Taken from bloomberglaw.com | Author: Isaiah Poritz | Date: 27 January 2023
French luxury design house Hermès International SA’s upcoming trademark trial against digital artist Mason Rothschild—the first of its kind—will test the boundaries of artistic expression and how nonfungible tokens are viewed in the eyes of decades-old intellectual property law.
Hermès on Monday will argue to a Manhattan federal jury that Rothschild violated trademark law by creating and selling “MetaBirkin” NFTs, which depict digital images of the famous Birkin handbag.
But Rothschild will counter that the MetaBirkin NFTs are artworks, no different from Andy Warhol’s silkscreen prints of Campbell’s soup cans, and are therefore protected by the First Amendment. The MetaBirkins show the Birkin handbag, which in real life can cost tens of thousands of dollars, covered in cartoonish, colorful fur instead of leather.
Rothschild said his 100 MetaBirkin NFTs, released in late 2021 at the Art Basel fair in Miami, provide commentary on the way that society places artistic value on status symbols and high valued goods.
“We’re at a point in trademark law, and First Amendment law, and changes in technology that have all been coming together in an avalanche of cases in the last couple of years,” said Felicia Boyd, head of IP brands at Norton Rose Fulbright US LLP. “The legal teams from both sides are very skilled, and they have teed up the issues for long-term review.”
Rothschild is represented by Lex Lumina PLLC, a recently formed intellectual property law firm composed of a group of renowned IP scholars from Harvard University, New York University, and the University of California Los Angeles.
Even if Rothschild does prevail in front of the jury, the fact that Hermès’ suit made it all the way to trial may already send a signal to the NFT art community that incorporating trademarks into their work may put them in legal trouble.
“This question is really interesting because we really need to determine exactly what NFTs are,” said Gai Sher, senior counsel at Greenspoon Marder LLP. “Are they artistic expressions, or are they functional commercial products?”
Trademarks on NFTs
Hermès argued in the lawsuit, filed a year ago in the US District Court for the Southern District of New York, that Rothschild’s use of the “MetaBirkin” name for his NFT project improperly appropriated the Birkin trademark.
Citing social media posts and press coverage, the complaint said that consumers were duped into believing that the NFTs were created or endorsed by Hermès, which isn’t the case.
Hermès accused Rothschild of harming the fashion brand’s ability to enter the NFT space, which has seen explosive growth since the start of the pandemic, though it’s cooled in the past year as the crypto market crashed.
NFTs use blockchain technology to link images with a unique digital identifier and have become particularly popular among digital artists.
Rothschild might try to argue that consumers wouldn’t be confused because Hermès is using the trademark on a real world handbag while he is using it on a digital asset, but that likely won’t be sufficient, attorneys say.
Even though Hermès doesn’t currently sell NFTs, “the fashion industry has been one of the standard bearers in digital assets,” said Michelle Cooke, an IP attorney at Arent Fox Schiff LLP.
As other brands and fashion houses like Louis Vuitton U.K. Ltd., Gucci, and Nike Inc. begin selling their own NFTs, a modern consumer would likely believe that an NFT with the Birkin label is being sold by Hermès.
Consumer confusion is a question of “what’s happening in the overall industry, not just what a particular brand owner is or is not doing,” Cooke said.
IP attorney Jessica Neer McDonald noted that many brands are beginning to expand their trademark registrations to include digital assets. “A lot of these filings, not surprisingly, are on an intent-to-use basis,” she said, which means those brands haven’t yet sold NFTs.
Art or Digital Knockoff?
Throughout the case, Rothschild’s attorneys have continually pointed to the Rogers test, a free speech-trademark rights balancing test, to argue that the MetaBirkins are protected expression.
The test, first defined in the decision of the 1989 case Rogers v. Grimaldi, allows artists to use a trademark in their work without permission as long as the use has a minimal level of artistic relevance and doesn’t explicitly confuse consumers.
Rothschild filed a motion to dismiss last February, arguing that his NFTs passed the Rogers test. Anything but an early dismissal would place a “chilling effect” on artists who want to depict or criticize brands, but don’t have the money for a legal defense, said Harvard Law Professor Rebecca Tushnet, who represented him at a hearing last May.
Judge Jed S. Rakoff was unconvinced. He ruled that while the Rogers test likely applies to the case, he needed more factual information to evaluate it.
After the parties collected consumer surveys and testimony from art critics, they each moved to be awarded a pretrial win, but Rakoff again denied the motions late last year. As of Friday, the judge hasn’t released an opinion describing his decision.
Deciding whether an NFT project is protected art or if it is a digital knockoff subject to trademark law is no easy job, according to Jeremy Goldman , co-chair of Frankfurt Kurnit Klein & Selz PC’s blockchain technology practice group.
“You could have a one-of-one, oil-on-canvas painting that gets sold in a gallery and no one would treat that as merchandise or as a consumer product,” he said. “But if you take that same painting, and you put it on posters, and you sell 100 of them, then it starts to look more like a commercial product.”
Hermès argued in court filings that Rothschild’s actions, which included creating domain names and social media handles bearing the Birkin moniker, are what contributed to the consumer confusion.
Rothschild countered that the fact that he markets and sells his art doesn’t mean that it is no longer art.
Rothschild’s art came in the form of NFTs, which are often traded on digital markets, and this may create the perception that he is selling digital assets “that just happen to have this art attached to it,” Goldman said.
“But, then again, physical artwork is also traded on a market,” he said.
The US Supreme Court in November decided to hear a case that will define the boundaries of the Rogers test. In that case, Jack Daniel’s Properties Inc. sued dog-toy maker VIP Products LLC for making a chew toy that has the distinctive shape of a Jack Daniel’s whiskey bottle and bears poop-related puns based on the actual product’s labeling.
VIP Products and other prominent IP law scholars are arguing that the toy is a “humorous parody” that is protected under the Rogers test.
Whatever the outcome of the trial, the high court’s guidance on the Rogers test will play a key role in any future appeals and new NFT cases, Boyd said.
Hermès is represented by Baker & Hostetler LLP. Rothschild is represented by Lex Lumina PLLC and Harris St. Laurent & Wechsler LLP.
The case is Hermes International v. Rothschild, S.D.N.Y., No. 1:22-cv-00384, jury trial set for 1/30/23.