Over the past several years, the emergence of non-fungible tokens (“NFTs”) has given rise to intriguing questions regarding the intersection of trademark law and digital assets. Trademark registrations play an important role in protecting brands and their associated goods and services. The application of trademark law to NFTs is still in its nascent stage, with courts only just beginning to define how and when NFTs may infringe on trademarks. This practice note summarizes and discusses three recent trademark cases involving NFTs: 1) Hermès v. Rothschild; 2) Yuga Labs v. Ripps; and 3) Nike v. StockX. These cases are among the first to address the intersection of NFTs and trademark law, dealing with novel questions about the extension of real-world trademark rights to the virtual world.
- Hermes v. Rothschild, 1:22-cv-00384-JSR
In January 2022, Hermes International filed a lawsuit in the U.S. District Court for the Southern District of New York against artist Mason Rothschild, alleging that Rothschild infringed on Hermes’s trademark rights through NFTs, known as “MetaBirkins,” that depicted Hermes’s Birkin handbags.
After the court denied Rothschild’s motion to dismiss, 603 F. Supp. 3d 98 (S.D.N.Y. 2022), and the parties’ cross motions for summary judgment, 2023 WL 1458126 (S.D.N.Y. Feb. 2, 2023), the case proceeded to trial in February 2023. In pretrial briefing, as well as at trial, Rothschild argued that his NFTs were works of art protected by the First Amendment, drawing a parallel with Andy Warhol prints. He contended that the use of Hermes trademarks in his artwork, per the Rogers v. Grimaldi test, was permissible as long as it did not explicitly mislead consumers. In Rogers v. Grimaldi, the Second Circuit held that the Lanham Act is inapplicable to “artistic works” as long as the defendant’s use of the mark is (1) “artistically relevant” to the work and (2) not “explicitly misleading” as to the source or content of the work. 875 F.2d 994, 999 (2d Cir. 1989). Conversely, Hermes maintained that the NFTs constituted unlicensed digital exploitation of their exclusive trademarks, necessitating evaluation under the likelihood of confusion standard.
On February 8, a jury delivered a verdict in favor of Hermes, finding that Rothschild had infringed on Hermes’s trademark. Dkt. 144. In his jury instructions (Dkt. 143), Judge Rakoff largely followed the Rogers test.
On March 3, Hermes filed a motion for a permanent injunction, seeking to permanently block Rothschild from promoting and selling the MetaBirkins NFTs. Dkt. 165. And on March 14, Rothschild filed a renewed motion for judgment as a matter of law or a new trial, alleging insufficient evidence and improper jury instructions. Dkt. 172.
On June 23, Judge Rakoff denied Rothschild’s request for judgment in his favor or a new trial, and instead granted Hermes’s petition for a permanent injunction. 2023 WL 4145518 (S.D.N.Y. June 23, 2023). The court enjoined Rothschild from using the Birkin marks or misleading the public about the source of the MetaBirkins NFTs due to the likelihood of generating confusion among consumers. Additionally, the court ordered Rothschild to transfer the domain name www.metabirkins.com and related materials to Hermes, and to disgorge any profits he derived from the MetaBirkins NFTs since the beginning of the trial.
The court’s opinion, although recognizing NFTs as artistic expression, emphasizes the need to avoid misleading consumers about the origin of such digital artworks. See Dkt. 191. No appeal has been noticed as of the publication of this note.
- Yuga Labs, Inc v. Ripps, 2:22-cv-04355-JFW-JEM
In June 2022, Yuga Labs, the creator of the Bored Ape Yacht Club (“BAYC”) NFTs, sued self-proclaimed artists Ryder Ripps and Jeremy Cahen for trademark infringement in the U.S. District Court for the Central District of California, alleging that the artists created NFTs that used the same images and trademarks as the BAYC NFTs. Yuga Labs argued that the artists were intentionally causing confusion among consumers and aiming to harm their business. In their answer, Ripps and Cahen claimed that their collection was a satirical take on the BAYC NFTs and asserted that Yuga Labs’ claims were barred by the First Amendment and fair use.
In March 2023, Yuga Labs moved for summary judgment, and in April, the court granted the motion, found that defendants had infringed Yuga Labs’ trademark, and set trial for damages only. See 2023 WL 3316748, at *1 (C.D. Cal. Apr. 21, 2023). The court concluded that the Rogers test did not apply, finding that, contrary to defendants’ claims, defendants’ collection did not qualify as protected artistic expression under the First Amendment (in contrast to Judge Rakoff’s jury instruction in Hermes that “MetaBirkins NFTs, including the associated images, are in at least some respects works of artistic expression”) (Hermes, Dkt. 143). The court further found that even if the Rogers test did apply, that defendants had intentionally attempted to mislead consumers. It noted that the domains rrbayc.com and apemarket.com, associated with the collection, contained branding elements confusingly similar to Yuga Labs’ branding. The ruling emphasized that the NFTs are more than just digital certifications; they are considered virtual goods for the purposes of the Latham Act, agreeing with Judge Rakoff’s ruling in Hermes that “defendant’s goods [do not need to] be tangible for Lanham Act liability to attach.” 2023 WL 3316748, at *4.
- Nike v. StockX, 1:22-cv-00983-VEC
In February 2022, Nike filed a lawsuit in U.S. District Court for the Southern District of New York against StockX, an online marketplace and clothing reseller, primarily of sneakers. Nike alleged that StockX-minted NFTs, called “Vault NFTs,” using Nike’s trademarks without authorization and sold them at heavily inflated prices. Nike’s claim raises questions about whether a tie between NFTs and associated physical goods affects whether they are considered goods under the Latham Act.
In its answer, StockX asserted the affirmative defenses of fair use and that Nike’s claims are barred by the first sale doctrine, which allows purchasers of lawfully trademarked goods to display, offer, and sell those goods under their original trademark. StockX also asserted that the Vault NFTs are “absolutely not ‘virtual products’ or digital sneakers” because each is tied to a physical good (i.e., a Nike sneaker). Dkt. 41 at 5. StockX has asserted that consumers who purchase the Vault NFTs have “two choices regarding ongoing possession: (1) retain digital possession of the Vault NFT” and leave the physical shoe in StockX’s inventory; or “(2) take possession of the physical good from the vault at any time, in which case the Vault NFT is removed from the customer’s digital portfolio and permanently removed from circulation.” Id. Nike has asserted that some Vault NFTs have been de-coupled from the associated shoes, “depriving the Vault NFT owner of possession of the shoes that are supposedly connected to the NFT.” Dkt. 39 at 4. What is undisputed between the parties is that the Vault NFT can be resold multiple times while the shoe originally associated with the NFT remains in StockX inventory. According to StockX, however, each NFT continues to be tied to the specific sneaker with which it was originally associated. And because, as StockX has asserted, each Vault NFT serves as a digital receipt for a specific sneaker, StockX has further asserted that each Vault NFT cannot actually be sold as a separate product. In contrast, according to Nike, the fact that NFTs can be resold multiple times without a buyer claiming the associated physical sneaker, as well as de-coupled from the associated sneaker, makes the Vault NFTs not simply digital receipts, but rather separate products. Nike has not yet reached the dispositive motion stage.
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The outcome of Nike will likely have implications for how trademarks are treated when there is interplay between NFTs and physical assets. Unlike the NFTs at issue in Hermes and Yuga Labs, each Vault NFT is associated with a specific physical asset—a sneaker. Nike may establish precedents for the creation, purchase, and sale of NFTs that are associated with physical assets and provide further clarity on the boundaries of trademark infringement and consumer confusion.