The reason many museums create Rights and Reproductions policies is because there are significant potential costs involved with not having a policy that arise from the damages for copyright infringement. A museum should use such a policy so long as B < P*L, where B = burden of legal precautions, P = probability of copyright infringement without the policies, and L = the amount of damages resulting from infringement. This is called the Learned Hand Formula or Hand Formula. For more information on its formulation, see United States v. Carroll Towing, 159 F.2d 169 (2d. Cir. 1947). Today, the formula remains influential amongst noted appellate judges such as Richard Posner.
The burden of maintaining this policy is very small in terms of the time and effort needed for compliance, whereas the probability of infringement is very great. The amount of actual damages is one of the lesser concerns in this scenario. A judge may award either the profits (17 U.S.C. § 504(a)(1)), likely minimal because not-for-profit activities on behalf of a museum will not raise that much money, or statutory damages (17 U.S.C. § 504(a)(2)). However, the statute for copyright infringement provides that statutory damages shall be remitted if the entity that infringed worked at a not-for-profit institution and reasonably believed their infringement to be permitted under Fair Use (17 U.S.C. § 504(c)(2)(i)).
Rather, the harm resulting from negative publicity could set the museum back for a period of years, thereby creating significant harm because of the destruction of goodwill. There is also the possibility that a judge would simply apply “statutory damages” as the remedy to copyright infringement which, depending on the degree of willfulness in the infringement, may range from $30,000 to $150,000 (17 U.S.C. § 504(a)(2)). Unfortunately, copyright infringement is a term of art defined very liberally (17 U.S.C. § 501), which works to the advantage of the artist.
Therefore, the necessity of a Rights and Reproductions policy is clear.
Still, some will say that a museum’s reproductions and derivative works, if for non-commercial purposes, ought to be protected by the Fair Use doctrine, codified in US Copyright Law. According to Fair Use doctrine, copyright will not be infringed if the reproduction or derivative work is used “for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research” (17 U.S.C. § 107). Courts must employ a balancing test, involving the intended use of the work, the nature of the work, the substantiality of the borrowing, and the effect on the market of the use (17 U.S.C. § 107(1)-(4)). For a seminal Fair Use analysis, see: Campbell v. Acuff-Rose Music, 510 U.S. 569 (1994).
Although many museum uses would no doubt be protected under Fair Use, such as for exhibition brochures or transparencies or CDs for a Summer Teacher Institute, as the US Copyright Office says, “The safest course is always to get permission from the copyright owner before using copyrighted material.”
That’s the end of the treatise part. Personally, I prefer not to scare all museums into thinking that they are in danger of copyright infringement if they do not receive a copyright license for every single potential use of a work, whether in a non-commercial exhibition brochure or a commercial exhibition catalog. There are very strong disincentives for some artists to pursue copyright infringement suits, such as the potentially significant cost of hiring counsel and the limited damages (if a judge awards the “profits” damages of 504(a)(1), they get very little money, and if a judge awards statutory damages of 504(a)(2), the penalty is likely remitted because it’s a not-for-profit museum!).
But artist rights collection societies (ARS, VAGA) or artist defense groups (VLA) may not be similarly inhibited because of substantially lower costs. Still, the artist must apply the B < P*L formula as a form of cost-benefit analysis as well. In other words, artists should only pursue legal action if the projected cost of litigating (B) is less than the damages (P) times the likelihood of receiving them (L). In this case, it seems as though only very rich artists or unwieldy estates would have the power to pursue these suits, and only then when the reward is very great since the potential cost is so large.
The real bottom line is that Fair Use will protect museums most of the time. One of the white knights of Fair Use is William Patry, whose treatises on copyright should always be preferred to over Nimmer (no, I don’t care how many times and places Nimmer has been cited — read the Patry blog and you will understand). I am still reading through Patry’s ridiculous corpus of work and will report more as I find it. I am also fortunate to know Professor Jeffrey Harrison, who was recently cited by my favorite justice, Justice Thomas, twice on the subject of copyright. He’s a “class” act, but, alas, I wouldn’t want to embarrass myself by asking too many dumb questions.
Importantly, while Fair Use will insulate museums from trivial or de minimis claims (based on economics, not law), it will not do so from abject refusal to respect the rights of the artist. Attempts to make money off using images on postcards, umbrellas, and notepads should be expressly forbidden no matter how permissible your Rights & Reproductions policy may be. Of course, works in the public domain are a different story.