On February 8, 2023, a jury in the Southern District of New York returned a verdict in favor of Hermes, finding NFTs linked to digital images depicting Hermes’ famous “Birkin” handbags infringe Hermes’ trademark rights. This appears to be the first trial focused on the interplay between NFTs—or non-fungible tokens—and trademark law.
An NFT is a unique digital asset that can be bought and sold on the “blockchain,” similar to cryptocurrency. For example, an NFT could be a unique work of art that exists only in digital form, but it is recorded on the blockchain so it cannot be duplicated or mass-produced. In this case, an artist named Mason Rothschild created 100 NFTs depicting Hermes bags and called them “MetaBirkins.” Rothschild’s bags, however, are covered in colorful, cartoonish fur rather than leather. Such NFTs can be bought and sold by collectors or art investors much like tangible paintings. So the court and jury were faced with the following question: is this artwork and protected speech, or is it trademark infringement?
At trial, Rothschild asserted his NFTs are works of art protected by the First Amendment, much like Andy Warhol prints. Under Rogers v. Grimaldi, Rothschild argued he is allowed to use the Hermes trademarks in his artwork so long as he does not explicitly mislead consumers. In contrast, Hermes argued the NFTs were simply unlicensed digital exploitation of its exclusive trademarks that should be evaluated under the well-known likelihood of confusion standard.
Judge Rakoff agreed with Rothschild and mostly followed the Rogers test when instructing the jury. Under that test, the jury had to consider (i) whether the trademark use in an expressive work is artistically relevant to the underlying work, and (ii) if it is, whether it is explicitly misleading as to the source or content of the work.
In the end, however, the jury agreed with Hermes even under the Rogers test, finding the NFTs were works of artistic expression but also finding Rothschild intended to confuse potential consumers.
The court’s decision to treat the NFTs as artwork likely is heartening to digital artists, but the jury verdict casts a cautionary shadow. Even artwork can infringe trademark rights when it misleads consumers as to the source of the work. Put another way, the trademark owner won despite the judge instructing the jury under the more artist-friendly Rogers test. Of course, this verdict is subject to possible appeal to the Second Circuit.
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