First Ever Trial On NFT Trademark Infringement Finds Against The NFT Creator
February 15, 2023
On February 8, 2023, a jury in the Southern District of New York reached a verdict finding Mason Rothschild liable for trademark infringement of the Hermes BIRKIN mark when Rothschild advertised and sold a series of “MetaBirkin” non-fungible tokens (NFT or NFTs).1 The verdict required Mr. Rothschild pay $110,000 for trademark infringement and dilution, as well as $23,000 for cybersquatting on the MetaBirkins domain name.2
This highly anticipated trial and the jury’s verdict against Mr. Rothschild reminds everyone that the Metaverse and other blockchain-related activities are not insulated from the reach of the Lanham Act.
In 2021, Rothschild, a digital artist known for making and selling NFTs, created and sold a collection of NFTs called MetaBirkins: digital handbags adopting the iconic style and shape of the Birkin bag. The NFTs sold at the time for around $450 each, but on resale they sold for thousands of dollars. Rothschild reportedly made about $87,000 from the sales.3
In 2022, Hermes sued Rothschild for trademark infringement, false designation of origin, trademark dilution, cybersquatting, and more. The amended complaint alleged that the name and appearance of the NFTs misappropriated the BIRKIN mark and confused customers about the source of origin of the NFTs. The luxury fashion brand makes and sells BIRKIN bags (or simply, Birkins) for tens of thousands of dollars each (they can sell for even more on resale).4 The bags are well known in the fashion world for their high price tag and exclusivity, often making them the most sought after handbags in the world.5 Hermes alleged that some consumers incorrectly assumed that the MetaBirkins were created and distributed by Hermes. Hermes also alleged that the MetaBirkins harmed Hermes’ opportunity to make its own NFTs, and that such confusion would only compound if MetaBirkins were allowed to continue.
Rothschild moved to dismiss the case, arguing first amendment protections and that the MetaBirkins constituted a fair use of the BIRKIN mark. Moreover, Rothschild argued that the MetaBirkins were artistically relevant and did not explicitly mislead customers. In Rothschild’s view, the MetaBirkins were akin to Andy Warhol’s famous Campbell’s Soup Cans6 as a comment on consumerism.
The jury sided with Hermes in the first US trial on NFT trademark infringement. Many followed this case closely for its novelty and consequences for the NFT marketplace, including digital artists’ exposure to intellectual property (IP) legal liability.
This verdict has several important implications for brand owners, as well as content creators.
First, it demonstrates how brand owners may pursue infringing uses of their IP in the Metaverse or for activities tied to blockchain. The days when blockchain was associated with anonymity may be long gone—at least when it comes to IP infringement. If a use of a mark is commercial and plausibly creates confusion, there can be a cause of action for trademark infringement and related claims. This verdict may also embolden brand owners to monitor the digital marketplace with more scrutiny and then target NFT creators.
On the content creator side, the verdict suggests the importance of the true nature of the activity of the creator. While commentary itself on a brand in the Metaverse may be immune from a Lanham Act claim, the commercial use in this case weighed heavily against such immunization.
While Mr. Rothschild received an adverse decision in the Southern District of New York, the case may be appealed to the Second Circuit, at which point the appeals court may revisit the legal issues decided by the jury verdict. We will continue to watch this space.
1 Hermes International SA v. Rothschild, S.D.N.Y., No. 1:22-cv-00384, verdict 2/8/23.
2 Id.
3 https://www.law360.com/articles/1574400/-metabirkins-verdict-serves-as-warning-for-artists-nft-use.
4 What Influences an Hermes Birkin Bag Price, Sotheby’s, Max Brownall, https://www.sothebys.com/en/articles/what-influences-an-hermes-birkin-bag-price.
6 “Campbell’s Soup Cans,” Andy Warhol, https://www.moma.org/learn/moma_learning/andy-warhol-campbells-soup-cans-1962/.