The U.S. Court of Appeals for the Second Circuit recently heard oral argument in an appeal from a jury verdict that found in favor of Plaintiffs Hermès International and Hermès of Paris, Inc. ("Hermès") against Mason Rothschild on trademark infringement over Rothschild's use of MetaBirkin and Hermès' iconic Birkin bag imagery displayed on non-fungible tokens (NFTs) offered for sale on a non-fungible token marketplace. Rothschild was offering NFTs with images of furry bags that looked like Hermès' iconic Birkin bags. Although Hermès had properly registered the trademark BIRKIN® and its iconic bag shape trade dress, its registrations only identified tangible goods in international class 18 (leather and imitation leather items); the registered trademarks did not include downloadable digital representations in the form of NFTs (i.e., software).
In using the Hermès trademarks and distinctive Birkin bag trade dress to sell NFTs, Rothschild claimed that the First Amendment gave him the right to create and sell artwork in the form of NFTs that depict the Birkin bag. Claiming that the NFTs were expressive works, Rothschild noted that his artwork commented on the original and therefore did not trade on the goodwill of Hermès' Birkin bag. He further argued that the inclusion of a disclaimer removed any possibility of consumer confusion.
The MetaBirkin appeal focuses on the district court's application of the test articulated in Rogers v. Grimaldi, which analyzes whether the use of another's trademark in an expressive work constitutes trademark infringement. Using trademarks in expressive works is proper under the Rogers test, if the use does not explicitly mislead consumers as to the source of the goods. In the appeal, Rothschild argues that if the Rogers test had been correctly applied, Rothschild's MetaBirkin NFTs would have been found not to infringe Hermès trademarks. The MetaBirkin NFTs, Rothschild argued, should have been considered an "expressive work," and the use of the Birkin trademarks had artistic relevance to the underlying NFT works, because Rothschild was commenting on consumer society and wealth.
In turn, Hermès argued on appeal that the district court correctly applied trademark law considering the Supreme Court's opinion in Jack Daniel's Properties, Inc. v. VIP Products LLC, holding that the Rogers test does not apply where an accused infringer uses another's mark as a source identifier for its own goods, which in Jack Daniel's were dog toys branded "Bad Spaniels" and shaped like whiskey bottles. After the "Bad Spaniels" case, the Second Circuit in evaluating the MetaBirkins wrestled with how to balance trademark rights and First Amendment protections, with Judge Chin noting that Jack Daniel's undercuts Rogers to an extent. The Rogers Test does not apply if a person accused of infringement uses another's trademark as a "designation of source" for their own goods—"in other words, has used a trademark as a trademark," the judge said.
During oral argument, the Second Circuit focused on issues concerning the application of the Rogers test after the Jack Daniel's ruling asking detailed questions about the factual record regarding Rothschild's intent in creating the NFTs. Mr. Rothschild's intent is applicable not only to the Polaroid factors in this case, but also to any application of the Rogers test, which asks about his intent to explicitly mislead consumers. At the district court level, Judge Rakoff stated that "the jury unanimously found, defendant 'Mason Rothschild' (real name Sonny Estival) is a straightforward swindler, who attempted to clock his fraud by posing as an 'artist.'" See Dkt. 230, at *1.
The appeal also focused on the district court's instructions to the jury regarding the First Amendment issues, and how the verdict in favor of Hermès could potentially chill the ability of future artists to engage in commentary. Throughout oral argument, the panel seemed to weigh both sides in evaluating whether to reverse, remand, affirm, or make any modifications as to the district court's decisions.
The Second Circuit Vans Decision: Will It Impact the Order on Appeal?
In issuing its order in the MetaBirkin case in the coming months, the Second Circuit may apply a similar analysis to its recent decision in Vans, Inc. v. MSCHF Prod. Studio, Inc., 88 F.4th 125 (2d Cir. 2023). Vans involved a dispute between Vans, the creator of the Old Skool shoe (a shoe with a distinctive wavy design on its side), and MSCHF, the creator of a "Wavy Baby" sneaker that sought to parody the Old Skool shoe by exaggerating the wavy design on the side of the shoe.
In the Vans case, the Second Circuit also was asked to weigh trademark infringement allegations invoking First Amendment concerns. In Vans, the Second Circuit applied the central guidance from Jack Daniel's, asking if the "Wavy Baby" sneaker used the Vans trademarks as source identifiers on its own goods. The Second Circuit reasoned in Vans that even if MSCHF did not "purport to sell the Wavy Baby under the Vans brand," the Wavy Baby use was a trademark use and not merely artistic expression, given that it sought to benefit from the good will that Vans had painstakingly generated.
Accordingly, in Vans the Second Circuit found that the Rogers test did not apply, and that applying the traditional Polaroid likelihood of confusion analysis was appropriate. While the facts underpinning the appeal in Hermès are different (handbags and NFTs vs. two different shoes in Vans), it is likely that the Second Circuit will look to its recent Vans precedent to evaluate the instant appeal, given that both actions hinge upon whether an alleged infringer's use of a plaintiff's mark was trademark use to determine whether the Rogers test should be applied. One of the key questions will be whether the Second Circuit views Mr. Rothschild's use of the MetaBirkins in connection with digital goods differently than the Vans case, where both goods evaluated were physical shoes.
It's clear that a vast amount of uncertainty remains concerning how to best enforce rights relating to the sale and trading of NFTs, and to the use of trademarks in the metaverse more broadly. It also remains true that analyzing trademark "use" in a wholly digital realm combining commerce with artistic expression is difficult and fact-intensive and requires an analysis of the intersection between NFTs, trademarks, and the First Amendment. If you have questions relating to any of these issues, contact the authors of this article or any of Venable's trademark professionals. We look forward to updating you further after the Second Circuit rules on this highly anticipated appeal.
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.
