ARE TRADE MARKS PROTECTED IN THE METAVERSE?
Cinzia Negro, Member of the Second Boards of Appeal; Victoria O’Connor, EUIPO Trainee
This case-law analysis reflects the opinion of the author and does not reflect the position of the Office.
Background
In one of the first decisions to apply trade mark infringement analysis to non-fungible tokens (NFTs), a New York court ruled that a collection of digital images of fur-covered handbags attached to an NFT called, ‘MetaBirkins’, was likely to confuse consumers with the luxury fashion brand, Hermès Birkin bag (Hermès International v Mason Rothschild (Case 1:22-cv-00384-JSR). A European parallel can be drawn with the decision rendered a few months earlier by the Court of Rome in Juventus Football Club s.p.a., v Blockeras s.r.l. (Docket No. 32072/2022, Court of Rome IP Chamber, 20/07/2022).
Analysis
Hermès argued that:
- ‘MetaBirkins’ infringe Hermès trade mark for the word ‘Birkin’.
- Its trade dress rights in the design of the Birkin handbag are infringed by the ‘MetaBirkin’ collection.
- There was evidence of cyber-squatting and unfair competition.
On 8 February 2023, the Court upheld all of Hermès claims and awarded the brand $133, 000 in damages. The decision could still be appealed.
The key legal issue was whether NFTs that contain an unauthorised use of a protected trade mark for physical goods can constitute a trade mark infringement. Significantly, Hermès had not yet sold any of its items as virtual goods (whether authenticated or not by NFTs). However, it argued that the ‘MetaBirkins’ collection interfered with its plans to enter the NFT market and profit from the well-known reputation of the Birkin bag. Rothschild sold NFTs for prices similar to a physical Hermès Birkin bag, which can retail for thousands of euros.
Trade mark infringement
The Court considered the infringement question under the Rogers v Grimaldi test (875 F.2d 922, 1000 (2d. Cir. 1989)). It adopts a speech-protective approach to evaluations of alleged trade mark infringement in works of ‘artistic expression’. An individual accused of trade mark infringement cannot be held liable for the infringement, provided their work is not artistically irrelevant or misleading. However, the alleged infringing use is not protected if it explicitly misleads as to the source or the content of the work.
Hermès successfully argued that the NFTs misled consumers about the origin of the product by leading them to believe that Rothschild’s work was either affiliated with or endorsed by Hermès. In this regard, Hermès presented evidence of the @METABIRKINS Twitter and Instagram accounts and advertising slogans such as ‘#NotYourMothersBirkin’ which allegedly showed actual confusion over Hermès’ role in Rothschild’s project.
NFTs and smart contracts
Another interesting aspect of this case concerns Rothschild’s allegations that the title ‘MetaBirkins’ referred to the NFTs and not to the images of the bags being sold that are linked to them through a smart contract (controlling which digital files are associated with each of the NFTs). This means that selling the NFT would not necessarily confer ownership of the name ‘MetaBirkin’. However, the Court disagreed with this argument. Applying the consumer confusion test, it held that the name ‘MetaBirkins’ refers to both the NFT and the digital image with which it is associated. From the consumers’ perspective, there was absolutely no distinction between the NFTs offered by Rothschild and the underlying images of the ‘MetaBirkins’ bags associated with them.
Practical significance
Although this decision has no binding effect in Europe, significantly, it indicates that existing trade mark rights on physical goods could potentially be enforced against their unauthorised use in virtual environments, in spite of the fact that the trade mark proprietor is not yet active in the metaverse or in the market of NFTs certified digital assets. It also indicates that digital images associated with NFTs that use an existing trade mark to ‘further plausibly expressive purposes’ can constitute a form of artistic expression in the USA. While this may affect the strength of future infringement claims, the NY Court’s decision confirms that people will not be able to freeride off the reputation of brand owners. It may require courts to partake on a balancing of the fundamental rights at issue when considering trade mark infringements related to NFTs and new forms of artistic expression.
Finally, it suggests that the distinction between owning the digital images and owning the ownership rights to the NFT, while not relevant in the consumer’s perception, can implicate who a trade mark proprietor can take legal action against to stop the infringement.
A European parallel: the Juventus case
In Europe, similar issues were considered by the Court of Rome in the Juventus case. Juventus successfully argued that the digital cards sold by Blockeras as NFTs that depicted Christian Vieri, a well-known Italian player, wearing a Juventus jersey infringed its word marks for ‘JUVE’ and ‘JUVENTUS’ and figurative mark consisting of the black and white striped jersey with two stars on the chest, registered, among others, in Class 9 of the Nice Classification for downloadable electronic publications.
In contrast to the Hermès case, Juventus owned trade mark rights for non-physical goods in Class 9 and presented evidence of operating in the same business field as Blockeras. In particular in the field of crypto games using blockchain technology and NFTs, besides carrying out widespread merchandising activities online and through dedicated stores. Notably, since the Juventus decision, Class 9 of the Nice Classification has been updated to include the protection of NFTs.
The Juventus decision confirms that NFTs which reproduce existing trade mark rights for digital goods without authorisation from the rights owner may amount to trade mark infringement and unfair competition where the owner has been active in the same market as the alleged infringer. In contrast to the US, in the EU, there has not yet been a decision that addresses the question of whether the owner of a trade mark for physical goods only, can invoke infringement proceedings for unauthorised uses of these rights in virtual environments regardless of whether they are active in the same business field as the alleged infringer.
On both sides of the Atlantic, the mass of minted NFTs heightens the risk of trade mark infringement. The Juventus and the Hermès decisions share the feature of concerning well-reputed marks, which are generally easier to successfully enforce than non-reputed marks. In this way, the Juventus decision highlights the value of trade mark proprietors with rights for physical goods to extend their trade mark protection to the corresponding virtual goods in downloadable format (whether or not authenticated by non-fungible tokens) in Class 9 of the Nice Classification.
SOURCE: EUIPO
