Non-fungible tokens, commonly referred to as NFTs, exploded in popularity over the last few years, largely as a result of the increased popularity of and investment in cryptocurrencies. Like cryptocurrencies, NFTs are tokens that are recorded on and exist in the blockchain and can be traded digitally.[1] Unlike cryptocurrencies, each NFT is given a unique identifier that makes it different than all other NFTs, hence the “non-fungible” aspect of such tokens. This means that no two NFTs are alike as far as the blockchain is concerned, whereas all units of a particular cryptocurrency are seen as the same.[2]
Pieces of digital art have commonly become tokenized as NFTs and traded on online marketplaces for cryptocurrencies, fiat currencies, or other NFTs. The promise of NFTs is that digital artists can sell their artwork and questions of authenticity, which commonly plague the physical art world, can quickly be answered given the digital piece’s unique identifier on the blockchain.
The rise of NFT art has raised important questions of intellectual property law, which had largely remained unanswered until this week.
On February 8, 2023, the luxury brand Hermès won a pioneering intellectual property lawsuit involving NFTs and intellectual property protections.[3] The company brought suit when artist Mason Rothschild launched the “MetaBirkin” NFT. MetaBirkin NFTs were digitally-rendered pictures of bags that looked very similar to Hermès well-known Birkin bag, though the images had fur on the bags instead of leather. The company sued to recover the profits Rothschild obtained from the NFTs under the theory that the MetaBirkin traded on the popularity and brand-recognition of Hermès signature bag and Rothschild’s NFTs violated Hermès’s intellectual property.[4] A jury in the U.S. District Court for the Southern District of New York disagreed with this argument but found Rothschild liable for trademark violations.
Rothschild’s raised the defense that the MetaBirkin NFTs were protected acts of free speech and expression protected by the federal Constitution’s First Amendment. Specifically, Rothschild argued that since the NFTs name was different and the images had fur rather than leather, the MetaBirkin is a piece of art and thus is constitutionally-protected protected expression. In determining what test for trademark infringement claims applies to the MetaBirkin and Rothschild First Amendment claims, Judge Rakoff held that the Second Circuit’s test in Rogers v. Grimaldi applied.[5] A major component of the Rogers test is the explicit misleading nature of the purported infringement. Rothschild’s case suffered from the fact that the MetaBirkin’s name was similar to Hermès’s Birkin bag, which likely confused members of the public who might have thought Rothschild’s NFT to be associated with Hermès.
The importance of this case is that it applied established intellectual property laws to NFTs. As technologies such as NFTs or Web3 (an idea for a decentralized and blockchain-oriented internet) grow in importance and digital art is created, owners of existing intellectual property rights might have protections available against artistic renditions of their intellectual property, particularly those that earn a profit trading on the rights-owner’s name.
[1] https://www.investopedia.com/non-fungible-tokens-nft-5115211
[2] https://opensea.io
[3] Hèrmes Int’l v. Rothschild, 22-CV-384 (JSR) (S.D.N.Y May 18, 2022).
[4] https://www.skadden.com/insights/publications/2023/02/jury-finds-that-metabirkin-nfts-infringed-hermes-trademark-rights
[5] Rogers v. Grimaldi, 875 F.2d 994 (2d. Cir. 1989).