NFT Artists Can’t Hide Behind Free Expression When Shilling for Profits Based on the Copyrights or Trademarks of Others
By Linnea Vail
Our Summer 2022 issue of Illuminations described a case involving Hermès, a luxury goods company that manufactures and sells the Birkin handbag, where the NFT artist was found liable for infringing Hermès’ trademark. A further development in the same case is that the artist has also been found liable for infringing Hermès’ copyright. He is also not the only NFT artist who has recently encountered a tenacious intellectual property owner.
The case was brought by Hermès against Mason Rothschild, an artist who produced and sold NFTs that he called “MetaBirkins.” Each MetaBirkin was a digital image of the Hermès Birkin handbag depicted as if made of fur. Hermès filed a lawsuit against Mr. Rothschild in federal court in New York – one of many actions that have been instituted by trademark owners against NFT holders for trademark infringement. In that decision, the court decided that the NFT infringed on Hermès’ trademark rights, and created customer confusion about whether Hermès was promoting the NFT. At the time, the court did not answer the question of whether the NFTs also infringed Hermès’ copyright rights – but that question has now been decided in favor of Hermès.
After several days of deliberation in February of this year, the jury found that Rothschild did profit off Hermès’ goodwill by producing NFTs based on the design house’s Birkin bags. In their initial filing, Hermès claimed that Rothschild was “stealing the goodwill in Hermès’ famous intellectual property to create and sell his own line of products,” which could create confusion among its consumer base. Each MetaBirkin was priced at $450, and Rothschild also received 7.5 percent of secondary sales. Hermès claimed in court filings that MetaBirkins reached about $1.1 million in total sales volume, and Rothschild estimated that he made about $125,000 from the NFTs, including the initial sales and royalties.
The attorneys for Hermès argued that Rothschild’s MetaBirkin NFTs not only misled consumers into believing the two brands were related, but that the use of the Birkin name in the NFT collection weakened the Hermès’ brand. Rothschild countered by claiming his artwork was protected by the First Amendment, stating that his project was simply art that provided a larger commentary on the fashion industry. The attorney for Rothschild argued that NFTs were art that was protected under the First Amendment as free speech, and that the Birkins were a “cultural symbol of rarefied wealth and status,” ripe for artists to explore as metaphors of consumerism (https://www.nytimes.com/2023/02/08/arts/hermes-metabirkins-lawsuit-verdict.html). However, part of the reasoning for the decision against Rothschild was evidence of his extensive profits from the sales of the NFTs. Objectively, it appeared that Rothschild’s primary purpose in creating the NFTs was less about artistic expression and more about monetizing off a globally recognizable brand.
This balancing of artistic expression versus commercial gain is the central element of the Rogers v. Grimaldi test, one of the authorities used to decide the Hermès case. The test originated when the actress Ginger Rogers sued the producer Alberto Grimaldi, arguing that the film “Ginger and Fred” violated her trademark rights because it used her name in connection with its depiction of a pair of Italian dancers. But a federal appeals court determined that the use of the name Ginger was an expressive element of the title, artistically relevant to the underlying film, and therefore subject to First Amendment interests that needed to be weighed against the risk of misleading consumers. The appeals court stated “A misleading title with no artistic relevance cannot be sufficiently justified by a free expression interest. For example, if a film-maker placed the title ‘Ginger and Fred’ on a film to which it had no artistic relevance at all, the arguably misleading suggestions as to source or content implicitly conveyed by the title could be found to violate the Lanham Act as to such a film.” (Ginger Rogers v. Alberto Grimaldi, Mgm/ua Entertainment Co., and Peaproduzioni Europee Associate, S.r.l.,, 875 F.2d 994 (2d Cir. 1989)
In the Hermès case, the jury was presented evidence of text messages in which Rothschild asked social media influencers to “do one more shill post” that might raise demand for his NFTs. The lawyer for Hermès also told the jury that Rothschild had publicized its cease-and-desist letter on social media, hoping that the conflict might drive interest. Both points tended to weaken Rothschild’s purported artistic intent and make clear that his purpose was to gain profits from the Hermès brand. Ultimately, the jury awarded $133,000 in damages to Hermès for the infringement by Rothschild.
Another recent case involving IP rights in NFTs involves the Bored Ape Yacht Club (BAYC). In that case there may have been doubt about NFT publisher Yuga Labs’ ownership in the copyrights in the artwork of BAYC. Yuga Labs was clearly the seller of the NFTs and owned the trademarks, though. When “conceptual artists” Ryder Ripps and a partner sold knock-off “RR/BAYC” NFTs, Yuga Labs was able prevail on trademark law grounds. Yuga demonstrated that, notwithstanding the defendants’ assertion that their work was satire, there was no significant artistry in the knock-offs, conceptual or otherwise.
For future litigation involving NFTs, it appears artists will be more highly scrutinized where there is evidence that their primary intent is to gain a profit. Whether an artist gained a commercial advantage is a central factor in assessing intellectual property infringement, thus if an artist or publisher is to use a third-party brand as part of an NFT, it is not assumed that the First Amendment will protect them. This case will provide future guidance to artists and brand owners alike on the line between commodities and protected artistic expression.