In a closely watched case with major implications for the non-fungible token (NFT) industry, a jury in the United States District Court for the Southern District of New York found a digital artist liable for trademark infringement and dilution for his unauthorized sale of digital artwork that was based on images of luxury retailer Hermès International SA’s famous Birkin handbags. The artist, Mason Rothschild, had created a collection of 100 “MetaBirkin” NFTs depicting the Birkin bags covered in playful designs, such as thick fur, smiley face emojis and Van Gogh paintings. The MetaBirkin NFTs initially sold for about $450 each, but prices soon rose to tens of thousands of dollars, and Rothschild received a percentage of all secondary sales.
Hermès filed a lawsuit against Rothschild in January 2022, claiming that the unauthorized sale of the MetaBirkin NFTs was likely to cause consumers to falsely believe that the NFTs were issued by, sponsored by, or associated with Hermès, and would dilute the value of Hermès’ trademarks. Hermès claimed that there were examples of actual consumers mistakenly believing that the MetaBirkin NFTs were associated with Hermès and argued that the continued sale of MetaBirkins would interfere with Hermès’ plans to offer its own NFTs.
Rothschild’s main argument in his defense was that the NFTs should be treated as artistic works rather than commercial goods and therefore should be protected by the First Amendment. Rothschild’s defense relied heavily on the US Court of Appeals for the Second Circuit’s decision in Rogers v. Grimaldi, where the court ruled that the use of someone else’s mark in an artistic work is not infringing if it has artistic relevance and does not expressly mislead with regard to the source of the work. Rothschild’s counsel pointed to other examples of artwork that featured well-known trademarks, such as Andy Warhol’s famous images of Campbell’s soup cans. However, Rothschild’s artistic expression argument was weakened by the fact that Rothschild had sent numerous text messages regarding the financial potential of the NFTs and had attempted to promote the NFTs through social media influencers to “pump” the value of the NFTs. Rothschild also pointed to a disclaimer on his website, claiming that the types of consumers who buy Birkin bags, which typically cost thousands of dollars and have long waiting lists, would not be confused into thinking the MetaBirkin NFTs were associated with Hermès.
However, the jury disagreed with Rothschild’s arguments and agreed with Hermès’ position that the MetaBirkin NFTs were more akin to commercial goods rather than works of art. In addition to injunctive relief, the jury awarded $133,000 in damages to Hermès.
This decision is likely to have a major impact on the NFT industry, as there are many other examples of NFTs that have been issued or sold that contain the image of a well-known product or the mark of a well-known brand. There are several other NFT-related cases making their way through the courts, including another closely watched case in New York in which Nike is suing a sneaker retailer that sells NFTs with virtual Nike sneakers. Furthermore, if NFTs are to be treated as commercial goods, it is very possible that a trademark owner’s failure to police or enforce its mark against use in NFTs could significantly impair the value of the marks. Although the values of NFTs and the hype surrounding the NFT market have decreased significantly in the past year, it is still important for trademark owners to monitor the NFT mark for unauthorized use to protect the value of their marks, especially if they plan to offer their own NFTs in the future.
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