Intermediary liability and trade in follow-on innovation

Abstract

Intellectual property rights have changed the market value and direction of artistic innovation throughout art history, in particular when new creations built on the art of predecessors. In this paper, we test how changes in legal frameworks and litigation risks affected market value and commercial trade around artistic reuses in the figurative arts and the ‘Appropriation Art’ movement in particular. Appropriation artists borrow images from different sources and incorporate them into new, derivative works of art. By doing so, they risk infringing copyright but also put auction trade and artwork availability at litigation risk as liability can extend to market intermediaries, such as auction houses, museums, or galleries. Using a differences-in-differences model and large-scale online data, we investigate the causal impact of the prominent Cariou v. Prince U.S. higher court decision on intermediary trade and the availability of artworks on sale in the Appropriation Art. As an exogenous shock, this decision changed the perceived litigation risk for market intermediaries around what constitutes fair use. Following the court decision, we find a temporary decline in the total number of global auctions in the Appropriation Art, a lower sales probability of these artworks, and a relocation of related auctions to non-U.S. houses.

Batman Forever? The Role of Trademarks for Reuse in the US Comics Industry

“…Second, we contribute to research on the economics of copyright. Specifically, our research complements work on copyright, reuse, and cumulative creativity in music (Gans, 2015;Watson, 2017a,b;Cuntz, 2022;Watson et al, 2022), book publishing (Heald, 2014;Reimers, 2019), visual arts (Cuntz and Sahli, 2023), and online platforms (Nagaraj, 2018).…”

The Economics of Copyright in the Digital Age

“…For example, Nagaraj (2018) shows that copyright restrictions drastically reduce citations to copyrighted works on Wikipedia, which results in lower-quality articles (as measured by page visits). Further, in a study of the market for Appropriation Art, which is characterized by varying degrees of legal uncertainty around copyright infringement, Cuntz and Sahli (2023) show that higher perceived litigation risks decrease sales volume in art auctions and lead art dealers to relocate to jurisdictions with less legal uncertainty.…”