Details of the case
In its landmark decision of February 8, 2023, the U.S. District Court for the Southern District of New York determined that Rothschild had infringed on the company's trademark rights and awarded Hermès $133,000 in total damages, reaffirming that Rothschild did, in fact, profit off Hermès' reputation by producing NFTs based on the design house's Birkin bags.
In December 2021, Mason Rothschild created digital images of faux-fur-covered versions of the luxury Birkin handbags of Hermès International and Hermes of Paris. Rothschild titled these images "MetaBirkins" and sold them using NFTs. In response, Hermès filed a complaint, claiming trademark infringement, trademark dilution, and cybersquatting. According to Hermes, Rothschild's NFT collection is "likely to cause consumer confusion and mistake in the minds of the public." Rothschild argued that his MetaBirkins digital images, which depict Hermès' luxury handbags covered in fur, are works of art where the physical Birkin bag serves as merely the subject of an otherwise transformative digital expression, an artistic commentary, and thus are protected by the First Amendment of the U.S. Constitution.
In May 2022, U.S. District Judge Jed S. Rakoff issued a written decision refusing to dismiss Hermès' trademark infringement claims. The court held that trademark infringement could exist even as applied to artistic expression if the artistic expression was created to explicitly mislead consumers. In this case, the court is leaving open the question of whether Rothschild's use of the "Birkin" trademark was intended as a source indicator for purposes of trading off the brand reputation of Hermès' Birkin handbags or, rather, as the title of artwork to which First Amendment protection should apply.
The outcome of this case is expected to affect a number of other currently ongoing issues of artistic expression in the virtual world. Multiple luxury brands such as Gucci, Louis Vuitton and Prada find replicas of their products sold in the virtual realm by individuals outside the respective fashion houses. This can become quite problematic, especially if these replications will seek their own trademark registrations with the intention to mislead the consumers.
The future of NFTs and trademark infringement
In 2022, more than 5,800 trademark applications were filed with the U.S. Patent and Trademark Office (USPTO) for NFTs and related technology, over two and a half times more than the 2,087 recorded in 2021. Many brand owners were looking forward to welcoming NFTs as an easy way to allow people to own digital intellectual property. Blockchain technology was supposed to make it easier for consumers to authenticate the design and confirm that it has not been replicated. Instead, the rapid growth in the popularity of NFTs and associated trademark applications gave rise to a number of unprecedented trademark infringement cases.
Trademark infringement is the unauthorised use of a registered trademark by any third party on any goods or services identical to the goods or services specified on the register. According to general trademark laws, a registered trademark is infringed when the infringer, without obtaining consent from the registered trademark holder, uses identical band assets for its goods or services despite the possibility of confusion by the average consumer. Examples of trademark infringement include instances in which one company sues because it contends that another company is profiting from its trademark without approval.
The lawsuit gave Hermès and other renowned brands the necessary push to extend their IP protection to the realm of digital goods. Hermès filed its first trademark application to protect its name in the Web3 space in August of 2022. Other brands such as Dolce & Gabbana, Nike, and Mercedes-Benz followed soon. As brand infringement attempts can be expected to increase in the upcoming future, the best advice for both established and emerging brands is to consider extending their trademark application by including virtual goods and services. To learn more about trademark options for NFTs and other digital assets, contact an experienced trademark attorney today.