Rising Trend in NFT Litigation Over Popular Brands
Two leading international brands have filed lawsuits in 2022 to prevent the sale of digital NFTs depicting their physical products, and both cases will test existing trademark law and impact online retailers of NFTs.
In January 2022, the French luxury brand Hermès filed a lawsuit alleging trademark infringement and dilution against Mason Rothschild, an American artist who created a series of NFT digital artworks depicting Hermès Birkin handbags—and who has previously sold Birkin digital artwork for tens of thousands of dollars. Rothschild calls the series “MetaBirkins,” and each digital bag is depicted as being fur covered. Hermès challenges both the use of its “Birkins” name and the depiction of the bag, and alleges that Rothschild’s use is misleading to consumers and harmful to its brand. Rothchild says that the series is a commentary on what he considers to be animal cruelty inherent in the manufacturing of leather handbags and his promotion of “fur free” alternatives in textiles. Rothschild filed a motion to dismiss arguing that caselaw protecting the use of trademarks and celebrity likenesses in traditional art forms and films should extend to the NFTs. Hermès filed an Amended Complaint in early March.
In February 2022, Nike filed a trademark infringement lawsuit against StockX—an online marketplace where consumers can buy and sell goods, including sneakers, to each other. Nike’s lawsuit was in response to StockX launching “Vault NFTs”—a collection of NFT digital collectibles that users purchase directly from StockX and then can trade with each other. StockX says that the Vault NFTs represent proof of ownership of physical items (maintained in the StockX vault) and that customers can “redeem” the digital NFTs in exchange for the corresponding physical item from the StockX Vault. Nike argues that customers will improperly associate these NFTs with Nike, including in ways that harm Nike’s reputation, and that StockX’s NFT marketplace will unfairly compete and cause confusion with Nike’s existing NFT marketplace. StockX’s response to the lawsuit is due at the end of March.
As online retailers and brand owners watch these cases unfold, they need to be rethinking issues about their own brands and how they are protected. Both cases will test the question of whether brands can rely on existing trademark rights (in physical products) when bringing enforcement actions for digital products. With the Hermès case, a critical question concerns the boundaries around what constitutes digital “art” and what is considered expressive speech under the Lanham Act. And to the extent a court finds infringement in either case, the lawsuits will test what equitable remedies are available when an NFT—which has been created to be immutable and permanent—violates a trademark. Interest in NFTs exploded in 2021 as a means to track ownership and transfer rights of digital files, such as the images here. Unsurprisingly, 2022 is starting off to be hot for NFT litigation.