Recently, the U.S. District Court for the Southern District of New York issued an opinion in Hermès International v. Rothschild, LLC, 22-cv-384 (May 5, 2022), denying Defendant Mason Rothschild’s motion to dismiss the lawsuit. The single page order will be supplemented with an opinion setting forth the reasons for the ruling in due course. The ruling, however, is significant based on the subject matter: non-fungible tokens or NFTs, and whether a brand holder of a physical product can proceed with a cause of action against a digital asset.
Non-fungible tokens, known as NFTs, are cryptographic assets on a blockchain with unique identification codes and metadata that distinguish one NFT from another. NFTs differ from fungible tokens, such as cryptocurrencies, which are identical to each other, because they are unique. While NFTs can represent real-world items like wine or physical artwork, a current market for NFTs relates to collectibles such as digital artwork.
The Hermès case relates to Rothschild’s MetaBirkins NFTs, which depict Plaintiff Hermès International’s Birkin bags covered in colorful fur. Hermès claims in its Complaint that Rothschild began offering the NFTs at the Art Basel art fair in Miami in December of 2021 without permission and that he had sold over $1 million worth of the NFTs by January.
Rothschild filed a motion to dismiss Hermès’ Amended Complaint, contending that his NFTs are protected by the First Amendment because they comment on the “animal cruelty inherent in Hermès’ manufacture of its ultra-expensive leather handbags.” Rothschild contended that his art “does not lose its First Amendment protection just because he sells it.”
Hermès responded to Rothschild’s motion to dismiss, arguing that its Amended Complaint states claims for trademark infringement and trademark dilution. Hermès also argued that the First Amendment “does not extend to the unauthorized use of another’s mark as a source identifier.”
The Court denied Rothschild’s motion to dismiss.
Several other cases involving NFTs are pending. In February 2022, Nike filed a trademark infringement lawsuit against StockX, an online marketplace that facilitates the trade of goods between consumers. In June of 2021, Roc-A-Fella Records brought suit against Damon Dash, a co-owner of the record label, based on Dash’s plans to mint and sell an NFT of Reasonable Doubt, Jay-Z’s debut album. The suit relates to copyright ownership. Miramax also brought a suit against Quentin Tarantino to stop Tarantino from auctioning off seven uncut Pulp Fiction scenes as NFTs.