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Will the Court Decision in Hermès v Rothschild Prompt the Registration of Specific Trademarks for NFTs?

posted 1 year ago

The long-awaited “MetaBirkin” lawsuit brought by the French luxury brand against digital artist Mason Rothschild has proven successful for Hermès. In January 2022, Hermès sued digital artist Mason Rothschild for infringement of their trademark rights by selling NFTs based on the luxury brand’s well-known “Birkin” model. After a week-long trial and three days of deliberation, Rothschild was sentenced to pay a fine of US$133,000 for trademark infringement, dilution and cybersquatting. It is also the first trial decision in the United States regarding trademark protection in the virtual world. Such a lawsuit therefore raises the question of the importance of trademark registration covering NFTs in order to effectively fight against potential infringements.

Currently, NFT, Metaverse and Web 3.0 are becoming familiar terms in the IP news. NFTs allow consumers to experience ownership in the digital age. In this case, Rothschild made over $1 million from the sale of the MetaBirkins collection, including virtual bags covered in colorful faux fur. The growth of NFTs can pose a threat to brand owners. The use of real-world trademarks in the digital world can lead to confusion among consumers.

So, what are the impacts of the decision of the Southern District Court of New York on 08 February 2023 in favour of Hermès on the protection of trademarks in the virtual world?

Primarily, it seems that the scope of trademark protection extends to the virtual world. The use of a trademark by a third party in the virtual world without the consent of the owners can be constituted as trademark infringement.

The decision in favour of Hermès encourages the fashion industry to strengthen the protection of their trademarks in the digital world, particularly in the Metaverse. Indeed, more and more luxury houses, including Gucci, Balenciaga, Yves Saint Laurent, etc., are registering trademarks covering virtual goods authenticated by NFT. However, it is advisable not to rush the filing of trademarks for NFTs if the company does not really intend to use its trademarks specifically for NFTs.

Therefore, the US court’s decision reflects the situation in which a trademark registered for physical goods can be used to stop virtual infringements. In particular, this is the case for well-known trademarks, which can prove freeriding and/or dilution.

Nevertheless, it is much more difficult for lesser known trademarks to defend themselves. In this case, the only way to defend oneself is to demonstrate the existence of a risk of confusion resulting from potential infringements. Thus, it is particularly advisable to use virtual product registrations when the trademark is not a well-known trademark.

In which classes should a trademark covering virtual goods and NFT be filed?         

The term NFT is considered too broad and unclear. Therefore, in principle, it is not possible to register the trademark for “NFT” products.

In January 2023, the 12th version of the Nice Classification came into force. This version allows brand owners to register trademarks covering virtual goods, such as “downloadable digital files authenticated by non-fungible tokens (NFT)” in class 9 or “transactions involving crypto-currencies” in class 36.

According to the recommendations of the European Union Intellectual Property Office (EUIPO), the most suitable classes for virtual goods are class 9 (apparatus and instruments for science), class 28 (toys, game apparatus, sports equipment, entertainment articles), class 35 (services concerning business activities), class 38 (communication and data transmission services), class 41 (entertainment services), or class 42 (technological and scientific services).

The decision of the Court of Southern District of New York marks the end of the first trial concerning the conflict between products appeared in the real world and ones coming from the virtual world. It seems that such decision will help evolve trademark protection and usage in the digital world.

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