “drops” of “digital, physical and experiential benefits” being supplied to Brown over a two-year period. Brown also alleges that after the arrival of the two NFTs, there were several issues with its usability. An example of this was the fact that Dolce & Gabbana hadn’t secured approval from the platform UNXD to use the NFT. Read the Court application here.
Repatriation of Nazi-looted artworks to Jewish heirs imminent
Switzerland’s Bührle Foundation has expressed its intention to settle with Jewish heirs over major Impressionist works by Courbet, Monet, Toulouse-Lautrec, Van Gogh, and Gauguin.
The Bührle Foundation has previously denied that these works once belonged to Jewish art collector and entrepreneur Max Silberberg, who was forced to sell his collection in 1937. Silberberg and his wife were later murdered at Auschwitz concentration camp during World War II.
According to its statement, the Bührle Foundation has identified five works that fall within the scope of new guidelines which expand the interpretation of the Washington Principles of 1998. The Washington Principles were updated in March 2024, most notably to including sales under duress as an involuntary transfer of property which falls within the scope of the Principles.
Other additions included defining “Nazi-confiscated” and “Nazi-looted” as items that were “looted, confiscated, sequestered and spoliated by the Nazi’s, the Fascists and their collaborators” during the Holocaust era between 1933-45. The guidelines also clarified that “just and fair” means that solutions are sought with the heirs of victims of the Holocaust and Nazi persecution being at the forefront of the issue. The Foundation said in a statement (translated from German) that the decision to seek settlement is not based on new information that has come to light but on updated “best practices” for dealing with Nazi-looted art published by the U.S. State Department in March this year.
The works identified to have belonged to Mr. Silberberg are Gustave Courbet’s Portrait du Sculpteur Louis-Joseph (1863), Claude Monet’s Jardin de Monet à Giverny (1895), Henri de Toulouse-Lautrec’s Georges-Henri Manuel (1891), Vincent van Gogh’s Der alte Turm (1884), and Paul Gauguin’s La route montante (1884).
These paintings will be removed from display while the Foundation and the Silberberg heirs finalise this settlement. Read more here.
Rubens sketch illegally sold in Germany returned 80 years later
A Peter Paul Rubens sketch will be returned Germany 80 years after it was illegally sold. In the aftermath of WWII, an oil sketch entitled Saint Gregory of Nazianzus (1621) by Peter Paul Rubens was illegally removed from Friedenstein Castle in Germany and sold by representatives from the former Ducal family of the Castle. The objects were sold to a New York Gallery, who then sold it to the Buffalo AKG Art Museum in 1952.
Saint Gregory of Nazianzus is one of twenty-two surviving oil sketches by Rubens. After over two years of negotiations, the Friedenstein Foundation agreed to purchase the Rubens oil sketch from the Buffalo AKG Art Museum, who had acquired the work without knowing it was looted. When returned, the oil sketch will be displayed permanently at the Ducal Museum, located within the Friedenstein Castle. Read more here.
$1.2 million USD Picasso recovered by US officials
A Picasso drawing worth $1.2 million USD has been found to have been purchased with misappropriated funds. The ‘1Malaysia Development Berhad’ had its funds misappropriated by high-ranking officials, including former Prime Minister Najib Razak, who embezzled more than $4.5 billion USD. Part of the embezzled money was then used to buy the Picasso Trois femmes nues et buste d'homme (1969). The US Justice Department has agreed to a confidential deal with the former general counsel of the sovereign investment development fund to recover the work. Read more here.