Is it designer? No, it’s infringement – NFTs back in the spotlight

17 March 2023

Although popular culture’s fascination with NFTs has arguably diminished since their prime in recent years, the legal issues surrounding NFTs (including those explored in our article here) certainly haven’t.

One of these legal issues, trade mark infringement, was recently explored in the high-profile US case of Hermes International v Rothschild.

In this case, Hermes International (Hermes), the entity behind the infamous Birkin bag (which can range anywhere from $10,000-$500,000 depending on the size, style and colour), successfully argued that the exclusive rights afforded by its ‘HERMES’ and ‘BIRKIN’ word marks and ‘BIRKIN’ shape mark were infringed by Mason Rothschild (Rothschild) in his creation of a collection of NFTs known as ‘MetaBirkins’.

Although this case relates to US trade mark registrations (and law), it nonetheless highlights a few important concepts which also exist in the Australian trade mark system, being:

  1. the notion of use…as a trade mark; and
  2. the likelihood of consumer confusion.

Use….as a trade mark

Under section 120 of the Trade Marks Act 1995 (Cth) (Act), a trade mark will only be infringed if:

a ‘persons uses as a trade mark a sign that substantially identically with or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered’

And what does the Act define as a ‘trade mark’?

a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade…

Accordingly, use of a trade mark outside of trade or commerce, for example, in a painting displayed only in an art gallery or museum will not (strictly speaking) constitute infringement of an owner’s exclusive rights in its trade mark.

Rothschild made a similar argument – ie that the images of the blurry faux-fur covered Birkin handbags contained within his ‘MetaBirkin’ NFTs (which had sold for prices comparable to the real-world bags) were art. Thus, his use of Hermes’ trade marks did not constitute use as trade marks.

However, Hermes successfully argued that Rothschild used its marks to ‘brand a product line…attract public attention and signify source’, providing examples of quotes given by Rothschild himself which demonstrated that he ‘entirely intended to associate the “MetaBirkins”…with the popularity and goodwill’ of Hermes’ brands, rather than merely provide an ‘artistic association’.

Consumer confusion

Because trade marks are designed to ‘distinguish’ certain signs in trade or commerce, it follows that that a key objective of trade mark law is to prevent confusion amongst the target audience of commercial trade: consumers.

For example, in the Australian case of Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd, Kitto J noted that one of the primary tests in determining whether trade mark infringement has arisen is whether ‘the result of…(the infringing use)…will be that a number of persons are caused to wonder’ whether two distinct brands are related, consistent with other commercial law concepts, for example those found under section 18 and 29 of the Australian Consumer Law.

Of great weight in Hermes International v Rothschild was Hermes’ ability to demonstrate ‘actual’ consumer confusion, pointing to examples created by popular entertainment mediums Elle Magazine and the New York Post, who each reported that Rothschild’s ‘MetaBirkins’ were ‘unveiled by Hermes in partnership with Rothschild’.

In handing down its decision, the New York District Court noted that Rothschild’s actions were ‘misleading in the sense that it induces [sic] members of the public to believe…(that the NFTs) were prepared or otherwise authorised’ by Hermes.

So what does this mean for NFTs?

Hermes International v Rothschild further highlights the tension between longstanding legal frameworks like trade mark law and the ‘decentralised’, ‘unregulated’ and ‘creativity-driven’ ideologies which underpin the world of NFTs.

Noting that major players like Hermes are unlikely to depart from assertive protection of their brands, this case certainly won’t be the last trade mark/NFT crossover we see, with an Australian equivalent likely to arise at some point.

As with all forms of technology, if you’re thinking about stepping into the world of NFTs, it’s important to consider which existing intellectual property regimes will intersect with your product, service or idea, and any potential consequences which may arise.

Want to know more about NFTs? Check out our article here.

Still have an NFT or IP-related question after reading? Contact a member of our Intellectual Property team to discuss.

This article was written by Daniel Kiley, Partner and Annabel Bramley, Solicitor.

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