This is an interesting question. The original artist, or his/her estate (if the artist is deceased), has the right to control the commercial use of the artist's name. Commercial misappropriation occurs where a business uses the identity or likeness of another person without consent. It is codified as Cal. Civil Code 3344.
However, there is an affirmative defense, where the use of the person's name or likeness is used for news or public affairs, sports broadcast/account or political campaign. And, the "public affairs" component has been broadly construed. To wit:
- “We presume that the Legislature intended that the category of public affairs would include things that would not necessarily be considered news. Otherwise, the appearance of one of those terms in the subsection would be superfluous, a reading we are not entitled to give to the statute. We also presume that the term ‘public affairs’ was intended to mean something less important than news. Public affairs must be related to reallife occurrences.” (Dora v. Frontline Video, Inc. (1993) 15 Cal.App.4th 536, 546 [18 Cal.Rptr.2d 790], internal citations omitted.)
- “[N]o cause of action will lie for the ‘publication of matters in the public interest, which rests on the right of the public to know and the freedom of the press to tell it.’ ” (Montana v. San Jose Mercury News (1995) 34 Cal.App.4th 790, 793 [40 Cal.Rptr.2d 639], internal citations omitted.)
On your facts, the issue is whether or not you have the right to inform the public that you are selling artwork created by a particular artist. It's inconceivable that a court would say, "no," you must pay the artist to advertise that you are selling his/her artwork that you originally purchased in a bona fide transaction. Were that permitted, the estate of Henry Ford could prevent anyone from advertising a used Ford car -- etc.
So, I think that the gallery is ill advised on the law, though, I can't promise you are immune from having to defend a lawsuit -- even one that appears as frivolously based as the one that you suggest may occur, unless the gallery does not advertise the artist's work.
Please let me know if my answer is helpful, or if I can provide further clarification or assistance.
And, thanks for using justanswer.com!