Trademarks in the Virtual Marketplace

A trademark’s protection can now expand to protect use of one’s trademark in digital worlds in the metaverse and within virtual reality. Hermès, a French luxury brand known for its iconic Birkin handbag, was successful in its litigation against Mason Rothschild, an NFT creator who is responsible for creating a series of 100 digital images entitled MetaBirkins.^[i] A jury awarded Hermes $133,000 after finding Mr. Rothschild infringed on the trademark of Hermès and profited “unlawfully off the goodwill of its sought-after luxury product.”^[ii] Other companies, like Miramax and Nike, have brought similar lawsuits asserting that NFT creators are infringing on the companies’ trademarks and copyrights.

Trademarks & NFTs

A trademark is a form of intellectual property that “can be any word, phrase, symbol, design, or a combination of these things that identifies your goods or services.”^[iii] A trademark is used to refer to a product that identifies as goods, while a “service mark” is used for services.^[iv] A trademark is utilized to assist customers in recognizing and identifying a product in the marketplace as well as aid customers in differentiating a product from its competitors. Most importantly, a trademark also can “provide legal protection for” a brand and help guard the brand “against counterfeiting and fraud.”^[v]

An NFT, a non-fungible token, is a blockchain-based one of a kind asset that is treated like a piece of art, digital content, or media. Once created, it cannot be reproduced or copied, making each NFT unique to the owner. They can be collected and traded within the virtual marketplace. The possession and ownership of an NFT has no current inherent legal meaning nor legal protection. Unlike trademarks, their legal significance is uncertain.

The trademark and NFT in question

In 1986 Hermès released a luxury leather handbag entitled the Birkin. It has become known as a coveted purse known for its high price tag and exclusivity. One cannot become the owner of a coveted Birkin without first being placed on a wait list, which includes the names of Hollywood royalty and the rich elite.

In 2021, entrepreneur and artist Mason Rothschild created the series of 100 digital images which depicted fur-covered handbags in the same well-known shape and style as the Hermès Birkin. His NFT, entitled MetaBirkins, sought to offer an additional way for an individual to own a version of the Birkin bag. Mr. Rothschild, and his attorneys, conveyed that the NFT “aimed to make a statement about conspicuous consumption.”^[vi] At one point, Mr. Rothschild’s creation sold at prices similar to the luxury handbag, selling for tens of thousands of dollars. Mr. Rothschild claimed the images he created were not meant to be a replica of a Birkin bag, but “rather art that depicts an imaginary bag.”^[vii]

Trademark Infringement & the First Amendment

In January of 2022, Hermès filed suit against Mr. Rothschild, arguing that Mr. Rothschild’s creation diluted the Hermès brand, confused its consumers, and allowed him to unlawfully obtain a profit off the goodwill of the product. Hermès further argued that Mr. Rothschild’s actions could pre-empt Hermès’ ability to offer its own products and services in the virtual marketplace. In its lawsuit, Hermès asked the Court to stop Mr. Rothschild from utilizing their brand, called for the destruction of the created NFTs and his profits, and claimed additional financial damages.

In response, Mr. Rothschild centered his arguments around the legal theory that the NFTs he produced were artwork within the protection of the First Amendment of the Constitution of the United States. Specifically, Mr. Rothschild argued that the existing trademark filed and obtained by Hermès, and its legal rights, did not apply to his series of NFTs because they were constitutionally protected artwork and within his rights related to freedom of speech. While it seems Mr. Rothschild’s argument was supported in part on prior case law that endorses protections for artistic expression, the fact that there was possibly consumer confusion between his NFTs and the Birkin bag itself, his argument was ultimately unsuccessful.

Why is this lawsuit significant? 

This specific lawsuit is among the first to deal with NFTs, how they intersect with the realm of intellectual property, and the free-speech protections associated with art. Litigation regarding trademark infringement does frequently occur concerning various types of products and services but has begun to enter an unknown territory associated with the virtual market. While this type of litigation can sometimes become a lucrative situation for the original trademark holder, it is also an opportunity to establish legal principle and precedent for the area of law in the future. Here, it was an opportunity for clarity on legal rights as virtual reality and the virtual market continue to expand and on what an existing trademark can provide

If you are looking for assistance with a trademark infringement case, the registration of a trademark, or another legal matter regarding intellectual property, and reside in the State of Tennessee, call Cole Law 615-490-6020 to schedule a consultation with one of our Brentwood, Tennessee Intellectual Property Attorneys.

^[i] Hermes Wins Case Against Artist Who Sold NFTs of Brikin Bags, Wall Street Journal (Feb. 8, 2023), available at https://www.wsj.com/articles/hermes-wins-case-against-artist-who-sold-nfts-of-birkin-bags-11675884201.

^[ii] Virtual Birkin Bags on Trial in Hemes Case Testing IP Rights, Wall Street Journal (Jan. 29,2023), available at https://www.wsj.com/articles/virtual-birkin-bags-on-trial-in-hermes-case-testing-ip-rights-11674962955.

^[iii] “What is a trademark?”, United States Patent and Trademark Office, available at https://www.uspto.gov/trademarks/basics/what-trademark.

^[iv] Id.

^[v] Supra note iii.

^[vi] Supra note i.

^[vii] Id.