Suit Over MetaBirkin NFTs Survives Motion to Dismiss

In one of the first trademark infringement cases involving an NFT project, a federal court in Manhattan recently denied artist Mason Rothschild’s motion to dismiss the lawsuit Hermès filed in connection with the artist’s MetaBirkin NFT project.  The decision is important because it shows how courts may analyze trademark infringement claims in connection with NFTs going forward.

Background

We previously blogged about this case here.  In a nutshell, Hermès, which owns the Birkin trademark for luxury handbags, sued Rothschild for trademark infringement over the artist’s MetaBirkin NFT project, which depicts imaginary Birkin bags covered in faux fur.   Hermès claimed that Rothschild intended to associate the MetaBirkins mark with the popularity and goodwill of Hermès’s Birkin mark, rather than intending an artistic association.  Notably, per Hermès, Rothschild stated in an interview that he “wanted to see as an experiment if [he] could create that same kind of illusion that [the Birkin bag] has in real life as a digital commodity.”  He also advertised the NFTs with slogans such as “NOT YOUR MOTHER’S Birkin” and complained that he has seen his MetaBirkin NFTs being “counterfeited” and that he has seen “more and more fake MetaBirkins sold every hour.”  Hermès also claimed that media outlets and consumers were confused into believing that Rothschild’s NFTs were affiliated with Hermès. 

Rothschild moved to dismiss the case for failure to state a claim.   He argued that Hermès’s trademark infringement claim fails as a matter of law in light of the First Amendment protection given to works of art under the seminal case Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989).  Under the Rogers test, an artist’s First Amendment rights trump a trademark owner’s rights unless the artist’s usage of the mark has “no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless the [usage] explicitly misleads as to the source or the content of the work.” 

Hermès, for its part, argued that the Rogers test did not apply because the NFT project was purely commercial, and thus the standard trademark infringement analysis under the Second Circuit’s likelihood of confusion test governs. Hermès further argued that, even if the Rogers test applies, the court could not make factual determinations of artistic relevance or explicit misleadingness at the motion to dismiss stage, and thus must deny Rothschild’s motion.

The Decision

Last month, Judge Jed Rakoff of the U.S. District Court for the Southern District of New York issued a written opinion denying Rothschild’s motion to dismiss.  One of the key issues for the court to decide was whether the MetaBirkin NFTs ought to be characterized as artistic works, to which the Court must balance the artist’s First Amendment rights against the brand’s trademark rights per Rogers, or whether the NFTs are merely commercial products and thus are governed by the standard likelihood of confusion test.

The court found that, “[b]ecause Rothschild is selling digital images of handbags that could constitute a form of artistic expression, balancing the First Amendment concerns with Lanham Act protection requires applying the Rogers test.”  The court found that Rothschild’s use of NFTs did not change the analysis:  “because NFTs are simply code pointing to where a digital image is located and authenticating the image, using NFTs to authenticate an image and allow for traceable subsequent resale and transfer does not make the image a commodity without First Amendment protection any more than selling numbered copies of physical paintings would make the paintings commodities for purposes of Rogers.”

Even though the Rogers test applied, the court ruled that the Amended Complaint “contains sufficient factual allegations that the use of the trademark is not artistically relevant and that the use of the trademark is explicitly misleading as to the source or content of the work,” and the court could not resolve these factual issues at the motion to dismiss stage.  The court thus denied the motion.

Earlier this week, Rothschild filed a motion to certify an interlocutory appeal of Judge Rakoff’s opinion.  By that motion, Rothschild argues that Judge Rakoff’s order misapplied Rogers; he claims that “if Rogers is applied in a way that requires full-blown litigation of trademark claims directed at suppressing artwork, as the Order requires, then the Second Circuit’s efforts to protect artistic freedom in this context will be, in a practical sense, nullified.”  Rothschild also argues that the court’s order misapplied another precedent, Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003) – Rothschild claims that under Dastar, only misrepresentations of the origin of tangible goods are actionable under the Lanham Act – other sorts of misrepresentations, including as to the origin of creative content, are not actionable.  Per Rothschild, the district court misconstrued Dastar when it ruled that it held only “that Section 43(a) of the Lanham Act does not prevent the unaccredited copying of an uncopyrighted work.”  The motion to certify and the case remain pending.

Take-Away Points

While every NFT project will have to be analyzed on a case-by-case basis, the decision provides some useful guidance as to how courts may analyze these projects going forward.  Even though the decision may ultimately be appealed, practitioners can for now take note of the following points.

The Rogers test can apply to NFTs.  The court refused to find that the use of NFTs made the sale “commercial” so as to lose First Amendment protection.  Per the court, the NFTs were just pointing to the location of the digital artwork and authenticating the image.

But the Rogers test may not apply if the NFT links to a virtually-wearable item.  Apparently, Rothschild has sold virtually wearable items through a different NFT project.   In a footnote, the court stated that “Rogers might not apply . . . if the NFTs were attached to a digital file of a virtually wearable Birkin handbag, in which case the ‘MetaBirkins’ mark would refer to a non-speech commercial product.”  Because Hermès did not allege that Rothschild used, or will soon use, the MetaBirkin mark to sell virtually-wearable bags, the court did not consider the issue for purposes of the motion to dismiss.