Today, a New York City jury will hear opening arguments in the Hermès International v. Rothschild trial, the conclusion of which could have precedential implications on what has become the fine line artists toe between artistic expression protected by the First Amendment and trademark rights enforced under the Lanham Act.
Specifically, a jury will be tasked with deciding whether NFTs representing "MetaBirkins," created by defendant Mason Rothschild, are considered artistic expression protected under the First Amendment, or if Rothschild's use of Hermès' BIRKIN and HERMÈS trademarks and trade dress crossed the line into infringement under the Lanham Act.
Here's what you need to know about the background of the case:
What Exactly Is an NFT?
An non-fungible token (NFT) is a cryptographic token representing a unique unit of data stored on a digital ledger called a blockchain. In the context of digital art collectables, the NFT functions as the digital receipt of the purchase of an associated item, i.e., the digital art. For digital art NFTs, the art itself is not typically stored within the NFT's underlying code, but rather may consist of a .jpeg or other digital file stored elsewhere online (including on a distributed file system and peer-to-peer network such as the InterPlanetary File System, or on a decentralized blockchain data-storage protocol such as Arweave). The NFT's code typically points to that separately stored asset, via a Uniform Resource Identifier (URI), and the NFT itself may contain other metadata referencing the art asset or other aspects of the NFT project, such as naming conventions applied to, or other sorting indices for visual attributes of, the assets.
Rothschild's Creation and Sale of MetaBirkins NFTs
In or around December 2021, Rothschild created "MetaBirkins," a collection of digital images depicting faux-fur-covered Birkin handbags. Rothschild then used NFTs to sell the MetaBirkins. The NFTs have sold on four different NFT platforms, and though the value of cryptocurrency continues to fluctuate, some of the NFTs in this collection have been sold for prices comparable to real-world, physical Birkin handbags.
There is no dispute that Rothschild is using Hermès' trademarks. The BIRKIN trademark is used as the name of the NFT token itself, in the source code used to create the NFT, in the slogan "NOT YOUR MOTHER'S BIRKIN" used to promote the digital art, in the domain name of the official MetaBirkins website (metabirkins.com), and on social media. In addition, Rothschild's original description of the project on the MetaBirkins website and in the OpenSea marketplace (in each case, as documented in Hermès' complaint) openly admitted that MetaBirkins were a "tribute to Hermes' most famous handbag."
(Original Description on MetaBirkins Website, subsequently deleted. Source: Complaint, Figure 5, Civil Action No. 22-CV-00384)
(Original Description of MetaBirkins on OpenSea, subsequently deleted. Source: Complaint, Figure 10, Civil Action No. 22-CV-00384)
Rothschild claims his use is a creative expression, asserting that MetaBirkins are an artistic commentary on fashion's fur-free movement as well as on consumerism generally within the digital space. The MetaBirkins website now features a disclaimer, noting that the project is "not affiliated, associated, authorized, endorsed by, or in any way officially connected with the [sic] HERMES, or any of its subsidiaries or its affiliates," with a link to Hermès' official website.
(Source: www.metabirkins.com)
Hermès Files Suit Against Rothschild
On January 14, 2022, Hermès filed a complaint, subsequently amended, against Rothschild alleging, inter alia, trademark infringement and trademark dilution for the use of the BIRKIN and HERMÈS trademarks to identify, promote, and profit from the sale of the NFTs. Rothschild claims he is entitled to protection under the First Amendment as set forth in the seminal case Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989) (argued and won by Pryor Cashman). The Rogers case created a test to determine when the use of a trademark is immune from an infringement claim because it is artistic expression protected under the First Amendment. In response, Hermès argues that even if the MetaBirkins pass the Rogers test, Rothschild's use of Hermès' trademarks was, and is, explicitly misleading to consumers, as explained in the Ninth Circuit's Gordon v. Drape Creative, Inc., 909 F.3d 257 (9th Cir. 2018).
Explicitly misleading use in the context of NFTs was recently before the U.S. District Court for the Central District of California in Yuga Labs, Inc. v. Ripps, Case No. CV 22-4355-JFW(JEMx), 2022 WL 18024480 (C.D. Cal. Jan. 16, 2022), awaiting decision on appeal to the Ninth Circuit. This case involves one of the most popular and profitable NFT collections, the "Bored Ape Yacht Club," created by plaintiff Yuga Labs. In the spring of 2022, defendant Ryder Ripps, a visual and conceptual artist, is alleged to have created (together with one or more co-defendants) a separate NFT project, consisting of tokens that include URIs pointing to the exact same digital images as used by Yuga Labs, at their original online storage locations. Yuga has alleged that, to market and advertise this "mirror" NFT project, defendants have used Yuga's marks (including the acronym "BAYC" and certain logos), including in the same NFT marketplaces where Yuga's own collection is sold.
This past December, the district court found that a "collection of NFTs that point to the same online digital images as the BAYC collection" did not, in and of itself, constitute an "expressive artistic work," and that the use of Yuga's marks in connection with this collection was explicitly misleading to consumers. Ripps, 2022 WL 18024480 at *5. Even more, the court held that Ripps' website disclaimer that it had no affiliation with Yuga Labs demonstrated Ripps' awareness that its use of Yuga Labs' marks was misleading. Id.
The facts of the MetaBirkins case may be distinguishable from the Ripps project in important ways – including as a result of Rothschild's creation of distinct visual assets. Ratcheting up the stakes, the MetaBirkins and Ripps cases are proceeding in two different circuits, both considered key in the development of legal precedent applicable to intellectual property in creative industries, but neither bound to follow the precedent established by the other.
Why Is This Dispute Different From Any Other Trademark Infringement Case, and What Could the Decision Mean for Brands and Artists?
This is not a standard trademark infringement case, but rather a case of first impression because of the medium in which the marks are used. The jury's decision in this case should help define, in the context of NFT projects, the blurry line between protectable artistic expression and commercial products capable of creating consumer confusion.
Yet the questions underlying that analysis are complex: Is the expressive artistic statement of an NFT project that involves the use of an established mark defensible under the Rogers test, and if so, under what circumstances? Is a distinction appropriately made between the NFT itself, and the associated visual artwork – such that one may be found to be protected speech, but the other to be infringing? Even where an artwork associated with an NFT, or an NFT project as a whole, is deemed artistic expression under the Rogers test, are there circumstances where that test does not apply? These questions will not be easy to parse in the MetaBirkins case, which is necessarily fact-specific and thus may not produce sweeping guidance.
The MetaBirkins decision has the potential to provide important guidance as to what constitutes trademark infringement versus constitutionally protectable artistic speech in the context of NFTs. If the jury finds that Rothschild's MetaBirkins images and the associated NFTs are protectable artistic expression, trademark owners may have a more difficult time enforcing their intellectual property rights against creators and sellers in the digital NFT marketplace. By contrast, should the jury find that Rothschild improperly misled the public and used Hermès' marks for commercial gain, the scope of artists' freedom of expression in the context of NFTs will be more narrowly circumscribed, creating greater risk that certain artworks sold with NFTs may cross the line into trademark infringement territory.
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.
