## Facts

- Artists and an artist foundation sued Sotheby’s, Christie’s, and eBay, alleging they acted as sellers’ agents in qualifying fine-art resales but failed to pay a statutorily required 5% resale royalty.
- The claims arose under the California Resale Royalties Act (CRRA), which grants artists an unwaivable right to a 5% royalty on certain resales of fine art.
- Plaintiffs sought damages and classwide relief for resales dating back to January 1, 1977 (the CRRA’s effective date).
- Federal copyright law changed on January 1, 1978, when the 1976 Copyright Act took effect, adding an express preemption clause (17 U.S.C. § 301(a)) and codifying the first sale doctrine (17 U.S.C. § 109(a)); the earlier 1909 Act contained no express preemption clause.
- The district court dismissed all CRRA claims as preempted by federal copyright law and entered judgment for defendants.

## Issues

1. Whether CRRA resale-royalty claims based on resales occurring after January 1, 1978 are expressly preempted by 17 U.S.C. § 301(a).
2. Whether CRRA claims based on resales occurring between January 1, 1977 and January 1, 1978 are preempted (expressly or by conflict preemption) under the federal copyright regime then in effect.
3. Whether defendants were “prevailing part[ies]” entitled to attorneys’ fees under the CRRA’s fee-shifting provision after the mixed merits disposition.

## Decision

- The Ninth Circuit affirmed dismissal of CRRA claims based on resales occurring after January 1, 1978, holding those claims expressly preempted by 17 U.S.C. § 301(a).
- The Ninth Circuit reversed dismissal of CRRA claims based on resales occurring between January 1, 1977 and January 1, 1978, holding those claims were not expressly preempted and not conflict-preempted.
- The case was remanded for further proceedings limited to the surviving pre-1978 claims.
- In a later order, the Ninth Circuit held Sotheby’s and eBay were prevailing parties entitled to attorneys’ fees under the CRRA fee-shifting provision, with the fee amount referred for calculation.

## Legal Principles

- Under 17 U.S.C. § 301(a), state-law rights are expressly preempted when they (1) fall within the subject matter of copyright and (2) are equivalent to rights within the general scope of copyright.
- A state resale-royalty right applied to post-1978 resales is equivalent to, and interferes with, the federal distribution-right exhaustion reflected in the first sale doctrine (17 U.S.C. § 109(a), as part of the 1976 Act’s regime), and is therefore preempted for sales governed by the 1976 Act.
- Section 301(a) does not apply to events occurring before the 1976 Act’s effective date; where federal law in force lacks an express preemption clause, state law is not displaced absent conflict preemption.
- A court may reject conflict preemption for a state resale-royalty claim governed by the pre-1978 federal regime and permit it to proceed for that limited period.
- A statutory fee-shifting provision may remain enforceable for actions brought under the state statute, even if many applications of the statute are preempted.

## Conclusion

The Ninth Circuit held that federal copyright law expressly preempts California’s resale-royalty claims for art resales occurring after January 1, 1978, but allows CRRA claims to proceed for the narrow window between January 1, 1977 and January 1, 1978; it also permitted prevailing defendants to recover attorneys’ fees under the CRRA’s fee-shifting provision.


Close v. Sotheby’s, Inc., 894 F.3d 1061 (9th Cir. 2018)