NFTs for the Sake of Art or Profit: What Will Matter for Trademark Infringement

A current case thrusting NFTs (non-fungible tokens) into the forefront of trademark law involves a defendant arguing that his right to create and sell NFTs is based on the same rights that Andy Warhol had to create and sell paintings of Campbell's Soup cans. In the Hermès International et. al. v. Rothschild, Rothschild was sued for creating and selling NFTs that included images of Hermès' famous Birkin handbags. The NFTs are called MetaBirkins. The NFT images portray the bags decorated in an array of colors and patterns (see metabirkins.com).

Hermès sued claiming, among other things, trademark infringement. Rothschild contends as part of his defense that he is permitted to create and sell the NFTs because they are art. Based on reports of the testimony elicited to date, Hermès has attempted to portray Rothschild as primarily motivated by potential profits, rather than artistic interests. Rothschild appears to be attempting to demonstrate that the images are conceptual art and, even if he is able to make money selling them, they constitute non-infringing art. The legal arguments pit fundamental trademark arguments against each other. Most people would agree that trademarks should not be used to prevent others from creating art. At the same time, many of those same people might be uncomfortable determining something is art if the purpose of the creation was to be sold for profit. 

Some commentators have likened NFTs to baseball cards, which offers a less artistic view of NFTs. But not all NFTs are the same. It likely is not a surprise to many attorneys that Judge Rakoff, who is presiding over the case, denied summary judgment and left the major questions to be decided by a jury at trial. That tends to focus the case on the NFTs at issue and the defendant's creation and sale of them, rather than on NFTs generally.

Judge Rakoff also refused to let an expert testify regarding the artistic nature of the NFTs. This ruling may be slightly more of a surprise. It probably places a great deal of focus on the facts for the jury to sift through. The ruling eliminates a witness that would have offered an opinion of those facts. The jury may need to parse through many nuanced decisions about the nature of the MetaBirkin NFTs based almost solely on the testimony of the parties.

Rothschild's trial testimony has been reported to be colorful. Over multiple days of testimony he was asked about his texts concerning the MetaBirkins, how he felt about being sued and his plans for future NFTs.  

The question that may end up being resolved may not be whether NFTs can be protected to the same degree as Andy Warhol's art. Instead, the trial could end up determining a more limited question focused on whether the defendant was able to establish the facts needed to enjoy such protection.

Still, resolution of that question could have widespread importance. A great number of the NFTs in existence are described, and often marketed and promoted, as "collectibles." The outcome of the MetaBirkins case could be important in determining whether such collectibles include NFTs designated as "art" and whether there is a distinction based on the profit motive of the creator or seller of collectible NFTs. If the artistic nature is reduced or negated based on whether the NFTs are sold as collectibles for profit, then it would be a significant decision in defining, from a legal perspective, what NFTs are.

Ongoing use of NFTs likely will be affected by the decision, particularly as to NFTs that include images of famous or commercial items. Additionally, in recent years the U.S. Patent &Trademark Office shifted some of its views on how NFTs should be described in trademark applications. Guidance from court decisions could affect those views and future applications as well.