The boundaries surrounding digital art, non-fungible tokens (NFTs) and trade mark law were recently re-evaluated as a US jury ruled in favour of French luxury fashion house, Hermes, in its landmark case against NFT artist Mason Rothschild. The verdict, which declared that Rothschild's NFTs featuring the design of Hermès' iconic bag violated that fashion house's trade mark rights, provides valuable insight into how intellectual property rights may be enforced within the rapidly evolving world of digital art. The outcome marks a critical moment in the ongoing struggle by brand owners to secure their IP rights and serves as a cautionary message to NFT creators regarding the importance of respecting these rights.
The dispute
Hermès is one of the world's largest luxury brands, well known for designing, producing and marketing the iconic Birkin bag. Individual Birkin bags regularly sell for tens of thousands of dollars, with some even fetching hundreds of thousands of dollars at art auction houses. The Birkin bag occupies a place of cultural importance as a symbol of wealth and exclusivity.
Rothschild is a self-described marketing strategist, who launched a collection of digital NFT images titled “MetaBirkins”, featuring unique images of a blurry faux fur covered Birkin handbags. Each of the MetaBirkin NFTs, which were recorded on publicly accessible ledger known as the blockchain, signified sole ownership of a particular image of the MetaBirkin.
For a visual comparison, the image on the left is a Hermès Birkin bag, while the image on the right is a NFT MetaBirkin released by Rothschild:
Hermès claimed trade mark infringement, dilution, unfair competition and cybersquatting relating to the unauthorised use of their registered trade mark “BIRKIN” and the trade dress of their famous “BIRKIN” handbag. In addition, Hermes asserted that Rothschild’s project disrupted the luxury brand’s efforts to enter the NFT market and hindered its ability to profit in that space form the Birkin bag’s well-known reputation. The company alleged that it was in the process of developing potential uses for NFTs as part of its overall business strategy, and that Rothschild’s actions have put it at a competitive disadvantage.
The decision
The key issue for the US court in this case was to establish whether Rothschild’s Metabirkin NFTs were:
artistic expression, in which case they would benefit from the US First Amendment protection of freedom of speech; or
commercial speech, in which case, it intended they intended to mislead consumers about the origin of the product or suggest an endorsement or affiliation with Hermès.
On 8 February 2023, a jury ruled in favour of Hermès, determining that the MetaBirkins were more like consumer products subject to strict trade mark laws, as opposed to works of art where appropriation is protected. Hermes was awarded $133,000 USD in damages.
What could this mean for the Australian NFT market?
The case raises some interesting questions about the application of trade mark rights to NFTs. In Australia, trade mark infringement occurs when another person uses the trade mark "as a trade mark" in relation to the same or similar goods or services for which the trade mark is registered. In the case of NFTs, the brand's trade mark may be registered in relation to specific goods or services, and the protection they offer would be limited by that registration. If the NFTs use the trade mark in relation to similar goods or services, and in a way that indicates the origin of those goods or services, this could potentially be considered trade mark infringement.
It is important to note that each case of trade mark infringement involving NFTs would be evaluated on its own merits and the specific circumstances of the case. Factors such as the extent to which the NFTs incorporated the trade mark, the manner in which they are marketed and sold, and the likelihood of consumer confusion would all be considered in determining whether trade mark infringement occurred.
In this case, Hermès made a number of claims based on arguments that consumers would be misled into believing that the NFTs originated from, or were linked to, Hermès. In Australia, similar allegations could be pursued by way of consumer laws. The Australian Consumer Law (ACL) offers protection against false or misleading representations in trade or commerce. If Hermès were able to prove that the MetaBirkin NFTs made false or misleading representations to consumers about the origin of NFTs and/or created an impression of an affiliation or endorsement by Hermès, the luxury house could potentially seek remedies such as injunctions to prevent further sales, damages and corrective advertising.
What does this mean for you?
While the case does not offer significant guidance on trade mark law, it does serve as a sign of reassurance for IP owners that their registered trade marks can be protected against NFT-based infringement. Brand owners should use this decision as an opportunity to assess the protection their current trade mark registrations provide and be proactive about their IP strategy.
For Web3 creators, it is important to consider possible infringement and proceed with caution before launching, or buying, new NFTs. It certainly brings the conversation back to the NFT community about what IP means in web3. It also raises important questions as to the responsibility NFT markets might have (if any) when selling potentially infringing works.