For years now, we’ve been following the legal fallout resulting from a rancorous dispute between Russian billionaire Dmitry Rybolovlev and his onetime art dealer, Swiss businessman Yves Bouvier.  The feud has resulted in legal proceedings in multiple countries, and other art world players have become entangled in the fray as well.  In one of those spinoff disputes, Rybolovlev has sued auction house Sotheby’s, alleging that it aided Bouvier’s machinations.  Earlier this month, a federal court rejected a number of those claims, but other claims will proceed to trial unless the parties can reach a settlement in an upcoming mediation.

On February 8, just two days after we published our last post, the jury in the MetaBirkins case reached a verdict, awarding Hermès $133,000 in damages in connection with the fashion house’s claims of trademark infringement, dilution, and cybersquatting. 

Almost two years ago, we shared some thoughts about the NFT market, how it might interact with the traditional art market, and what questions and issues it might raise as it develops.  Now, we are watching with interest as an early wave of NFT-related litigation begins to make its way through the courts.  In this update, we explore some of the legal disputes that are applying established law to this new context, and raising novel questions for courts to decide.

In the last few years, aided by the rise of non-fungible tokens (“NFTs”), digital art has become an increasingly important part of the art market.  Now a new frontier seems to be opening up: art that is created at least in part using artificial intelligence (“AI”) technology.  Indeed, just as NFTs have crossed into the traditional art market, artists who are creating using AI are likewise being welcomed onto the art scene (for example, by gaining gallery representation).  As this trend unfolds, we art lawyers find ourselves wondering how AI art will interact with our current copyright system. 

Art is increasingly viewed as an investment asset, and in some ways, it behaves like one.  But any investment in art also has to take into account the real risk of physical damage and the legal headaches that can arise out of such damage—as one recent lawsuit reminds us.

Last week, the Supreme Court heard oral argument in the major copyright case of Warhol Foundation v. Goldsmith, which could provide a significant opinion about the "fair use" defense to copyright infringement, with wide-ranging potential implications for the art world—especially appropriation art, photography, and copyright licensing and management.  The oral arguments, however, underscore both the magnitude of the questions posed, and the odd aspects of the case’s path to the Supreme Court, which arguably complicate the Court’s ability to grapple with the already-complex issues it presents. 

Last month, the Grossman team prevailed in defending a prominent art dealer’s complaint against a gallery’s motion to dismiss.

An infringement case pending in a California federal court raises some interesting questions about how copyright law applies in the context of interactive art installations—an important topic in an art market that is increasingly exploring these innovative forms and mediums.

There has been a lot of buzz—okay, that’s an understatement—about NFT art lately, and it may feel confusing to those who hail from the more “traditional” art world.  Here at Grossman LLP, we’ve been intrigued by this phenomenon, and now this post aims to discuss some of the basics about NFTs and some widespread misconceptions about them.  We also offer some thoughts on how they may potentially impact the art market going forward.  

Last month, this blog wrote about several forfeiture complaints recently filed by the United States Department of Justice seeking to recover the illicit proceeds of the 1MDB scandal.  The complaints sought, among other things, the recovery of several high value works of art that had allegedly been used to launder the misappropriated 1MDB funds.  We noted that “[t]hese forfeiture complaints serve as a reminder that high-end art transactions are often viewed by white collar criminals as an effective method of money laundering.”  And now, a recently-released Senate report shows that Congress is taking these concerns very seriously and may soon take up legislation cracking down on money laundering in the art world. 

A recently filed lawsuit by the artist Pat Lipsky highlights an often-overlooked risk for New York galleries and auction houses exhibiting works online:  running afoul of New York’s Artist’s Authorship Rights Act (“AARA”).  That law—a precursor to the federal Visual Artists Rights Act (“VARA”) of 1990—gives artists in New York the legal right to claim or disclaim authorship of a work of art, and object to its display, publication or reproduction in an altered, defaced, mutilated, or modified form that could damage the artist’s reputation.  Unlike VARA, AARA protects not just the artist’s interests in the work itself, but also any reproductions of the work, even if no physical change has been made to the original work.

An ongoing challenge for art dealers, galleries, and auction houses, is guarding against the use of art transactions as a means of laundering the proceeds of criminal activity.  Money laundering is a federal crime that involves disguising the proceeds of a crime by integrating those proceeds into the legitimate financial system, often through a series of complex and confusing transactions designed to conceal the origin, source and ownership of the funds.  When money laundering is successful, it becomes difficult to distinguish illicit proceeds from legitimate financial resources, thus permitting funds to be used by criminals without detection.  Purchasing art is one way to conceal the source of illicit funds.  Several recently filed civil forfeiture complaints from the U.S. Department of Justice highlight the ongoing need to remain vigilant about money laundering in the context of art transactions.

Amidst the social and economic fallout of the COVID-19 pandemic, the Association of Art Museum Directors (AAMD) has temporarily revised the guidelines it imposes on its members.  Recognizing that museums (like many other art-related businesses) are struggling to stay afloat, the AAMD is easing certain restrictions on the use of trusts, donations, and gains from endowment investments, and on the use of proceeds from deaccessioning artworks.  

​In the few short weeks since our last post in this space, the world has changed in staggering ways.  The COVID-19 pandemic has wreaked havoc on governments, businesses, economies, markets, communities, and most importantly, countless families and lives. 
 
The current crisis has also profoundly impacted the larger art world.  We do not claim to have any special powers to predict the future of the art market, particularly in the face of this unprecedented crisis. But as seasoned litigators with years of experience in art law, here are a few thoughts about what we may see in the coming months in the realm of art disputes, as the ramifications of this pandemic continue to unfold.

As the new year begins, we write with some brief updates on two significant stories we’ve been following for some time.  One involves the ongoing issues arising out of the discovery of several forged Old Master works on the European art market.  The other involves a bitter, globe-spanning feud between a mega-collector and his onetime dealer.  And both of these complex situations will continue to reverberate throughout the art ecosystem.

​The scandal surrounding troubled art dealer Inigo Philbrick is heating up. A British judge has issued an order to freeze millions of dollars worth of his assets in the wake of several lawsuits alleging that he is improperly holding or has sold major artworks that don’t belong to him.

The artwork at the center of a lawsuit against dealer Inigo Philbrick now has new claims that complicate a story that includes accusations of a fake auction guarantee. In a lawsuit filed last week with the Supreme Court of New York, Guzzini Properties, Ltd., a company that collects art, claimed ownership of the work against competing claims from Aleksandar Pesko, whose company is Satfinance Investment Ltd. and Germany’s Fine Art Partners. 

This summer, a New York Supreme Court judge threw out another complaint filed in a long-running legal battle between London art dealer James Mayor’s gallery and members of the Agnes Martin catalogue raisonné committee, providing further comfort for art authenticators who may face litigation in retaliation for their opinions.

More than a year has passed since New York dealer Ezra Chowaiki pled guilty to federal charges related to his misconduct in cheating numerous clients in fraudulent art deals.  But the legal fallout continues.  Many of his victims and business associates have asserted claims (for money or art) in connection with the bankruptcy of his gallery, Chowaiki & Co., as well as in federal forfeiture proceedings that allow claimants to assert their rights to artworks ordered forfeited to the government as part of Chowaiki’s guilty plea.