Trademark Protection and Protected Speech In and Out of the Metaverse

The line between free speech and brand protection remains blurry after a February jury verdict in the NFT case of Hermès Int’l. v. Rothschild and the recent Supreme Court oral arguments in Jack Daniel’s Properties, Inc. v. VIP Products.¹

The Hermès case was the first major trademark litigation involving allegations of infringement of a real-world brand in the virtual space of NFTs, or non-fungible tokens. Rothschild created 100 digital images of Hermès Birkin handbags covered in colorful fake fur and tokenized and sold the images as NFTs, calling the images “MetaBirkins.” Hermès sued Rothschild for trademark infringement based on unauthorized use of both the BIRKIN mark and the design of the Birkin bag.² In defense, Rothschild argued that his MetaBirkins were unique, original artworks that sought to comment on the Birkin bag rather than rip off its design, including by drawing attention to the use of fur in the fashion industry. Invoking Andy Warhol’s famous Campbell’s Soup Cans, Rothschild claimed that artists are generally permitted to use imagery and wording subject to trademark protection in their works.

Rothschild seemed to have a shot at winning the battle when Judge Rakoff held that the trademark infringement count should be analyzed under Rogers v. Grimaldi,³ the test for balancing the First Amendment right to free speech against trademark protection.⁴ Under the Rogers test, use of a trademark in an expressive work is actionable as infringement only if (1) the trademark use has no artistic relevance or (2) it is explicitly misleading as to the source or content of the work.⁵ Something more than likelihood of confusion is required in this context; even use of third party trademarks that is likely to confuse consumers may be protectable as free speech if the public interest in free expression outweighs the public interest in avoiding consumer confusion.⁶

Given the priority that Rogers places on free speech, it is no surprise that most works reviewed under the standard have been found non-infringing.⁷ In this case, though, the Hermès jury found Rothschild liable on all counts, including trademark infringement.⁸ This may have been a product of the specific facts of the case, as the trial uncovered several pieces of evidence that clearly made Rothschild less sympathetic to the jury. Among other bad facts, it emerged that Rothschild “told associates that he wanted to make ‘big money’ by ‘capital[izing] on the hype’” of this case and the media attention.⁹ Meanwhile, Hermès introduced evidence indicating that it also intended to enter the NFT space, bolstering the argument that Rothschild sought to occupy a market for HERMÈS-branded virtual goods that rightfully belonged to Hermès itself. And last, the digital context itself appears to have played a role: Although there is no evident reason that digital artworks sold as NFTs should not trigger “the public interest in free expression,” the jury apparently saw Rothchild’s MetaBirkins as more purely commercial and less deservingly “artistic” than the Warhol paintings referenced in his arguments.  

But there is no clear requirement that an artistic work be non-commercial—or not tokenized—in order for the speech embodied in the work to merit First Amendment protection.  In the Jack Daniel’s case currently pending before the Supreme Court, the district court initially declined to apply the Rogers test to VIP’s line of “Bad Spaniels” dog toys colored and shaped like a bottle of Jack Daniel’s whiskey and bearing a label reading “Bad Spaniels, the Old No. 2, On Your Tennessee Carpet.”¹⁰  The Ninth Circuit remanded, finding that the toys were in fact expressive works that created a new, protectable message by “juxtapos[ing] the irreverent representation of the trademark with the idealized image created by the mark’s owner”—in other words, by referencing the Jack Daniel’s marks in dog toys.¹¹ Directed to apply Rogers, the district court determined that Jack Daniel’s could not satisfy either prong of the heightened test, and granted summary judgment for VIP.¹²

By June, the Supreme Court will decide where the line lies between expressive dog toys meriting First Amendment protection and garden-variety consumer products conveying only commercial messages. Even if the Court clarifies the application of the Lanham Act in this context, though, the distinction between art and commerce seems destined to remain challenging. Is it relevant that the producer intends to make money by referring to a famous mark, or that the work in question is digital versus physical, or an otherwise functional consumer product versus a painting? While Rothschild certainly intended to and did use the Hermès marks to attract interest in his NFTs, Warhol also intended to and did capitalize on the fame of Campbell’s trademarks to sell his paintings of soup cans—not to mention the thousands of silkscreens and prints churned out by his Factory.

By evaluating the MetaBirkins NFTs under the Rogers framework in the first place, Judge Rakoff indicated that digital artworks created to be tokenized and sold as NFTs are, or at least can be, “expressive works” conveying speech worthy of First Amendment protection.  The Supreme Court’s upcoming decision on Bad Spaniels should provide more clarity on the spectrum of works that may express a message under Rogers and how to identify such works, allowing brand owners to update enforcement strategies to fit the universe—and metaverse—of 2023.