The bottom line
- Brands should monitor whether and how their trademarks are used in new technology and know that such use is still subject to traditional principles in the Trademark Act.
- Creators should be aware of the limits of First Amendment protection, especially when dealing with well-known trademarks.
- Still, brands and creators should be careful not to exaggerate the precedential value of Hermès’ victory in the trial, given the unique facts of the case.
A recent jury verdict in a closely watched case brought by French luxury fashion brand Hermès clarified how traditional trademark law may apply to NFTs. In Hermès Int’l v. Rothschild, the jury found that the unauthorized representation of the brand’s famous Birkin handbags as a series of NFTs constituted trademark infringement, trademark dilution and cybersquatting. Hermès was awarded $133,000 in damages.
The judgment, handed down on February 8, 2023, in the US District Court for the Southern District of New York, arose out of one of the first NFT trademark lawsuits to be heard and go to trial. The ruling sends a big signal to established brands and creators alike that trademarks can still be protected in the new digital economy, as judges — and juries — apply decades-old precedent to cutting-edge technology.
NFTs and artistic commentary
The defendant, known professionally as “Mason Rothschild”, created and sold unauthorized non-fungible tokens (NFTs) depicting colorful fur-covered versions of Hermès’ iconic Birkin handbags. NFTs are digital images stored on the blockchain that can be bought and sold as investments. Rothschild made more than $1 million in profits from the sale of the NFTs. Rothschild argued that the NFTs, which he marketed as “MetaBirkins,” were artistic commentary on luxury goods and protected by the First Amendment. This contrasted with evidence presented to the jury which suggested Rothschild was at least as interested in commercial gain as artistic expression, telling a supporter that “he doesn’t think people realize how much you can get away with in art by saying” in the style of,” according to court records.
Just days before the jury returned its verdict, Judge Jed Rakoff denied the parties’ cross motions for summary judgment. He ruled that the so-called Rogers legal test applied to determine whether Rothschild’s allegedly expressive work crossed the line into trademark infringement. Under the Rogers test, the First Amendment’s right to free speech does not preclude liability for trademark infringement “if the plaintiff can show that either (1) the use of the trademark in an expressive work was not ‘artistically relevant’ to the underlying work or (2) the trademark is used to “explicitly misled” the public as to the source or content of the underlying work.” Given the material factual issues that remained, the court could not decide the central question of “whether the trademark was used to mislead the public about the origin of the product or the parties endorsing or associated with it” as a question of law.
The verdict
After a week of trial and three days of deliberation, the jury found that Rothschild infringed Hermès’ Birkin trademark and that such infringement was not entitled to First Amendment protection. In particular, Rothschild’s defense was undermined by several challenging facts, including, for example, a penchant for poking fun at luxury brands, making over $1.1 million in profits from the sale of the NFTs, the use of the entire Birkin trademark in the NFTs’ name and website domain and evidence of actual consumer confusion.
On Hermès’ cybersquatting claim, the jury found that the Birkin trademark was distinctive at the time the domain name “metabirkins.com” was registered; that “On Hermès’ cybersquatting claim, the jury found that the Birkin trademark was distinctive at the time the domain name “metabirkins.com” was registered; that the “metabirkins.com” domain name is identical or confusingly similar to the Hermès Birkin trademark; and that Rothschild had a bad faith intention to profit from the Birkin trademark Hermès argued throughout the case that Rothschild’s MetaBirkins interfered with and delayed its own efforts to enter the NFT market, limiting its ability to capitalize on the NFT space from goodwill associated with the Birkin brand and undermines its ability to compete with other luxury fashion brands already entering the metaverse and NFT space.
While this case presented some unique facts, such as Rothschild’s own admitted desire to push the boundaries of association with luxury brands, Hermès’ decisive victory is likely to encourage other brands to actively enforce their trademark rights in digital realms. This will surely also serve as a warning to creators to at least be aware that their digital creations may expose them to liability.
The content of this article is intended to provide a general guide to the subject. You should seek specialist advice about your specific circumstances.
