The Verdict
On Wednesday, February 8, a Manhattan jury returned a verdict determining that Mason Rothschild's sale of MetaBirkins NFTs is an infringement of Hermès' trademark rights—ultimately declaring that MetaBirkins NFTs are not protected under the First Amendment. For now, this verdict stands as a small victory for trademark owners and a strong warning to artists.
The Trial
In the trial, which began on January 30 and continued for eight days, Hermès argued that the MetaBirkins NFTs are misleading commercial products. Hermès relied on expert testimony to support its argument that the MetaBirkins NFTs are commercial by nature, and pointed to other evidence concerning what it regarded as an exploitation of Hermès' trademarks to promote the MetaBirkins NFTs. Rothschild's key witness, Blake Gopnik, was not allowed to testify. Gopnik would have supported Rothschild's position by comparing the MetaBirkins project to the works of Marcel Duchamp, Andy Warhol, and other artists within a tradition that Warhol himself dubbed "Business Art." Instead, Rothschild's counsel attacked the legitimacy of Hermès' consumer confusion survey and presented evidence in support of his argument that the MetaBirkins NFTs are protectable artistic expression under the First Amendment.
Ultimately, the jury found for Hermès, finding Rothschild liable for unlawful cybersquatting, trademark infringement, and trademark dilution, awarding the luxury handbag company $133,000 in damages.
More to Come on This Legal Issue
Notwithstanding the verdict, the debate regarding protected speech under the First Amendment and infringement under the Lanham Act is far from over. For example, Yuga Labs, Inc. v. Ripps, where the District Court's ruling that defendant Ripps' NFT project is not protectable under the First Amendment, has been appealed to the Ninth Circuit, which is not bound to follow the current precedent set in the Second Circuit—different circuits, different facts, and a potentially different outcome.
Where Is the Injunction?
In the parties' Joint Pretrial Consent Order, Hermès seeks, inter alia, a permanent injunction against Rothschild's manufacture and sale of the MetaBirkins NFTs. A permanent injunction is normally issued by a judge after a full trial on the merits. Now that the verdict is in, it is likely that Hermès will seek this form of equitable relief from the court.
In most cases, a trademark owner alleging infringement wants the infringing product off the shelves—the goal being to rid the marketplace of counterfeit goods that confuse the consumer and trade on the goodwill of the trademark owner. In the case of physical products, a trademark owner usually seeks an injunction prohibiting distribution of the goods and a certification from the infringer that, within a certain period of time, all the infringing products have been destroyed.
Here, the proverbial shelf is the blockchain, the marketplace is a digital platform, and the products are MetaBirkins NFTs. Thus, Hermès' injunction, if awarded, will look different. The very nature of the blockchain is that information on it cannot be deleted, so destruction here most likely consists of permanently removing the MetaBirkins NFTs from circulation by transferring them to a wallet where they cannot be retrieved. And although Hermès seeks control of the token smart contract, the images it points to are already out there. The proliferation of digital assets proves that images can be disseminated quickly and worldwide, posing practical challenges to enforcing an injunction in a global NFT marketplace.
Time will tell how Hermès will enforce an injunction, if granted, but the high profile of this case may have achieved Hermès' ultimate goal—there is now widespread public recognition that Hermès did not create, nor should it be associated with, Rothschild's Metabirkins NFTs.
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