The Southern District Court of New York recently ruled in a much-watched trademark infringement case. The dispute involved the plaintiff, Hermès International, designer and supplier of the luxury Birkin bag, and the defendant-artist, Mason Rothschild, creator and seller of non-fungible tokens (“NFTs”) depicting “MetaBirkins” or “fur-covered” Birkins -bags. In this case, a federal jury ruled that the artist’s NFTs, digital versions of the Birkin bag, infringed on the plaintiff’s trademark rights. The jurors also concluded that the NFTs were not protected speech under the First Amendment. The most important lesson to be learned from this decision concerns the need to obtain a license to use the intellectual property rights of others using a tailor-made NFT trademark agreement, or risk exposure to a lawsuit, liability and bad press.
Critical details of the NFT trademark decision
Although the NFT market has declined, there are still important, relevant concepts to understand about NFTs and trademark rights. The recent court decision illustrates the need to carefully consider the possibilities of using someone else’s intellectual property rights in a potential NFT venture. Plaintiff’s Birkin handbags are both iconic among the consuming public and quite expensive. After learning about MetaBirkin’s NFT collection, the plaintiff sued the artist, arguing that “the trademark was diluted and potential consumers may be tricked into purchasing the unrelated virtual goods.” The defendant claimed, among other things, that the NFTs constituted art that was protected by the First Amendment as freedom of expression. However, in ruling in favor of the plaintiff, the jury concluded that the MetaBirkins were related goods and therefore subject to trademark protection. With this justification, it was determined that the artwork embodied in the NFTs was not entitled to the Trade Marks Act’s exception for fair use.
NFT trademark rights, experiences
As demonstrated by this decision, one type of “theft” in the NFT space is the unauthorized use of third-party intellectual property to create digital NFT art. According to a recent news report, artists have lamented that “the prevalence of theft in the NFT space shows how its most touted feature – IP protection – turned out to be its biggest drawback.” Minters who knowingly or unknowingly use third party intellectual property rights (including copyrighted material) to create their NFT Collections are exposed to the risk of lawsuits and significant financial liability. To avoid such an unfortunate outcome, NFT creators and sellers are encouraged to enter into an agreement with intellectual property rights owners before using their marks as part of an NFT collection. Companies wishing to mint, sell and/or license NFTs must ensure that they own or are properly licensed to use the underlying art in question.
Who can help resolve NFT trademark concerns?
If you plan to develop your own NFT collection, make sure you get the proper rights to use someone else’s intellectual property. Not only is the NFT landscape changing rapidly, but the provisions in well-drafted NFT agreements are also highly nuanced and complicated. Given the foregoing, it is important that you consult with attorneys experienced in the area to avoid NFT-related litigation.
