United States: Hermès V. Metabirkin: Digital Artist Liable For Infringement In Trademark Case Involving NFTs

In one of the first major NFT-related trademark infringement cases to go to trial, a New York federal jury found that a digital artist's "MetaBirkins" NFTs infringed Hermès' trademarks. This case hinged on claims that the NFTs infringed Hermès' marks protecting its Birkin handbags both in name and appearance. Notably, the defendant argued that the First Amendment insulated him from liability for his conduct, but the jury ultimately rejected that argument. This outcome of this case presents interesting takeaways about trade mark law in the current digital age not only for brand owners, but also for digital artists creating NFTs.

WHO IS MASON ROTHSCHILD AND WHAT IS METABIRKINS?

Sonny Estival (also known as "Mason Rothschild") is a digital artist and designer based out of Los Angeles. He is a co-founder of Terminal 27, a fashion boutique, and the founder of Gasoline, a creative studio focused on digital assets.

In early 2021, Rothschild created a non-fungible token ("NFT") named "Baby Birkin." The animated image featured a transparent Hermes Birkin-style handbag with a fetus inside and was sold for 13 Ethereum, or around $23,500 (as of 2021). By November, he had created a larger set of related NFTs called "MetaBirkins," which featured furry Birkin-style handbags sporting a variety of colors.

WHY DID HERMES SUE METABIRKINS?

In December 2021, Hermes contacted Rothschild the following month in order to have the MetaBirkins NFTs removed. Rothschild resisted their demands, and although the NFTs were delisted from most websites, Reuters estimated that transactions involving MetaBirkins had exceeded $1 million by that time. Hermes subsequently filed a lawsuit, alleging that Rothschild had committed trademark infringement, trademark dilution, and cybersquatting.

WHAT IS TRADEMARK INFRINGEMENT AND DILUTION?

Trademark infringement occurs when one party uses another party's trademarks without permission, either by copying the original or using a similar mark that confuses consumers. In order to succeed in a trademark infringement action, the owner of the original must show that their valid and legally protectable mark has been used in an unauthorized manner, and that such use is likely to cause consumer confusion and result in financial harm.

Trademark dilution is an additional protection conferred to owners of "famous" marks, such as Apple, Coca-Cola, and Nike. Once a trademark is considered famous, the likelihood of confusion test is no longer necessary. Courts will instead consider whether the mark's distinctiveness has been "blurred" or "tarnished" as a result of another party's use of a similar-looking mark on an inferior product. Damages for trademark dilution claims are awarded when the diluting party attempts to profit off their similar mark.

WHAT IS CYBERSQUATTING?

Cybersquatting occurs when a party uses, sells, or registers an internet domain name either identical or similar to an established trademark or company name with the intent of profiting off of it. Trademark owners can sue cybersquatters in federal court under the Anticybersquatting Consumer Protection Act (the "ACPA") in order to either gain ownership of the domain or receive money damages.

Under the ACPA, the trademark owner must show that (1) the domain name owner was trying to profit off the trademark in bad-faith; (2) the trademark was distinctive at the time the domain name was registered; (3) the domain name is identical or confusingly similar to the mark; and (4) the mark qualifies for protection under federal trademark laws.

THE ARTIST'S DEFENSE AND THE ROGERS TEST

In his response to Hermes' complaint, Rothschild drew parallels to Andy Warhol's Campbell Soup Cans paintings and argued that MetaBirkins consisted of artwork constitutionally protected by the first amendment. Thus, according to the defendant, his actions should be considered protected free speech, and he should not be liable for infringement.

Although trademark law under the Lanham Act normally protects trademarks by banning the use of third-party marks that confuse consumers, the Rogers Test explores the boundaries of what type of content can be protected. First established in Rogers v. Grimaldi (2d. Cir. 1989), the test essentially states that a work can use a trademark without authorization as long as it meets a certain level of artistic expression and does not explicitly mislead consumers. As with fair use, the level of artistic expression necessary for protection under the Rogers Test is considered to be "minimal."

THE RESULT

In the case of MetaBirkins, the jury applied the Rogers Test as instructed and decided that Rothschild's NFTs did not fall under first amendment protection. Factors contributing to this decision may have included Rothschild's significant profits, Hermes' evidence of actual consumer confusion, and the court's barring of an expert witness who would have testified as to the similarity between MetaBirkins and Andy Warhol's Campbell Soup Cans.

In addition to both trademark infringement and trademark dilution, the jury also found that Rothschild was liable for cybersquatting since (1) Rothschild likely had a bad-faith intent; (2) the Birkin trademark was distinctive at the time www.metabirkins.com was registered; and (3) the domain name was confusingly similar to Birkin. In total, Hermes was awarded $133,000 in damages.

WHAT CAN COMPANIES AND ARTISTS TAKE WAY FROM THIS CASE?

Although the results of trademark infringement cases are often fact-intensive and difficult to use as a predictor for future cases, it is certainly possible that Hermes' victory will have both a chilling effect on the unauthorized use of trademarks in the NFT space and a bolstering effect on the willingness of fashion brands to pursue NFT artists in court.

Regardless of whether you are a digital artist or an owner of a trademark planning to expand into NFTs, contacting a trademark attorney will save you time and money in protecting your brand and assessing potential risks.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.