NFT Lawsuits Keep Dropping
Last year, we wrote about a few early lawsuits involving NFT projects including a Pulp Fiction drop and a planned Jay-Z album drop here and here. More recently, a number of other NFT-related lawsuits have been filed, including a case over the rights to an early NFT, cases against an artist and an artist’s estate over rights to mint, and suits by brands alleging third-party drops infringe and dilute their trademarks. Here’s a roundup of the cases.
The Birkin Bag Case: Hermès Int’l et al. v. Rothschild, Index No. 1:22-cv-384 (S.D.N.Y.)
On January 14, 2022, Hermès sued Mason Rothschild over the artist’s MetaBirkin NFT project, which depicts imaginary Birkin bags. The Complaint contains claims for trademark infringement, trademark dilution, cybersquatting, and unfair competition. In its Complaint, Hermès alleges that Rothschild cannot be “immunize[d]…by proclaiming that he is solely an artist” because he has “adopted and is using METABIRKINS as a trademark.” Although Hermès has not yet minted its own NFTs, consumers “would expect that NFTs featuring famous brands are affiliated with those brands or wonder why the famous brands are permitting such dilutive use of their valuable assets and think less highly of them.” Rothschild posted on Instagram a public response stating: “My lawyers …put it well when they said that the First Amendment gives me the right to make and sell art that depicts Birkin bags, just as it gave Andy Warhol the right to make and sell art depicting Campbell’s soup cans. I have the right also to use the term ‘Metabirkins’ to describe truthfully what that art depicts, and to comment artistically on those bags and on the Birkin brand. The fact that I sell the art using NFTs doesn’t change the fact that it’s art.”
Rights to Mint the “Guernica of India:” Tamarindart, LLC v. Husain et al., Index No. 1:22-cv0595-AT (S.D.N.Y.)
On January 21, 2022, TamarindArt, LLC (“Tamarind”) sued the administrators of the estate of artist Maqbool Fida Husain for a declaration that Tamarind’s NFT project of Husain’s artwork did not infringe any of the estate’s rights. Per the Complaint, in 2002, Tamarind purchased a sixty-foot-long mural by the artist entitled Lightning (1975) for $400,000 (per the Complaint, the work was often called the Guernica of India). Recently, Tamarind launched a campaign to sell NFTs based on the artwork. In response, the estate sent Tamarind a cease-and-desist letter stating that Tamarind’s plans to sell NFTs based on the artwork would violate the estate’s copyright interests in the work.
Tamarind seeks a judicial ruling that its planned NFTs would not infringe any rights held by the estate. Per Tamarind, as part of the purchase, the artist signed a bill of sale, granting Tamarind title to the work and an “exclusive, royalty free, worldwide license…to display, market, reproduce and resell all or any part of the artwork, including all intellectual property in respect thereof.” Tamarind also alleges that it and the artist signed a further agreement in 2003 in which the artist agreed “that all artworks already purchased or created for Tamarind/affiliates are considered copyright protected property of Tamarind or its affiliates,” which, per Tamarind, extinguished any residual rights the Estate may have had in the artwork and made Tamarind the copyright owner of the work.
Right of Publicity Case: Parks p/k/a Lil Yachty v. Opulous et al., Index. No. 2:22-cv-00587 (C.D. Cal.)
On January 27, 2022, Lil Yachty sued music blockchain platform Opulous and its founder, asserting claims of unfair competition, trademark infringement, and violation of his right of publicity. Opulous, a platform of so called “music copyright-backed NFTs,” offers buyers a share of a song’s future royalty earnings. According to the Complaint, Lil Yachty and his team had some preliminary conference calls with Opulous concerning the possibility of a collaboration, but no deal terms were reached, and no agreement was formed. Nonetheless, Opulous allegedly launched a press and advertising campaign using Lil Yachty’s name, trademark, and image, falsely representing that Lil Yachty was affiliated with the Opulous platform, and falsely representing that the platform would drop NFTs of his copyrighted works.
Case over Early NFT: Free Holdings Inc. v. McCoy et al., Index No. 1:22-cv-00881-LGS (S.D.N.Y.)
On February 1, 2022, Free Holdings Inc. sued artist Kevin McCoy, Sotheby’s, Nameless Corporation, and Alex Amsel a/k/a Sillytuna in federal court in New York over the marketing and sale of what is widely regarded as the first-ever NFT, Quantum by McCoy. In the suit, Free Holdings alleges that McCoy created the Quantum NFT on the Namecoin blockchain in 2014, but he let the record for the Namecoin blockchain expire in or around January 2015 by failing to update the records (the Namecoin blockchain requires a user to update their block records periodically). In April 2021, Free Holdings claimed that record and alleges that it thereby became the owner of the NFT. Free Holdings alleges that, when McCoy and Sotheby’s offered for sale a newly minted Ethereum-based Quantum at auction, their marketing efforts and a condition report prepared by Nameless for the work were false and misleading because the Namecoin record had not been “effectively burned” as the condition report had conveyed but was still active and controlled by Free Holdings. (Note -the condition report states: “To avoid domain squatting, Namecoin was designed to include removal of pointers after 36,000 blocks. Accordingly, this specific Namecoin entry was removed from the system after not being renewed, and was effectively burned from the chain.”) The Ethereum-based work sold at auction for $1.47 million. After the auction, Sillytuna revealed himself on Twitter as the winning bidder, claiming to be the owner of the “[f]irst ever crypto art nft.” Free Holdings alleges claims of deceptive trade practices against Sotheby’s, McCoy and Nameless, and claims of slander of title and commercial disparagement against all the defendants.
The “Vault NFT” Case: Nike, Inc. v. StockX LLC, Index No. 1:22-cv-983-VEC (S.D.N.Y.)
On February 3, 2022, Nike sued StockX for trademark infringement and dilution in connection with StockX’s use of Nike’s trademarks in its “Vault NFTs.” StockX operates an online resale platform for sneakers, apparel, and other retail products. Nike claims StockX’s NFTs prominently use Nike’s trademarks, “marketing those NFTs using Nike’s goodwill, and selling those NFTs at heavily inflated prices to unsuspecting consumers who believe or are likely to believe that those ‘investible digital assets’ (as StockX calls them) are, in fact, authorized by Nike when they are not.” While StockX’s responsive filing is not yet due in court, the Complaint notes that StockX claims that its “’Vault NFTs’ do no more than track ownership of a physical Nike product safely secured in its ‘vault.’”
Take-Away Point
As more and more artists, startups, and brands launch NFT projects, disputes over the rights to mint and market NFT drops have surfaced, and we can expect to see more lawsuits filed. Some of these cases will require courts to grapple with how to apply established copyright, trademark, and unfair competition law to the NFT space. These questions include: What is the line between artwork protected by the First Amendment and trademark usage by an NFT artist? When a reseller drops an NFT associated with a physical product, at what point would the drop violate the manufacturer’s trademark rights? These cases, if ruled on by the courts, could help define the contours of the rights of various stakeholders in the NFT space.
