MetaBirkin’s NFT Trademark Verdict: What Next? – Trademark

The verdict

On Wednesday, February 8, a Manhattan jury returned a verdict that found Mason Rothschild’s sale of MetaBirkin’s NFTs to be a violation of Hermès’ trademark rights—ultimately declaring that MetaBirkin’s NFTs are not protected under the First Amendment. For now, this ruling stands as a small victory for trademark owners and a stark warning to artists.

The trial

In the trial, which began on January 30 and continued for eight days, Hermès argued that MetaBirkin’s NFTs are deceptive commercial products. Hermès relied on expert testimony to support its argument that the MetaBirkins NFTs are commercial in nature, and pointed to other evidence regarding what it considered exploitation of Hermès’ trademarks to promote the MetaBirkins NFTs. Rothschild’s key witness, Blake Gopnik, was not allowed to testify. Gopnik would have supported Rothschild’s position by comparing the MetaBirkins project to the works of Marcel Duchamp, Andy Warhol and other artists within a tradition that Warhol himself called “Business Art.” Instead, Rothschild’s attorney attacked the legitimacy of Hermès’ consumer confusion investigation and presented evidence to support his argument that MetaBirkin’s NFTs are protectable artistic expression under the First Amendment.

In the end, the jury found for Hermès, finding Rothschild liable for illegal cybersquatting, trademark infringement and trademark dilution, and awarded the luxury handbag company $133,000 in damages.

More on this legal issue

Despite the ruling, the debate over protected speech under the First Amendment and violations under the Lanham Act is far from over. For example, Yuga Labs, Inc. v. Rippswhere the district court’s ruling that defendant Ripps’ NFT project cannot be protected under the First Amendment has been appealed to the Ninth Circuit, which is not bound to follow the applicable precedent set in the Second Circuit – different circuits, different facts and a potential different result.

Where is the order?

In the parties’ Joint Pretrial Consent Order, Hermès seeks, blue, a permanent injunction against Rothschild’s production and sale of MetaBirkin’s NFTs. A permanent injunction is normally granted by a judge after a full hearing on the merits. Now that the judgment is out, it is likely that Hermès will seek this form of equitable relief from the court.

In most cases, a trademark owner who alleges infringement wants to have the infringing product off the shelves – the goal is to rid the marketplace of counterfeit goods that confuse the consumer and trade on the goodwill of the trademark owner. In the case of physical products, a trademark owner usually requires an injunction prohibiting the distribution of the goods and a certification from the infringer that all the infringing products have been destroyed within a certain period of time.

Here, the well-known shelf is the blockchain, the marketplace is a digital platform, and the products are MetaBirkin’s NFTs. Thus, Hermès’ injunction, if granted, will look different. The very nature of the blockchain is that information on it cannot be erased, so destruction here most likely consists of permanently removing the MetaBirkins NFTs from circulation by transferring them to a wallet where they cannot be retrieved. And even as Hermès seeks control of the token smart contract, the images it points to are already out there. The proliferation of digital assets proves that images can spread quickly and worldwide, posing practical challenges to enforcing an injunction in a global NFT marketplace.

Time will tell how Hermès will enforce an injunction, if granted, but the high profile of this case may have achieved Hermès’ ultimate goal – there is now widespread public recognition that Hermès did not create, nor should it be associated with, the Rothschilds Metabirkin’s NFTs.