Metaposes: NFT Complications and Considerations for Traditional Brand Owners | Stinson LLP

In yet another example of the law trying to keep pace with technology, the US District Court for the Southern District of New York ruled in Hermès International, et al. v. Mason Rothschild which examines traditional trademark concepts in the context of non-fungible tokens, or “NFTs.” This helped provide a glimpse of how courts will treat sales of NFTs and other digital assets in the future.

Artist, self-proclaimed marketing strategist and entrepreneur, Mason Rothschild created a collection of digital images of Hermès Birkin bags covered in faux fur, which he called “MetaBirkins.” Rothschild then began selling MetaBirkins as a series of NFTs at prices similar to the elusive and coveted physical bags themselves. To promote the NFTs, Rothschild created social media accounts and websites with the MetaBirkin name. Rothschild even went so far as to describe his creative inspiration as an experiment to see if he could “create the same kind of illusion that [the Hermès Birkin bag] have in real life as a digital commodity.”

Provoked by these actions, Hermès, the owner of the Birkin trademark for luxury handbags, brought a claim for trademark infringement and dilution of the Birkin mark. Hermès appeared to have a strong case, considering the amount of actual confusion expressed by consumers on social media, as well as in the traditional media, with major magazines and newspapers falsely reporting a partnership between Rothschild and Hermès. However, Rothschild threw a wrinkle into Hermès’ position when he filed a motion to dismiss for failure to state a claim. He argued that Second Circuit precedent required dismissal of Hermès’ trademark claim on First Amendment grounds because his digital images were protected artistic expression and not actual handbags. Therefore, the key question before the court was whether Rothschild sold commercial products under the Birkin brand or creative works of art entitled “MetaBirkin.”

While the court sided with Rothschild and went with the latter interpretation—because the digital images “could constitute a form of artistic expression”—they denied Rothschild’s severance motion due to the unresolved factual disputes. Under Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989), use of a trademark in a work of art is not infringement as long as (i) the name is artistically relevant to the work and (ii) the use of the trademark does not explicitly mislead as to the source or content of the work. In this case, the court found that the MetaBirkin name may not be artistically relevant, and even if it were, Rothschild’s use of it could still be explicitly misleading and point to allegations of Rothschild’s intent to exploit the Birkin brand’s popularity and goodwill. can be used as evidence of actual confusion.

This case is certainly one to watch as it raises many interesting questions about the future of trademark law in the digital age. Will brand owners be able to enforce their trademark rights against new forms of digital art? How much confusion will the NFT marketplace introduce to traditional brand owners? In particular, the use of NFTs did not influence the court’s decision in the MetaBirkins case. However, the court noted that Rogers might not apply if the NFTs were attached to a practically portable bag—a non-speech commercial product.

The court’s balancing act between trademark protection and First Amendment concerns is likely to affect both brand owners and artists, at least in the near future. For example, many brand owners have already raced to file trademark applications for the anticipated use of their brands with NFTs and/or virtual goods in the metaverse. As consumers become increasingly interested in digital experiences, it is critical to understand the metes and bounds of our intellectual property rights and actively police both the physical and digital worlds to keep pace with any changes in technology and law.