Do not use my trademarks in your NFTs! The Hermes v. Rothschild judgment

On February 8, 2023, a jury in the Southern District of New York returned a verdict in favor of Hermes, finding NFTs associated with digital images depicting Hermes’ famous “Birkin” handbags infringe Hermes’ trademark rights. This appears to be the first court case focused on the interaction between NFTs – or non-fungible tokens – and trademark law.

An NFT is a unique digital asset that can be bought and sold on the “blockchain”, similar to cryptocurrency. For example, an NFT may be a unique work of art that only exists in digital form, but it is recorded on the blockchain so that it cannot be duplicated or mass produced. In this case, an artist named Mason Rothschild created 100 NFTs depicting Hermes bags and called them “MetaBirkins.” However, Rothschild’s bags are covered in colorful, cartoonish fur instead of leather. Such NFTs can be bought and sold by collectors or art investors much like tangible paintings. So the court and jury were faced with the following question: is this artwork protected speech, or is it trademark infringement?

At trial, Rothschild argued that his NFTs are works of art protected by the First Amendment, much like Andy Warhol prints. Under Rogers v. Grimaldi, Rothschild claimed that he is allowed to use the Hermes trademarks in his artwork as long as he does not explicitly mislead consumers. In contrast, Hermes argued that the NFTs were simply unlicensed digital exploitation of its exclusive trademarks that should be evaluated under the well-known standard of likelihood of confusion.

Judge Rakoff agreed with Rothschild and mostly concurred Rogers test when instructing the jury. Under this test, the jury had to consider (i) whether the trademark use in an expressive work is artistically relevant to the underlying work, and (ii) if it is, whether it is explicitly misleading with regard to the source or content of the work. .

In the end, however, the jury agreed with Hermes himself below Rogers test, finding the NFTs were works of artistic expression, but also finding Rothschild intended to confuse potential consumers.

The court’s decision to treat the NFTs as works of art is likely encouraging for digital artists, but the jury verdict casts a cautionary shadow. Even artwork can infringe upon trademark rights when it misleads consumers as to the source of the work. Put another way, the trademark owner won despite the judge instructing the jury under the more artist-friendly Rogers test. Of course, this judgment can be appealed to the Second Circuit.

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