What’s New in the Metaverse? The Line Between Artistic Expression and Commercial Goods May Soon Exist!


Anita Gogia is an IPilogue Writer and a 2L JD Candidate at Osgoode Hall Law School.


The May 18th 2022 decision by Judge Rakoff for a motion to dismiss in the case of Hermès International and Hermès Paris, Inc v Mason Rothschild clarified the applicability of Rogers v Grimaldi and the Polaroid likelihood-of-confusion factors on NFTs containing trademarks for artistic expression.  This case has significance in the application of our current understanding of trademark infringement in the metaverse.

Suggested reading: The March 2, 2022 article titled It’s Not a Bag, it’s a MetaBirkin! written by Jasmine Yu was posted on IPilogue and covers the early developments and key legal issues of this case.

Background

In brief, on January 14th, 2022, Hermès filed a complaint against Rothschild for his use of Birkin bag trademarks in his NFTs. This case differed from other counterfeit trademark infringement cases because Rothschild’s work (100 NFTs of various Birkin bags) has no physical form. Hermès claims these “MetaBirkins” diluted their trademarks and goodwill contrary to s. 43(a) of the Lanham Act  and are commercialized similarly to their valuable real-life products.

The Arguments

On February 9th 2022, Rothschild submitted a motion to dismiss. On March 21, 2022, Rothschild filed a memo of law in support of his motion to dismiss, where he argued that  his MetaBirkin commented “on the animal cruelty inherent in Hermès’ manufacture of its ultra-expensive leather handbags, and that the MetaBirkin is speech, art, and expression protected by the First Amendment. Harvard Law School Professor Rebecca Tushnet, representing Rothschild, has said that MetaBirkins comment on the relationship between consumerism and the value of art.

Rothschild also cited the Rogers test from a 1989 2nd Circuit ruling— those using trademarks for artistic expression which doesn’t explicitly mislead consumers are protected from infringement claims. The Rogers bar is high, and a slight risk that the use of a trademark suggests endorsement or sponsorship is “outweighed by the danger of restricting artistic expression”. Tushnet has also stated that anything but a dismissal of the case may have a “chilling effect” on artists.

On the other hand, Hermès argues that Rogers does not apply because Rothschild’s actions of setting up an online store and the marketing materials support a goal of selling a digital good. To this, Tushnet responds that artists are protected in marketing their work to make a profit. Hermès also argues that Rothschild’s statements in which he said that there wasn’t “much difference” between having the crazy handbag or “now” bringing that into the metaverse illustrates that the MetaBirkin NFTs are a commodity. Hermès argued that the court should apply the Polaroid factors to evaluate whether the use of the trademarks confuse the public.

The Decision

In May, Judge Rakoff denied Rothschild’s motion to dismiss, releasing detailed reasons for his decision on May 18th, 2022. Judge Rakoff held that the Rogers test applies in this case because the MetaBirkin NFTs “could constitute a form of artistic expression”. Using the NFTs does not make the image (Rothschild’s artwork) a commodity without First Amendment protection. .However, the motion was ultimately denied because the Court held that the MetaBirkin does not satisfy the Rogers test at this stage as Rothschild intended to associate the NFTs with the goodwill of their Birkin marks. Judge Rakoff held that Hermès made sufficient allegations of “explicit misleadingness” and so denies the motion to dismiss. Judge Rakoff also denies Rothschild’s argument that the court should not follow the Polaroid likelihood-of-confusion factors in assessing whether MetaBirkin explicitly misleads per Rogers.

It is notable that Judge Rakoff was influenced by Rothschild’s marketing efforts and commercial actions — this casted doubt as to whether the NFTs were meant only for artistic expression and not as commercial goods.

Although freedom of artistic expression varies globally, the inherent idea that art is interpretative and holds meaning beyond a superficial level is arguably a universal truth. The metaverse allows artists to explore a new source of income, undoubtedly increasing the volume and popularity of NFTs and other virtual commodities. Such a cultural movement illustrates the significance of this case; and while it originates in the US Southern District of New York, the importance transcends borders. This decision has important implications as to how courts may interpret metaverse-related trademark infringement claims moving forward.

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