hired. In Chapter 7 bankruptcies a trustee is appointed. The trustee will review the various claims filed and decide which ones to acknowledge and which ones to contest. Claims also are grouped according to whether they are secured and unsecured. A secured claim is a money claim which has specific collateral assigned to support it. This generally will not be the case with a commercial artist and his or her dient. By and large, artists are deemed unsecured creditors, which puts you at the bottom of the list in terms of collecting. This is the case if you have completed and transferred the artwork and/or trademarks and copyrights to a dient for a lump sum payment and your client has completed all contractual obligations to you except for paying you. You can expect to recover little, if anything, for your troubles. However, many if not most commercial artists will find themselves in a situation where all obligations under their contracts are not completed. Such contracts are known as "executory contracts" and provide an artist with a greater opportunity to collect monies due. In such cases, the artist, notwithstanding the bankruptcy, may very well be in a position not only to collect back monies owed, but if the client intends to continue using the artwork, also to be paid at his or her full rate for future use, plus be provided additional assurances that the bankrupt dient will be able to maintain the payment schedule. The specific legal definition on an executory contract differs from jurisdiction to jurisdiction. However, the basically accepted definition is that "an executory contract is a contract under which the obligations of both the bankrupt, and the other party to the contract, are so far unperformed that the failure of either to complete performance would constitute a material breach, excusing the performance of the other." In the commercial artist/client contract, clauses that may make a contrac executory would require the artist to provide notice of any infringement suits, provide notice of any additional licenses granted for the same or similar art, defend any infringement suit brought against the client, hold the client harmless from liability for breaches of warranties set out in the agreement, or require the client to pay royalties, make quarterly reports on sales to the artist, maintain books and records, keep aspects of the license confidential, and furnish the artist with an accounting. Many of these requirements will be familiar to anyone who regularly grants artistic licenses. It must be emphasized that no two cases are handled in the same manner, and that while this list is compiled from existing cases, it is offered by way of illustration only. If a contract is deemed executory, the bankrupt client has the right either to accept the contract, or to reject it. If they reject it all rights revert to the artist, who may make future use of the work, and if any funds are owed, the artist can try to collect them as an unsecured creditor. (However, it is often the case that the artwork and logos provided by artists are essential to the bankrupt client and to their continuation in business. The dient may continue to use the artist's work only if they fulfill three legal requirements: First, they cure any current default, such as overdue royalties (or provide the artist with adequate assurances that the default will prompdy cured.) Second, the debtor must provide compensation, or adequate assurances of compensation, to the artist for any actual monetary loss that resulted from the prior default. Finally, the debtor must provide adequate assurances of future performance under the contract. This puts the artist in a very good position, better than most people in a typical bankruptcy situation (and perhaps even better off than they would have been without a bankruptcy, especially if the client has been slow in paying). The timeframe for acceptance or rejection of executory contracts differs based on the nature of the bankruptcy. In Chapter 7 bankruptcy, in which the debtor is winding down their business, there is a 60-day period after entry of the order, to provide time to decide whether to accept or reject a contract. In a Chapter 11 bankruptcy, a debtor in theory, has 120 days, but this is often extended for a period of years. The extra time is granted so that a proper reorganization plan may be created. There are techniques and methods available to protect the artist if the debtor continues to use the artwork during the determination period and then ultimately rejects the license. If, in a Chapter 11 situation, the artist feel, that he or she is being abused that or she can file motions with the court requesting that the rejection or acceptance of the agreement be made a at time certain. The artist can petition the court to change the bankruptcy from a Chapter 11 to a Chapter 7, or request that a trustee be appointed, even in a Chapter 11 bankruptcy. Also, the monies owed for using the artwork while the debtor is deciding whether to accept or reject the executory contract may be deemed an "administrative daim,” which is one of the highest priority claims and one in which the likelihood of being paid is gready enhanced. One common clause seen in many contracts, is known as the "ipso facto" financial default provision. It reads something like "... in the event of a bankruptcy, or insolvency, the appointment of a trustee, the license granted herein shall immediately terminate." These clauses are unenforceable. It is amazing, even though the unenforceability of such statements has been a part of the law for several years, how many contracts still contain such language in their "standard boilerplate forms." Another general rule in bankruptcy is that the non-assignability clauses in contracts are not enforceable. Non-assignability clauses seek to prevent your clients from assigning use of your artwork to other people without your prior consent. However, there is an exception to the bankruptcy law refusal to honor non-assignability clause, that is, if they are covered by other "applicable laws." Courts have held that the non-assignability language found in copyright and trademark laws are "applicable laws." Therefore artists, unlike other creditors, can prevent a debtor from assigning the license or right to use the artwork or logos. Many of these special benefits to artists are contingent on the language used in their agreements. Two contracts covering the same transaction but in different language might provide drastically different results in a bankruptcy situation. Therefore, it is important that you review your contracts to ensure that if your client goes bankrupt, you are provided with the maximum number of rights available. This is all the more important when dealing with start-up clients or clients who you feel might be confronting financial difficulties. If your client declares bankruptcy, and you do not have an executory contract, be sure to file the appropriate papers, and perhaps attend the creditor meetings. While in many instances it is true that unsecured creditors get pennies, if anything, on their debt, there are many cases in which unsecured creditors who are diligent can collect hefty sums. If a dient of yours does declare bankruptcy and your contract with them is still executory, and if they continue to use the art work, they will be required to bring themselves current, continue paying you, and provide assurances that you will continue to be paid, or rights in the artwork reven to you. Ironically, under some circumstances your dient's bankruptcy may in fact be a blessing in disguise. Copyright Joshua Kaufman 1992 ART BUSINESS NEWS Down By Law in law reviews and trade journals. with both sides voicing the artistic basis for allowing or not allowing the While the art and music world have discussed these as abstract issues, a number of artists and musicians have Courts Put Art Copycats, Samplers on the Run incorporation of pre-existing artworks taken the more senous route and filed into subsequent works by different artists. Pro-appropriation arguments generally range from "ant is for the people" to "all art is derivative and appropnation is just the logical exien sion of an accepted concept." Many artists whose works have been used without their consent do not share the altruistic approach of the appropriators. They feel their rights have been infringed upon, and that appropriation is nothing short of theft. lawsuits So far, and with uncommon uniformity, the courts have not been persuaded by the artistic arguments used by appropriators in their own defense. Instead, the courts have found, under a variety of legal theories, that appropriating and incorporating others' work is a violation of both copyright and trademark law. The courts are not only repudiating appropriation, but are expanding the legal basis under which artists may protect their work. In fact, for the first time in the United States, a court has ruled that an artist with a distinct style who has acquired a wide following can stop others from creating works in a highly similar or imitative manner. Two recent cases in the visual arts, along with several in the music field, all using different legal theories, have virtually closed the door on appropriation. Circle 63 on reader service card DOWN BY LAW anogance and greed In addition, in remanding the case back to the lower inal coun, the appellate judges look an unusual step The panel directed the trial judge to ascertain whether Rogers would be entitled to enhanced damages because Koons behavior was so egregious The Koons case was decided under copyright law and was based on the accepted principles that direct copy ing is an infringement, even if the second work is in a different medium In a second case, the Tarkay case. the coun expanded the rights of ongi nal creative artists beyond what has been the generally accepted boundaries The Tarkay case deals with imitation of style more so than a direct copying of a specific work The suit was filed by Romm Art Creations and London Contemporary Art Ltd., the licensed distributors of lizchak Tarkay's posters and limited edition prints, respectively, against Simcha International Inc. claimed were extremely similar in The law goes beyond the right to prosect a logo or simple trademark, also covering the overall impression a product's look and design have among the viewing public. The underlying test in all trademark cases is the "likelihood of confusion on the part of the Simcha was marketing a line of consuming public as to the source or prints that the Tarkay representatives origin of a particular product." Zvonimir Mihanović Like handmade photographs of dreams. Mihanone's landscapes of docing reation awak th the dawn or semie down with the dusk. Emerging from the night in peace and silence a tiny fishing hamber is touched by the rose-fingered down. ART BUSINESS NEWS The plaintiffs, Romm Art and don Contemporary in this case ferred to several theones under the Lanham Act; and under a sumilar type of state action called dillusion, and also under unfair competition and deceptive trade practices, another se cause of action. The plaintiffs claimed the work sold by the defendants was for the "willful and calculated purpose of trading upon plaintiffs' good will." The Tarkay side was successful. and the court granted a preliminary injunction barring defendants from publishing the series of works deemed to be too similar in style to Tarkay's If the case, scheduled for a trial by jury beginning in September, does not settle, the matter will go forward based on these issues. It is important to note the count did not write a sweeping opinion in which it stated that no one could copy the style of another artist. Instead, it limited the scope of its ruling. The count stated that it is necessary to find that the look (style) of the first artist's work is distinctive, and that it has acquired a "secondary meaning "(serondary meaning is a trademark term signifying the artist and his style are so distinct and so well known that the purchasing public has come to idenufy that unique and distinct style with a specific artist.) Additionally, the style for which protection is sought must serve only aesthetic gratification and have no express purpose other than to identify the creator of the artwork. The court also held that there, of course, must be a simulanty between the works. The court ruled. "It is the combinabon of features as a whole, rather than a difference in some of the details which must determine whether the competing product is likely to cause confusion in the mind of the public." The court examined color patterns. shading. placement of figures, the physical attributes of the characters. the depiction of the characters in their setting and reclining positions, the characteristics of clothing vis-a-vis the different works and concluded there was a sufficient similanty between the products. The court also indicated that there must be a direct competition between the two products, as that increases the likelihood of confusion. Another fac for the court considered was the "junor user's good faith," ie., whether Circle 69 on reeder service card |