The highly anticipated verdict in the fight between Hermes and Mason Rothschild, the creator of a collection of “Metabirkins” NFTs, is in. On 7 February 2023, the jury determined that Rothschild’s use of Hermes’ BIRKIN mark in the title of his NFT collection was not entitled to be protected as free speech under the First Amendment, but instead constituted trademark infringement, trademark dilution and cybersquatting. Hermes was awarded USD 133,000 in damages. Its claim for injunctive relief has yet to be decided.
For more background facts, see here.
The verdict has been widely billed as an affirmation that trademark rights in the real world can extend into the virtual world, but has also provoked fears of a chilling effect on creativity, especially for artists making forays into the digital realm. As it may be some time yet before a similar fight reaches our sunny shores, we examine two key themes in the case and how these could potentially be approached by the Singapore courts.
A key challenge that Hermes faced was that its BIRKIN mark was only registered for real-life goods, but not for virtual goods or NFTs. It is also not using the mark for virtual goods or NFTs and so could not claim use-based rights. Hermes argued that virtual goods and NFTs nevertheless fell within the ‘natural zone of expansion’ of its trademark registrations - as evidenced by the fact that many fashion brands have entered the metaverse and its own plans to launch NFTs and virtual bags, such that it was entitled to protection in this realm as well.
In the US, the ‘natural zone of expansion’ doctrine states that a trademark owner who cannot prove use of its mark in the disputed area can nevertheless claim rights over that area by establishing that it falls within the zone of his probable or natural expansion. The doctrine has been relied on to extend the protection conferred by a trademark registration to goods and services not covered by the claimant’s registration, as well as to a different geographical area.
The ‘natural zone of expansion’ doctrine is not part of Singapore law. However, that is not to say that a Singapore trademark registration cannot confer protection on goods or services not covered by the registration. The protection conferred by a Singapore trademark registration can extend beyond the goods or services covered by the registration in two ways:
The first way in which protection could be extended – that is, to argue that the Metabirkins NFTs are “similar” to the real world goods covered by Hermes trademark registrations, is unlikely to be helpful to Hermes. Quite clearly, it would be a tall order to convincingly argue that the virtual handbags depicted in the Metabirkins NFTs have the uses, users and trade channels as real life handbags, or would compete with the latter.
Hermes would likely be more successful arguing that its BIRKIN mark is “well known” in Singapore, and therefore should be accorded protection even for dissimilar goods. A key challenge would be to meet the high evidential threshold required to prove that a mark is “well known”. However, Hermes’ BIRKIN mark would likely cross the bar seeing as it enjoys a high degree of recognition - at least amongst actual and potential consumers of luxury products, and businesses dealing in the same.
If so, then subject to any applicable defences, Rothschild’s liability for infringement will turn on Hermes being able to demonstrate that Rothschild’s use of “Metabirkins” will suggest that his NFTs originate from or are somehow licensed or endorsed by Hermes, and will damage its interests. Hermes is likely to succeed on this score as well given that, at trial, Hermes had adduced evidence of actual consumer confusion, including results of a market survey and media reports which mistakenly linked the NFT collection to Hermes.
Before the US District Court, Rothschild had argued that his acts qualified as protected speech under the First Amendment because his artworks and associated NFTs are art and commentary on Hermes’ Birkin handbag. To support his arguments, Rothschild sought to draw parallels between his NFT collection and pop artist Andy Warhol’s paintings of Campbell soup cans.
Warhol’s paintings (32 in all, one for each flavour of the soup Campbell was selling in the 1960s), which were displayed at a Los Angeles art gallery, had similarly been created without Campbell’s permission. However, Campbell never took legal action against Warhol, but instead embraced his use of its trademarks given the positive publicity which it generated. As such, the legality of Warhol’s actions had never been examined by a court.
To succeed in his defence, Rothschild had to satisfy the test established in Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989) (affectionately known as the “Rogers test”), which requires that two conditions be met – the use of the trademark must both (1) have artistic relevance to the work; and (2) not be explicitly misleading as to the source of the work. Rothschild argued that his work had artistic relevance as a commentary on “the fashion industry's history of cruelty to animals,” and was not explicitly misleading because he had included a disclaimer on the Metabirkins website stating that the NFT collection is unconnected with Hermes.
The jury was unconvinced. It determined that the Roger test had not been satisfied, concluding based on the evidence adduced at trial that Rothschild had chosen the name “Metabirkins” in order to capitalise on Hermes’ goodwill. The jury also determined that NFTs were more akin to commodities than artwork, so that a stricter application of trademark laws was warranted in this space.
In Singapore, trademark infringement is a statutory tort so that only statutory defences apply. The possible defences are set out in section 28 of the Singapore Trade Marks Act (Cap. 332) and these do not include any defence which is based on or linked to either the right to free speech or ‘artistic relevance’. The closest equivalent would be the defence of use of a mark for the purpose of news reporting or news commentary, but this is clearly of limited scope and a commentary on “the fashion industry's history of cruelty to animals” is unlikely to fit the bill as this can hardly be said to be “news”. There also does not appear to be any other potentially applicable defence.
Based on the analysis above, it appears that Hermes would also have prevailed if the case had been fought in Singapore (and possibly other jurisdictions with similar trademark laws). Good for Hermes, but are there any lessons that brand owners draw from this? Quite a few, in fact:
Oct 03 2023
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