Content creators beware: big brands have NFTs in the bag

The recent US case of Hermès International et al v. Rothschild recognises not only the value in NFTs, but also the care creators of NFTs must exercise.

NFTs are unique tokens on blockchain networks that are often linked with a digital asset commonly in the form of digital art or video clips. A blockchain is way of storing data and authenticating ownership. The popularity of NFTs is on the rise, with household names such as Coca-Cola and Nike hopping on the trend. Auction house Sotheby’s held the first curated NFT in 2021, where NFT collection CryptoPunks sold a masked alien punk that fetched $11.75 million. It is therefore not surprising that more and more brand names are getting involved in NFTs.

The Hermès case concerns a hundred-piece collection of “MetaBirkins”, a series of NFTs linked to images of bags that reassemble the iconic Birkin bag produced by the luxury French brand. MetaBirkins were being sold for up to $45,100 (£37,000) a piece, a price that mirrors that of the real thing. In this case, Hermès sued the artist behind the MetaBirkins, Mason Rothchild, for trade mark infringement, trade mark dilution and cybersquatting. Hermès argued that Mr Rothschild was profiting unlawfully from the goodwill it had built up in its coveted Birkin bag, diluted its brand and caused consumer confusion. Mr Rothschild attempted to argue that the images associated with the MetaBirkins were his artistic expression as should be allowed under freedom of speech laws. Earlier this month, a jury in New York found in favour of Hermès, agreeing that Mr Rothschild capitalised on Hermès’ substantial goodwill. Mr Rothschild has been ordered to pay $133,000 (£110,000) in damages.

What does this mean for NFT creators and brand owners in the UK?

Whilst this is a US case, it is one of the first examples of a common law country reckoning with how intellectual property rights apply to the digital content linked with NFTs. Given the popularity of NFTs, it is reasonable to surmise that it is only a matter of time before a similar case is brought in the English courts. At the same time, the English courts have already been asked to grapple with at least one key issue relating to NFTs, in Osbourne v Persons Unknown & Anor [2022] EWHC 1021 (Comm) where it was ruled that NFTs can be classified as a property right. This perhaps seemingly simple issue actually underpins important questions as to whether intellectual property rights, which include trade mark rights, subsist in NFTs. Following Osbourne, it is inevitable the English courts will be asked to assess the application of trade mark rights to NFTs.

The Hermès case marks another important step in the application of intellectual property rights to the digital world. Whether you are a creator of NFTs, a brand owner, or simply a purchaser of NFTs, this case highlights the important role which intellectual property plays. It is one of the first steps in applying US trade mark law to NFTs, marking a big win for brand owners and sends a clear message to content creators that the world of NFTs does not provide immunity to the benefits and restrictions imposed by relevant intellectual property laws. Many luxury brands are venturing into the world of NFTs, and this case will no doubt reassure them that they have the mechanisms to control and benefit from the power of their brands. Equally, it is important that any business considers its intellectual property portfolio, and where necessary, bolsters this to ensure it has the relevant legal tools to take effective action.

If you have questions about intellectual property laws and NFTs, please contact Will Sander.