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A non-fungible token (NFT) is a digital receipt recorded on the blockchain for transparency and immutability. These receipts are inextricably linked to commodities, including art, real estate, video games and fashion both in the real and digital world, with the hope of generating value through rarity and authenticity. Recently, NFTs were brought back into the spotlight on the back of the decision handed down by the US District Court for the Southern District of New York on Wednesday 8 February 2023.

In December 2021, Hermès sent Mason Rothschild a cease-and-desist letter alleging trade mark infringement of the well-known Birkin trade mark by way of sale of digital artworks titled ‘MetaBirkins’. Hermès argued that the trade mark ‘MetaBirkin’ gave consumers the impression that the digital artwork was endorsed by Hermès, and that this enabled Rothschild to generate increased sales through use of the world-famous brand. However, Rothschild was confident that his digital artworks were protected from trade mark claims via the First Amendment in America’s constitution, which provides for a right to create art based on individual interpretations of real-world commodities.

Brave new (digital) world: Trade marks and the First Amendment

With both combatants unwilling to back down from their position, the stage was set for the US District Court to determine whether trade marks could extend beyond the tangible universe and just what was the reach of the First Amendment.

Rothschild’s main argument was based around his classification of the MetaBirkin as ‘art’. By classifying the digital images as artistic works, he argued that they were lawful under America’s First Amendment, and that this gave him the right to make, and sell, art that represents the Birkin bag; akin to how Andy Warhol created art depicting Campbell’s soup cans. If Rothschild had been successful in convincing the jury that the MetaBikins were artistic works, then he would have been able to rely on the First Amendment as an exception and defence to both trade mark and copyright Infringement in the US.

Is it art or a consumer product?

Significantly, it was held that the MetaBirkins were more akin to consumer products than artwork. This was based on factual evidence led by Hermès’ counsel that demonstrated Rothchild’s overwhelming motive for the creation of the MetaBirkins was financial reward. Accordingly, the use of MetaBirkin as a brand for the digital artworks was (and is) subject to the strict trade mark laws protecting brands.

By finding in favour of the famous fashion house, Hermès in its law suit against artist Rothschild, the decision sets a ground-breaking precedent in the USA for the enforcement of trade mark rights, and their application, in the digital world. The seminal issue in the case, which has far-reaching consequences for the USA (more so than any other jurisdiction) was whether the digital commodities to which the NFTs relate were considered artistic works or consumer products (artistic expression is protected by the American constitution). In this instance it was held that the digital artworks were consumer products.

While Hermès was successful in this instance, different factual circumstances surrounding the dominant purpose for creating digital assets in the USA is bound to warrant close attention from artists and brand owners, alike. The law in this regard is by no means settled.

When in doubt – register it out

What is certain is that it is vital to secure trade mark registration – but for Hermès diligently securing trade mark registrations for its Birkin bag, the outcome of the case would have been different. Trade mark registration for your brand is necessary to legally protect it and assist customers in distinguishing your products and services in the market.

If you have secured a registered trade mark you have:

• a business asset that becomes more valuable as your business becomes more profitable,
• a legal right to place the registered trademark symbol next to your trademark,
• exclusive rights to use your trademark in Australia,
• the ability to legally deter others from utilising it, and
• the ability to sell or licence it to others.

If you are concerned that a third party is utilising your trade mark without your permission, or you require assistance in securing registration of your trade mark, contact our expert IP Team who can reliably and commercially secure protection for you, and enforce your rights against third parties.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.