‘A Lot of Grey’ for NFT artists despite MetaBirkins jury verdict
A nine-person jury in Manhattan federal court found this week that Rothschild’s NFTs, which link to digital images of Hermès’ famous Birkin bag covered in colorful faux fur, infringed on Hermès’ trademark rights. Rothschild’s lawyers have already signaled they plan to appeal the decision, just the first at the intersection of NFTs and intellectual property law.
Meanwhile, the US Supreme Court is set to review another trademark case that tests the limits of free speech, the balancing test from the Second Circuit’s ruling in Rogers v. Grimaldi, which regulates the unauthorized use of marks in expressive works. This creates a lot of uncertainty for the courts about how to decide whether such NFTs really infringe trademark rights.
“This has been such a difficult area of the law for litigants and practitioners to operate in,” said Mark Sommers, an attorney at Finnegan Henderson Farabow Garrett & Dunner LLP. “It’s really a lot of gray.”
The jury determined that Rothschild’s NFTs – digital assets bought and sold using blockchain technology – are not protected by the First Amendment.
In a last-ditch effort to escape the case, Rothschild’s lawyers asked the judge
“Artists will be in the dock repeatedly” if a strong First Amendment standard is not applied by judges, Christopher Sprigman, a law professor at New York University and founder of Lex Lumina PLLC, told Rakoff minutes after the jury left to deliberate.
But Rakoff was unconvinced, ruling that only the jury could resolve factual disputes over whether Rothschild intended to mislead consumers into believing the MetaBirkins came from Hermès.
Future appeals
The specific language in Rakoff’s instructions to the jury could potentially be reviewed by an appeals court, said University of San Diego trademark law professor Lisa Ramsey.
“If the jury instructions did not include the exact language of the Second Circuit’s current interpretation of the Roger test, then this is a reason why the Second Circuit could reverse the decision,” Ramsey said.
The US Court of Appeals for the Second Circuit established the two-part test in a case involving Hollywood star Ginger Rogers. Under the test, an artist can use a trademark without the owner’s permission as long as the use is artistically relevant and does not explicitly mislead consumers.
Digital artist Mason Rothschild’s creation of “MetaBirkin” non-fungible tokens sparked a trademark battle with Hermès International SA.
Source: Court documents
Rothschild argued in pretrial motions that his NFTs passed the test, but Rakoff disagreed. The judge said that even if the Rogers test governed the case, a jury would have to consider evidence to decide whether the NFTs passed.
At trial, Rakoff ruled that Rothschild’s use of the “Birkin” trademark was artistically relevant to the NFTs, so they passed the first prong of the test. However, Rothschild’s lawyers said the judge abused the second prong by improperly asking jurors to examine the artist’s intent.
While the second prong of the Rogers test asks whether the artist “explicitly misleads” consumers, the jury instructions asked them to consider whether Rothschild “actually intended to confuse” potential NFT buyers
The controlling case law says Rothschild could only be found liable if he told explicit lies about the NFTs, which he never did, Sprigman told the judge.
Supreme Court see
The Supreme Court is preparing the hearing of the case Jack Daniel’s Properties Inc v. VIP Products LLC where it will scrutinize the nature of the Rogers test and examine the difference between commercial products protected by trademark laws and artistic works protected by the First Amendment.
In that case, VIP Products argues that its dog chew toy shaped like a Jack Daniel’s whiskey bottle and covered in poop-related puns is a parody of the well-known whiskey brand and therefore passes the Rogers test.
Although the Hermès ruling was based on specific facts presented at trial, further clarity from the Supreme Court on the Rogers test may provide more guidance to courts on how to adjudicate disputes between trademark owners and artists that refer to their intellectual property rights – both in NFT -area and the real world.
“The fact that there was an NFT involved is almost a bit of a sideshow to the main issue of trademark versus art,” said Stuart Levi, an IP attorney at Skadden Arps Slate Meagher & Flom LLP.
Cooling effect
Rothschild and other legal observers have argued that letting the case go all the way to trial has had a chilling effect on other artists who want to use trademarks in their artwork.
Alfred Steiner, an intellectual property lawyer and artist involved in the NFT space, said judges and juries should not act like art critics, but the subtle artistic message behind the MetaBirkin NFTs may have hurt Rothschild’s chances with a jury.
“What the ruling could do is push artists to make work that lacks subtlety, which I think is unfortunate for everyone,” Steiner said.
Rothschild told the jury that the NFT project was an “artistic experiment” intended to examine how society places value on status symbols such as the Birkin bag, even though they are digital images. He first sold the NFTs for about $450 each, before they skyrocketed in resale value.
But not all lawyers agree, especially given that jury verdicts are based on specific facts.
During the trial, Hermès claimed that Rothschild wanted to cash in on the Birkin name, pointing to dozens of text messages that Rothschild sent to potential investors saying they wanted to “pump” or “shill” the NFTs.
Those texts “most likely turned the jury against” Rothschild, said Gina Bibby, a fashion technology attorney at Withers LLP. But other cases may prove different, Bibby said.
