Trademark
January 24, 2023
In November, we wrote about the Hermès International vs. Rothschild “MetaBirkin” NFT lawsuit which, among other things, involves questions about whether an artist’s use of trademarks is protected under the Rogers vs. Grimaldi test for trademark infringement. Another case involving NFTs now raises some of the same issues, but with numerous interesting elements all its own.
Yuga Labs launched the Bored Ape Yacht Club (BAYC) NFTs in 2021. This project consists of 10,000 images of — you guessed it — bored apes generated by an algorithm. Sales of the NFTs in this project total more than $1 billion, making it one of the most financially successful NFT projects to date.
But, while BAYC NFTs became hot commodities among celebrities and wealthy collectors, Ryder Ripps, a conceptual artist, interpreted the BAYC’s logo and elements of the ape images as promoting racist stereotypes and incorporating Nazi and neo-Nazi imagery and ideas. In Ripp’s view, Yuga is trying to infiltrate mainstream society with toxic imagery through superficially harmless cartoon art. For example, Ripps noted: similarities between the BAYC and the Waffen SS logos; the ape skull on the Yuga Labs logo has 18 teeth and 18 is code for Adolf Hitler; and the expression “surf the Kali Yuga” is used by white supremacists.
He published these opinions online and, last May, launched an NFT collection called RR/BAYC.
The RR/BAYC NFTs link their own crypto tokens to the BAYC images and sell for about $200 each. According to Ripps’ website, the project “uses satire and appropriation to protest and educate people regarding The Bored Ape Yacht Club and the framework of NFTs.”
Unsurprisingly, especially because of the value of the original BAYC NFTs, in late-June 2022, Yuga Labs sued Ryder Ripps and others involved with RR/BAYC. Yuga Lab’s Complaint alleges false advertising, trademark infringement, and cybersquatting, among other things. According to Yuga Labs, the RR/BAYC “is a deliberate effort to harm Yuga Labs at the expense of consumers by sowing confusion about whether these RR/BAYC NFTs are in some way sponsored, affiliated, or connected to Yuga Labs’ official Bored Ape Yacht Club.”
Notably, despite elsewhere claiming that RR/BAYC NFTs infringed Yuga Lab’s copyrights, the Complaint does not include a claim for copyright infringement. Nor does it include a claim for defamation against Ripps and others involved with RR/BAYC.
Ripps and the other defendants in the lawsuit moved to dismiss the Complaint. They argue RR/BAYC is an expressive artistic work protected by the First Amendment and, therefore, not actionable under Rogers. They also claim that Yuga Lab’s Complaint must be dismissed because RR/BAYC buyers “understood that their NFT was being minted as a test against and parody of BAYC, and no one was under the impression that the BAYC NFTs were substitutes for BAYC NFTs or would grant them access to Yuga’s club. They explicitly acknowledged a disclaimer when they purchased [the NFTs].” Ripps also filed an anti-SLAPP motion, claiming Yuga Labs is trying to silence him through its lawsuit.
In December, the Court denied defendants’ motions. It held Rogers did not apply as the RR/BAYC NFTs did not “express an idea or point of view, but, instead, merely ‘point to the same online digital images associated with the BAYC collection.’” It also concluded defendants’ use of Yuga’s marks isn’t nominative fair use because defendants are using the marks to sell their own NFTs, not plaintiff’s NFTs.
As for the anti-SLAPP motion, Judge Walter wrote, Yuga Labs had “not brought claims against Defendants for defamation, slander, or libel. Instead, Plaintiff’s claims are limited to and arise out of Defendant’s unauthorized use of the BAYC Marks for commercial purposes.”
And that’s what’s so interesting here: Yuga sued solely for trademark infringement and not for defamation or copyright infringement. Why? On defamation, maybe to prevent anyone from looking too deeply at whether Yuga Labs’ imagery is, in fact, racist or relies on white supremacist imagery and ideas. However, this strategy seems to have backfired as the Court recently required the founders of Yuga Lab to sit for a deposition. Presumably, defendants’ lawyers used this opportunity to specifically address this issue.
On copyright, it seems likely that Yuga Labs didn’t bring a claim because any copyrights belong to the NFT purchasers, not Yuga. Yuga may have also avoided bringing a copyright claim to skirt the issue of whether algorithm-generated NFT collections like BAYC are sufficiently original to qualify for copyright protection.
In any event, stay tuned. If the parties don’t settle, this case will likely go to trial later this year.
November 15, 2022
Over the past few years, NFTs have emerged from nowhere to become a big deal — even if a lot of people are fuzzy on the details of what an NFT is. And, as with any new creation, especially one that reaches across art, entertainment, finance and culture, conflicts over NFTs raise new legal issues. On this, I’m especially fascinated by Hermès International vs. Rothschild, 22 Civ. 384 (S.D.N.Y.). It raises so many questions: What is art? Who is an artist? What is an NFT? How do art and commerce interact and where does the First Amendment fit into all this?
This is a very “meta” case (in more ways than one).
It’s a simple story. In 2021, Mason Rothschild, a Los Angeles-based digital artist, launched his “MetaBirkin” project. The project involved the sale of 100 NFTs, each linked to a digital image created by Rothschild. The images are of imaginary, Birkin-style bags covered in distinctively colored fur. (Birkin bags are very expensive handbags made by Hermès, the French luxury fashion brand. They are often made from leather or exotic animal skins and can cost more than $100,000.)
Rothschild promoted MetaBirkins on social media with hashtags like #NotYourMothersBirkin and #MetaBirkin and created a Discord group for followers. His stated intention was to use the NFTs to raise awareness of the fashion world’s “fur-free” initiatives and promote the use of ethical textiles. Sales of these NFTs quickly took off.
Hermès was not amused and sent Rothschild a cease and desist letter. A few weeks later, it filed suit, claiming, among other things, trademark infringement, unfair competition and cybersquatting stemming from the use of “MetaBirkin” and hashtags containing the word “Birkin.” OpenSea, the world’s largest NFT marketplace, removed the MetaBirkins from its site and resale prices, which had reached as high as $46,000 for a single NFT, plummeted.
Hermès makes several arguments, but its central claim is that Rothschild is misleading consumers into thinking Hermès authorized the NFTs and otherwise trading on Hermès’ goodwill. Here, the company points to posts on Rothschild’s social media accounts and in the news indicating confusion over Hermès’ relationship to MetaBirkins.
It also vehemently argues that the Court should ignore Rothschild’s images of fanciful, fake fur covered Birkin-style bags because “[t]he MetaBirkin NFTs are data recorded on the Ethereum blockchain,” which Rothschild could swap out for something completely different and unrelated. In other words, Hermès argues Rothschild’s work is just bits of code that can be disassociated from the images. Thus, according to Hermès, his work is not art and, therefore, outside the scope of the First Amendment. In support of this claim, Hermès notes that when the MetaBirkins were first minted, the image was covered in a shroud and didn’t show the actual picture being sold. It also repeatedly claims that Rothschild is a marketer and not an artist.
In response, Rothschild asserts the First Amendment allows him to make and sell art that depicts Birkin bags. In his words: “I am not creating or selling fake Birkin bags. I’ve made works of art that depict imaginary, fur-covered Birkin bags. I have the right also to use the term ‘MetaBirkins’ to describe truthfully what that art depicts, and to comment artistically on those bags and the Birkin brand.” What’s more, he goes on, “[t]he fact that I sell the art using NFTs doesn’t change the fact that it’s art.”
Mason Rothschild also claims his use of “Meta” is an indication that the images are part of a commentary and argues that Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989) requires the Court to dismiss Hermès’ case.
As a refresher, the dancer Ginger Rogers sued the makers of a movie called “Ginger and Fred,” claiming that the movie’s use of her name impermissibly implied that she sponsored the movie, which was about fictional cabaret performers named Ginger and Fred. The Second Circuit rejected her claims. It held that the First Amendment requires courts to dismiss trademark claims involving artistic works unless the public’s interest in avoiding consumer confusion outweighs the public interest’s in free expression. With celebrity names in titles, the court held that a trademark claim must be dismissed unless “the title has no artistic relevance to the work whatsoever, or if it has some artistic relevance, unless the title explicitly misleads as to the source or content of the work.”
Based on this, Rothschild argues that the images associated with his NFTs have sufficient artistic content to bring this case within the ambit of Rogers and he has not explicitly misled anyone about the source of the NFTs. Specifically, he notes that it is not in his interest to have consumers think the NFTs were created by Hermès because he wants to be credited as the artist.
It’s hard to say where the court is going to come out on this, but it doesn’t seem terribly likely that Hermès will prevail here. Courts don’t want to be in the business of deciding what is and isn’t art and are likely to err on finding something is art. Moreover, the lengths to which Hermès goes to try to disassociate the images from the NFTs would seem to support a conclusion that the images are, in fact, art.
And, while it’s true that Rothschild could substitute the images linked to the NFTs, that’s pure speculation and doesn’t bear any relationship to the actual facts here. If anything, the fact that in the minting process the NFTs were associated with images on a pedestal covered with a shroud make it seem even more like these digital images are, in fact, art because that specifically calls to mind the unveiling of a statue or other artwork.
Thus, for Hermès to prevail, it’s going to have to show the NFTs explicitly misled people about their source. It’s hard to see that happening.
This will be fascinating to see where the court comes out and watch for this case’s impact on the new, evolving world of NFTs, the market for them, and how they further develop.
October 7, 2022
When she gives her employer broad rights to use her name even after her employment ends.
Of course, of course.
This may sound like a bad (or completely nonsensical) Mr. Ed joke, but allow me to explain. Here is the story of renowned wedding dress designer Hayley Paige Gutman, who recently announced she will henceforth be known as Cheval (aka “horse” in French). Why? Because, as a result of an agreement with her former employer, she no longer owns the Instagram account she created and which bears her name.
This case is particularly interesting to me because (1) it shows how existing laws — here, contract and the work-for-hire doctrine — are applied to new platforms and novel situations, and (2) the Court went to great lengths in an attempt at resolution, but ultimately, simply went back to existing laws to reach a decision.
Let’s begin with the facts: In 2011, Gutman entered into an employment agreement with a company named JLM Couture, which designs and manufactures luxury bridal gowns. The agreement stated Gutman would neither compete with her employer nor use her name in connection with wedding dresses and bridal items during its term and for two years after its termination. Gutman also agreed that JLM would own everything she created in connection with her employment and could trademark her name — some pretty broad rights. In exchange, JLM promised to invest money into the “Hayley Paige” brand and pay Gutman a salary and royalties. Of course, this being the modern age, a vital marketing element for the venture was the Instagram account @misshayleypage that Gutman created shortly after entering into the contract and which was used to promote the dresses she designed for JLM.
Everything was fine — at least, from a legal standpoint — until 2019 or 2020, when negotiations over a new contract broke down. Gutman locked JLM out of the Instagram account and began using it to promote non-JLM products. JLM sued Gutman for, among other things, breaching her agreement by taking over the account; JLM also sought to prevent Gutman from using the @misshayleypage Instagram unless approved by JLM. The lower court agreed with JLM.
Gutman appealed and the Appellate Court found the lower Court wrong to restrain Gutman without first deciding whether JLM could show it owned the social media accounts and sent the case back to the lower Court to figure that out.
Once there, Gutman argued this question was answered by the fact that she created the Instagram account as a personal account. The lower Court was not convinced. It said that the issue needed to be resolved by looking at: (1) how the Instagram account was described to the public; (2) how it was used; and (3) if JLM employees accessed it. Based on this, the Court held that JLM was likely to succeed on its claim that it owns the Instagram account or, at least, show it had superior rights to the account because it linked to JLM websites and was regularly used to promote JLM’s business and communicate with its customers.
The Court also noted that, under her contract with JLM, Gutman agreed that anything she developed in connection with her employment belonged to JLM. To me, it seems like the Court could have saved itself a lot of time by starting there. In my view, there was no need to dissect the use of the Instagram account in order to determine ownership just as there would have been no need to debate ownership of, say, a printed JLM catalog featuring a dress designed by Gutman. The employment agreement covered all materials related to the Hayley Paige brand regardless of media type or who initiated its creation.
As a result, the “Hayley Paige” brand and Instagram account continue to be owned by JLM, and Gutman is operating as Cheval. I’m really curious to see whether the @misshayleypaige followers will follow her Cheval Instagram and whether she will be able to monetize this new persona. Will the answer be yay or… neigh?
Sorry, it had to happen.
July 14, 2022
On June 9, 2022, Senators Patrick Leahy (D-VT) and Thom Tillis (R-NC), the Chair and Ranking Member of the Senates Judiciary Committee’s Subcommittee on Intellectual Property, sent a letter to the Director of the United States Patent and Trademark Office (PTO) and the Director of the United States Copyright Office (Copyright Office) asking them to complete a study on various issues related to non-fungible tokens (NFTs). The non-exhaustive list of topics in this letter includes:
- What are the current and future intellectual property and intellectual property-related challenges stemming from NFTs?
- Can NFTs be used to manage IP rights?
- Do current statutory protections for copyright, for example, the Digital Millennium Copyright Act, apply to NFT marketplaces, and are they adequate to address infringement concerns?
On July 8, 2022, the PTO and Copyright Office responded to the Senators. In their response, they stated that they would consult with relevant stakeholders and complete the requested study.
While the list provided by the Senators is a good starting place, the fact that they gave the PTO and Copyright Office until June 2023 to complete the study, means that it’s going to be a while until we have any additional information from the PTO and Copyright Office. Moreover, while the PTO and Copyright Office certainly have a role to play here, the legal framework will continue to develop as Courts rule on cases involving NFTs.
June 19, 2017
Until today, the United States Patent and Trademark Office (“USPTO”) could refuse to register trademarks (or cancel trademarks) on grounds that they were potentially disparaging or offensive. In 2014, the USPTO used this provision to cancel trademarks for the Washington Redskins find they were offensive to Native Americans. It also relied on this provision to deny a trademark to a band called the Slants, a term the USPTO concluded was offensive to Asian-Americans, but which the Slants said was an effort to reclaim a previously derogatory term. The Supreme Court today concluded: “Speech may not be banned on the ground that it expresses ideas that offend.”
If you’re curious, the decision is available here.
