New District Court Decision Offers Useful Guidance on Applying Trademark Law to Virtual Goods


May 20, 2022

Click for PDF

On May 18, 2022, U.S. District Judge Jed S. Rakoff of the Southern District of New York issued a ruling in an ongoing dispute between international luxury fashion house Hermès and the self-proclaimed artist, operating under the name Mason Rothschild, affecting the artist’s line of non-fungible tokens (NFTs) called “MetaBirkins”. This lawsuit is one of the first significant trademark lawsuits related to NFT offerings. Importantly, Judge Rakoff denied the artist’s motion to dismiss the trademark claims. While Judge Rakoff’s decision to deny the artist’s motion to dismiss does not resolve the merits of Hermès’ claims, it does offer some of the first available insight into how courts will consider trademark claims related to NFTs.

In Hermès International, et al. v Mason Rothschild, Hermès sued the artist, working under the name of Mason Rothschild, in federal court in the Southern District of New York for the manufacture and sale of NFTs, which he called MetaBirkins, each of which was a digital replica of Hermès’ Birkin handbag, which, like was made of fur; The artist also sold MetaBirkins and other NFTs through social media channels and digital storefronts under the MetaBirkin name. No. 22-cv-384 (JSR), Dkt. 24 (SDNY January 14, 2022). Hermès argued that the sale of these MetaBirkin NFTs violated and diluted Hermès’ Birkin trademark, misrepresented the origin of the NFTs as Hermès authorized digital products, and violated and diluted Hermès’ business reputation. Hermès also asserted a cybersquatting lawsuit based on Rothschild’s use of the domain name for the website where the NFTs were offered. ID.

The artist applied for termination. ID. dct. 26, 27. The artist mainly argued that the use of the term “MetaBirkin” was a protected term in the landmark Second Circuit case Rogers versus Grimaldi875 F.2d 994 (2 Cir. 1989), which held that the use of a famous mark (in this case a mark composed of a prominent name) in connection with a work of art does not infringe trademark rights so long as ( 1) the name for the product is “minimally artistically relevant”; and (2) the use is not “explicitly misleading” as to content, authorship, sponsorship, or endorsement. ID. The artist argued that naming his products “MetaBirkins” was at least minimally relevant to his claimed project to question the fashion industry’s cruelty to animals and the nature of luxury and value, and that the term was not explicitly misleading, regardless of whether some observers may have actually been confused. Hermès denied the motion to dismiss, emphasizing the artist’s extensive commercial use of the MetaBirkin label, including selling other products under that label and running digital storefronts and marketing campaigns using the name. ID. dct. 31. Hermès also highlighted evidence of actual confusion among consumers and industry observers about the origin and approval of the MetaBirkin NFTs. ID. And Hermès referred to the artist’s own statements, including in an interview with Yahoo! financecalling the MetaBirkin a “digital commodity” and saying that there’s not “a lot of difference” between having the “crazy purse” in real life and “being able to take it to the metaverse” “now” . those legendary NFTs” and complained about people selling counterfeit MetaBirkins NFTs in competition with his NFTs. ID. Hermès argued that those of the second circuit Rogers The case should not apply to “goods” sold commercially, such as the MetaBirkin NFTs. ID. Hermès also argued, even if the Rogers Case applied, the court should nonetheless consider whether the MetaBirkin label, by using the ‘venerable Polaroid Factors,” a set of criteria from a 1961 Second Circuit decision that courts use to assess whether a defendant’s mark will confuse the public. ID. The artist’s response insisted that the Rogers The case should apply because the MetaBirkin NFTs were works of art and should apply equally to the works themselves and to the language marketing of those works. ID. dct. 38. The artist also argued that if the Rogers Test applied, the court should ignore the Second Circuit Polaroid Multi-factor test, because the only question should be whether the MetaBirkin label expressly misled the public, not whether it could actually mislead the public. ID.

Judge Rakoff heard a hearing on May 4, 2022 and issued an executive order on May 5, 2022 denying the motion to dismiss. ID. dct. 49. On May 18, 2022, Judge Rakoff issued a court order justifying his decision. ID. dct. 50. Judge Rakoff ruled that the Second Circuit has jurisdiction Rogers The test was used because the MetaBirkin NFTs, “digital images of handbags”, “could represent a form of artistic expression”, despite the fact that the artist also used the label to market and promote these works of art. ID. Specifically, Judge Rakoff ruled that “Rothschild’s use of NFTs to authenticate the images” does not “change the application of Rogers: Because NFTs are simply code that indicates where a digital image is located and authenticates the image, using NFTs to authenticate an image and allow for traceable subsequent resale and transmission does not render the image an unfirst commodity Amendment protection, as well as selling numbered copies of physical paintings, would not make the paintings commodities Rogers.ID.

Judge Rakoff declined to rule on whether the MetaBirkin label was deemed minimally artistically relevant at the dismissal motion stage Rogers Case requires protecting a defendant. The court recognized that the threshold of artistic relevance was below the Rogers The case is “minor,” but also noted that Hermès had claimed that the artist “completely intended to associate the ‘MetaBirkins’ brand with the popularity and goodwill of Hermès’ Birkin brand, rather than an artistic association.” to intend”. ID. Judge Rakoff quoted the artist’s own statements to the press about his efforts to “create the same kind of illusion that [the Birkin bag] has in real life as a digital commodity.” ID.

Regardless of whether the MetaBirkin label was deemed artistically relevant, Judge Rakoff ruled that Hermès had reasonably claimed that the MetaBirkin label was expressly misleading, which was sufficient to make a claim that the Rogers Test does not protect Rothschild’s behavior. Accordingly, the court denied the motion to dismiss. ID. Judge Rakoff specifically dismissed the artist’s argument that courts in the Second Circuit should ignore longstanding trials Polaroid Factors of likelihood of confusion in determining whether a mark is expressly misleading Rogers Test. In addition, the court concluded that Hermès had appropriately asserted certain facts Polaroid Factors supporting the conclusion that the MetaBirkin label was misleading. Judge Rakoff further concluded that even if the artist was right, that the Polaroid factors do not apply, the motion to dismiss would still fail Rogers Test because Hermès had sufficiently claimed that the artist had in fact used enough confusion and sufficient effort to mislead the public, including the artist’s own statements to the press. ID.

Judge Rakoff’s decision was clearly influenced by the commercial nature of Rothschild’s activities with regard to potential future sales of virtual goods in a metaverse or enhanced reality context. The court found that the NFTs could not are considered works of art “if the NFTs were attached to a digital file of a handy Birkin handbag, in which case the ‘MetaBirkin’ mark would refer to a non-language commercial product (though not yet one that considered ordinary or everyday).” ID. 12n.3. But because Hermès had only hinted that the artist might sell “virtually wearable ‘MetaBirkins'” in the future, Judge Rakoff declined to consider that issue for purposes of the dismissal motion. ID. As recognized by Judge Rakoff, the proliferation of virtual objects and their potential applications and uses in conjunction with “metaverse” technologies require further analysis.

This decision represents one of the earliest decisions by a court in a trademark dispute arising from non-fungible tokens and provides the first indication of how courts will evaluate NFT-related trademark claims. Other lawsuits involving NFTs are already progressing through the courts. Judge Rakoff’s decision will likely be considered when these other disputes reach the point of court decisions.

The following Gibson Dunn attorneys prepared this client alert: Howard Hogan and Connor Sullivan.

Gibson Dunn’s attorneys are available to assist you with any questions you may have about these developments. Please contact the Gibson Dunn attorney with whom you normally work, the authors, or any of the following firm heads specializing in intellectual property, fashion, retail and consumer products, media, entertainment and technology, global financial governance or privacy, cybersecurity and Data Practice Groups Innovation:

Intellectual property group:
Kate Dominguez – New York (+1 212-351-2338, [email protected])
Y. Ernest Hsin – San Francisco (+1 415-393-8224, [email protected])
Josh Krevitt – New York (+1 212-351-4000, [email protected])
Jane M. Love, Ph.D. – New York (+1 212-351-3922, [email protected])

Fashion, Retail and Consumer Group:
Howard S. Hogan – Washington, DC (+1 202-887-3640, [email protected])

Media, Entertainment and Technology Group:
Scott A. Edelman – Los Angeles (+1 310-557-8061, [email protected])
Kevin Masuda – Los Angeles (+1 213-229-7872, [email protected])
Benyamin S. Ross – Los Angeles (+1 213-229-7048, [email protected])

Global Financial Supervision Group:
William R. Hallatt – Hong Kong (+852 2214 3836, [email protected])
Michelle M. Kirschner – London (+44 (0) 20 7071 4212, [email protected])
Jeffrey L. Steiner – Washington, DC (+1 202-887-3632, [email protected])

Data Protection, Cybersecurity and Data Innovation Group:
Ahmed Baladi – Paris (+33 (0)1 56 43 13 00, [email protected])
S. Ashlie Beringer – Palo Alto (+1 650-849-5327, [email protected])
Alexander H. Southwell – New York (+1 212-351-3981, [email protected])

© 2022 Gibson, Dunn & Crutcher LLP

Attorney Promotion: The attached materials have been prepared for general informational purposes only and are not intended as legal advice.


Comments are closed.