25-08-2022

In a previous article (“NFT, THE NEW HYPE. WHAT ABOUT INTELLECTUAL PROPERTY RIGHTS?”) we took a closer look at Non Fungible Tokens or NFTs and explained what exactly these NFTs are. Even though NFTs are not completely new, the first ones appeared in 2015, we are currently entering unknown territory with this relatively new phenomenon. NFTs give rise to various legal questions, including their relationship to intellectual property rights. Since there is no specific legislation regulating NFTs, we are bound to rely on the general principles of current (intellectual property) law and its application in case law. With more companies venturing into the metaverse, we are also seeing more conflicts arising that are increasingly being brought before courts around the world. The importance of this case law cannot be underestimated given the legal vacuum in which NFTs find themselves. With this article, we would like to give you a brief but clear overview of four high-profile NFT-cases currently pending before the courts.

Hermès vs. Rothschild

One of the first cases that received a lot of attention is the Hermès vs. Rothschild case. In January 2021, the French luxury goods manufacturer Hermès, known among other things for the Birking bag, sued the artist Maso Rothschild after he had created a collection of 100 “MetaBirkins” NFTs. The NFTs refer to images of the famous “Hermès Birkin bags” covered in a fur coat in a range of different colours.

Hermès claims Rothschild “is a digital speculator who is seeking to get rich quick by appropriating the brand METABIRKINS for use in creating, marketing, selling, and facilitating the exchange of digital assets known as non-fungible tokens (“NFTs”). Defendant’s METABIRKINS brand simply rips off Hermès’ famous BIRKIN trademark by adding the generic prefix “meta” to the famous trademark BIRKIN.” Hermès argues that Rothschild’s widespread use of the “MetaBirkins” mark constitutes trademark infringement and dilution of the famous Birkin trademark.

In response Rothschild filed a motion to dismiss in which he argues that, because the digital images of the “Birkin bags” that are tied to the NFTs he sells are ‘art,’ the Second Circuit's test in Rogers v. Grimaldi applies, and that applying the Rogers test requires dismissing Hermès's claims on First Amendment grounds. The Rogers v. Grimaldi ruling allows artists to use trademarks provided it is artistically relevant and does not explicitly mislead the consumers as to the source or content of the work. Although the court found the Rogers test to be applicable in the Hermès vs. Rothschild case, the motion to dismiss was eventually denied. The court found Hermès sufficiently alleged that Rothschild intended to associate the “MetaBirkins” mark with the popularity and goodwill of Hermès’s Birkin trademark, rather than intending an artistic association. In this regard, the court referred to Rothschild’s statements that his “MetaBirkins” were intended as a tribute to Hermès’ most famous handbag, “the Birkin” and that he wanted to see as an experiment if he could create that same kind of illusion that “the Birkin bag” has in real life as a digital commodity. Furthermore, the court found the use of “MetaBirkins” mark was explicitly misleading. In this regard, the court referred to the fact that consumers had already expressed their confusion on the “MetaBirkins” Instagram about Hermès’ involvement in the “MetaBirkins” collection. Similarly, there was also confusion in the media as magazines Elle, L'Officiel and the New York Post had all mistakenly reported that the “MetaBirkins” NFTs were unveiled by Hermès in partnership with Rothschild.

Nike vs. StockX

In February 2022, Nike sued StockX, the operator of an online resale platform for various brands of sneakers, apparel, luxury handbags, electronics, and other collectible goods, for the unauthorized and infringing use of Nike’s famous marks in connection with StockX’s “Vault NFTs”. Nike alleges StockX is minting “Vault NFTs” that prominently use Nike’s trademarks without Nike’s previous authorization or approval, marketing those NFTs using Nike’s goodwill, and selling those NFTs at heavily inflated prices to unsuspecting consumers who believe or are likely to believe that those NFTs are minted or authorized by Nike which they are not. Nike bases its claims on trademark infringement, false designation of origin and unfair competition, trademark dilution and injury to business reputation and dilution.

StockX in turn argues the NFTs are not virtual products or digital sneakers but only serve to track ownership of a physical Nike product secured in its vault. According to StockX each Vault NFT is tied to a specific physical good that has been authenticated by StockX. Consumers who purchase the Vault NFTs have two options regarding ongoing possession: (1) retain digital possession of the Vault NFT and leave the authenticated physical good in StockX’s vault; or (2) take possession of the physical good from the vault in which case the Vault NFT is removed from the customer’s digital portfolio and permanently removed from circulation. The Vault NFT itself would have no intrinsic value and merely functions as a claim ticket, or a “key” to access the underlying physical item.

Furthermore, StockX’s asserts its use of images of Nike sneakers and descriptions of re-sale Nike products in connection with StockX Vault NFTs constitute fair use. StockX claims “It is no different than major e-commerce retailers and marketplaces who use images and descriptions of products to sell physical sneakers and other goods, which consumers see (and are not confused by) every single day. Nike’s suit threatens the legitimate use of NFTs not just by StockX, but by other innovators that also use NFTs to track title to physical goods held in a vault, such as fine art, whiskey, and wine”.

On 25 May 2022 Nike amended its complaint due to the discovery of additional facts which Nike found to be “highly relevant to its claims against StockX”. Nike refers to its entry into the NFT market since the filing of its complaint in February and more in particular the release of the Nike Dunk Genesis CryptoKicks™ NFTs, along with the Evo Skin Vial NFTs, which allow owners of the Nike Dunk Genesis NFTs to customize the colorway of the digital shoes. Furthermore, Nike alleged it obtained 4 pairs of counterfeit “Nike” shoes from StockX, which were verified as authentic.

In an answer to Nike’s amended complaint, StockX says “StockX’s 100% Verified Authentic process is understood by its customers and has been praised by consumers, commentators and industry participants alike, including Nike. StockX is at the forefront of combatting counterfeiting”, concluding Nike’s initial claims and new allegations lack any merit.

Miramax LLC vs. Tarantino

In November 2021, Miramax filed a lawsuit against Quentin Tarantino after the movie director revealed his plans to auction off seven exclusive scenes from the 1994 motion picture Pulp Fiction in the form of NFTs. Each NFT would contain one or more previously unknown secrets of a specific scene from Pulp Fiction (“the secrets from Pulp Fiction”). Miramax claims this is particularly problematic as Tarantino granted and assigned nearly all of his rights to Pulp Fiction to Miramax in 1993, including the rights necessary to mint the secrets from Pulp Fiction that Tarantino intends to sell. According to Miramax “Tarantino’s limited “Reserved Rights” under the operative agreements are far too narrow for him to unilaterally produce, market, and sell the Pulp Fiction NFTs”.

In essence, this case revolves around contract interpretation, and in particular which party has the right to develop, mint, market and sell the NFTs relating to Pulp Fiction on that basis.

Roc-A-Fella Records Inc. v. Damon Dash.

Damon Dash, co-owner of the record label Roc-A-Fella Records Inc. alongside Jay-Z and Kareem Burke, announced plans to mint and sell an NFT of the debut album of Jay-Z ‘Reasonable Doubt’. Roc-A-Fella Records Inc. then sued Dash to prevent him from auctioning off this NFT in June 2021. A temporary restraining order was granted in favour of Roc-A-Fella Records Inc. by a district court in New York prohibiting Dash from “altering in any way, selling, assigning, pledging, encumbering, contracting with regard to, or in any way disposing of any property interest in Reasonable Doubt, including its copyright and including through any means, such as auctioning a non-fungible token (“NFT”) reflecting such interests”.

Meanwhile, a settlement has been reached between parties clarifying that "Roc-A-Fella Records Inc. owns all rights to the album ‘Reasonable Doubt,’ including its copyright. No shareholder or member of Roc-A-Fella Records Inc. holds a direct ownership interest in ‘Reasonable Doubt’”.

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We note that an increasing number of NFT lawsuits are being filed in courts that do not only deal with intellectual property issues but also with other legal aspects. We refer to lawsuits such as Yuga Labs, Inc. (the company behind the popular collections of Bored Ape Yacht Club tokens) v. Ryder Ripps, Jeeun Friel v. Dapper Labs, Lil Yachty v. Opolous, etc.

It is recommended that these and other cases be closely monitored as they will provide a first set of indications regarding how courts will handle NFT-related intellectual property claims.

For more information regarding NFT4s and intellectual property rights, contact our IP-team: Christine De Keersmaeker, Levi Van Dijck, Thaïssa Nuyens, Katrijn Huon, Yuki Choy.