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Hermès NFT Trademark Suit Has ‘All the Digital Marbles’ at Stake

Jan. 28, 2022, 10:02 AM

A fight over the use of the Hermès trademark in artistic non-fungible tokens highlights the legal tension between trademark rights and the First Amendment’s right to expression.

NFTs are a relatively new market for artists, making earlier case law on protection for brand owners difficult to apply—and leaving room for courts, possibly including the the U.S. Supreme Court, to set new precedent for the Rogers test.

Courts use some version of the Rogers test to balance potential trademark infringement with First Amendment rights in cases involving expressive works. The test tends to favor artists and differs across appeals courts.

“This is a perfect vehicle for the Supreme Court to speak on the First Amendment test as applied to the Lanham Act,” said Edward Lee, the co-director of the intellectual property program at the Chicago-Kent College of Law. “Since there are several versions of the Rogers test, this might be a perfect opportunity for the Court to consider what is the appropriate test under the Lanham Act for the use of a trademark under an expressive work.”

The use of trademarks in artwork associated with NFTs has been on the rise in both authorized and unauthorized works, trademark attorneys said, but Hermès International is the first to take significant legal action.

Some brands like Nike Inc. and Adidas AG started selling their own NFTs, while luxury fashion houses including Louis Vuitton U.K. Ltd. and Burberry Group PlcLC waded into the space by selling NFT game characters donning the brands’ labels.

Ripe for Review

Digital artist Mason Rothschild’s MetaBirkins are covered with faux fur and feature both Hermès’ Birkin word mark and its trademark for the shape and design of the bag, according to a complaint the fashion house filed in the U.S. District Court for the Southern District of New York.

The suit might have all the elements that make it ripe for an eventual review by the U.S. Supreme Court, Lee said. The new technology of NFTs, the high-profile plaintiff, and the First Amendment issues raised may be enticing ingredients for the high court.

If Rothschild’s defense focuses on the Rogers test, the federal court in New York will need to find the right balance between protecting artistic expression and avoiding the likelihood of confusion with a famous mark. The question, Lee said, is what test will strike that balance.

In applying the Rogers test, born out of a suit where a movie used the name of actress Ginger Rogers in its title without permission, the U.S. Court of Appeals for the Second Circuit said courts must weigh whether or not there’s artistic relevance to the underlying work and whether the work explicitly misleads consumers on the identity of its source.

Most cases tend to find that there’s some artistic relevance to works, leading to results in favor of artists. Other courts have applied the Rogers test in slightly different ways, by equating it with a likelihood of confusion analysis or just as an additional factor when considering likelihood of confusion.

“The issue is important enough and the courts have been inconsistent enough that it is a good opportunity if it goes this far,” Lee said. “There’s a lot of money at stake for these brands because if this turns out to be perfectly fine, that would open the doors to artists to be able to use trademarks in NFTs.”

‘New Era’

An NFT is a code on a blockchain that points to a piece of digital art or another product, but isn’t the item itself.

Rothschild launched 100 NFTs called “MetaBirkins” at the Miami Beach Art Basel in December. The NFTs sold for more than $1.1 million in total as of Jan. 6, according to the complaint.

Hermès, which sells its physical Birkin bags for around $20,000 apiece—and some for around $2 million—didn’t see a dime of those profits. Hermès hasn’t announced any plans to sell digital works.

Susan Scafidi, the director of Fordham University’s Fashion Law Institute, said she was waiting for such a case that has the potential to provide guidance on how art and fashion will coexist in the digital world.

“This is for all the digital marbles,” Scafidi said. “This is a whole new era of luxury, but also a whole new era of wealth.”

Warhol’s Campbell Soup

Rothschild claims that the First Amendment gives him the right to make and sell art that depicts Birkin bags. He calls the allegations “groundless” and invokes other instances where artists’ work included famous brand names, according to his statements on Twitter and Instagram.

But Rothschild’s MetaBirkin NFTs aren’t a perfect comparison to Andy Warhol’s pop art paintings of Campbell Soup cans, Lee said. The Campbell Soup Co. wasn’t likely to get into the business of selling paintings, whereas Hermès could follow the lead of other luxury houses and sell its own NFTs or collaborate with artists, attorneys said.

Hermès has a good shot at this case because consumers might actually assume that the brand is associated with the NFTs, and the high volume that Rothschild sold gives the art a more commercial element that isn’t as clearly protected by free expression, Scafidi said.

“The more commercial it gets, the less artistic it gets,” Scafidi said. “There’s certainly a gray area in between and that’s what makes this so exciting and really a moment where the courts and the trademark office have to decide how the ownership of the metaverse will proceed.”

To contact the reporter on this story: Samantha Handler in Washington at shandler@bloombergindustry.com

To contact the editors responsible for this story: Renee Schoof at rschoof@bloombergindustry.com; Keith Perine at kperine@bloomberglaw.com

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