Landmark trade mark/NFT decision in favour of IP owners

The Manhattan federal jury's decision suggests registered brands can be protected against NFT infringements

Hermès has succeeded in its case of trade mark infringement against non-fungible token (NFT) artist Mason Rothschild. This was the first US trial considering the enforceability of intellectual property rights against the creator of NFTs. The outcome represents a win for IP owners in the fight for protection of their brand, and offers a cautionary tale for creators of NFTs.

Background

Hermès is one of the world’s largest luxury brands, with one of its most iconic products being the Birkin bag. Birkins are highly exclusive handbags, valued in the tens-to-hundreds of thousands of dollars, for which demand far outstrips tightly controlled supply. Hermès protects the Birkin brand around the world with a global trademark portfolio including registrations for the word “BIRKIN” and ‘trade dress’ or ‘shape mark’ registrations for the Birkin’s appearance.

In late 2021, digital designer Mason Rothschild created 100 'MetaBirkins'. These were NFTs featuring stylised digital depictions of the Birkin bag. The first MetaBirkin to be auctioned sold for $40,000.

Hermès filed a complaint against Rothschild in New York, alleging various causes of action including registered trademark infringement and other claims such as trademark dilution, common law trademark infringement and cybersquatting on ‘metabirkin’ domain names.

Principally at issue was whether the conduct of the artist constituted infringement including trademark dilution (if consumers would be misled and perceive the MetaBirkin NFT as coming from Hermès).

Rothschild claimed in defence that the MetaBirkins were works of art – artistic commentary on the cultural status of the iconic handbag and constituted a lawful use of Hermès’ IP under protections in the US for artistic expression.

The Decision

A Manhattan federal jury found in favour of Hermès, awarding damages. Hermès had sought damages to (in part) compensate for losses resulting from the impact on its plans to enter the NFT market itself.

Consequences for IP owners and creators of NFTs

The decision comes at an interesting time, with many major brands (including Nike, Adidas and Gucci), entering the NFT space. There have also been several decisions around the globe relating to the enforcement of IP (and other) rights against NFT creators (see cases involving Juventus Football Club and Pokémon Company International, Inc).

While this was a jury trial, and so the decision is not accompanied by judicial reasons, the case raised interesting questions about the application of trademark rights to NFTs. Trademarks are registered in respect of specific goods and services, and the protection they offer is generally limited by the scope of that registration. For example, in Australia, trademarks are usually only infringed if another person uses that trademark, “as a trademark” (ie, in a way that indicates the origin of goods or services), in relation to the same or similar goods or services as those in respect of which the mark is registered.

In some circumstances broader protection can be sought by way of consumer laws. In this case for example, a number of Hermès claims were based on arguments that consumers would be misled into thinking that the NFTs originated from, or were linked to, Hermès. In Australia, a similar claim could be brought under the Australian Consumer Law.

Although this decision does not offer significant guidance on principles of trade mark law generally, the initial run of trade mark cases in different jurisdictions is beginning to offer some comfort to IP owners that their registered brand elements will be protected against infringement perpetrated through the medium of NFTs.

Brand owners should use this decision as an opportunity to reconsider their trademarks and the protection they offer over the digital aspects of their business. This is particularly important for brands that want to use NFTs or other digital assets to engage consumers, or simply prevent third parties using their brands to do the same.

For more on strategies for protecting your products, brands and content in the metaverse, read our series The IP in NFTs.