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Federal Jury Rejects First Amendment Defense In 'MetaBirkins' NFT Standoff
Perhaps no other area in the technology sector — save perhaps the recent explosion of generative AI models — has raised as many thorny intellectual property issues as the proliferation of Non-Fungible Tokens, or NFTs, many of which are based on, refer to, or even incorporate, expressive works. Leading the charge have been cases addressing whether NFT makers who utilize other parties' trademarks can turn to the First Amendment as a defense to trademark infringement. This inquiry turns on the now decades-old test established by the Second Circuit in Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989). The Rogers test allows defendants to raise a free speech defense if their use of a mark is artistically relevant to their work and does not explicitly mislead consumers as to its source.
On Feb. 8, 2023, after deliberating for three days, a jury in one such case, Hermès International v. Mason Rothschild, found the defendant — the maker of the infamous "MetaBirkins" NFT collection — liable for trademark infringement, trademark dilution, and cybersquatting, and ordered defendant to pay $133,000 in damages. The jury reached this verdict notwithstanding early rulings in the case by Judge Rakoff, both at the motion to dismiss and summary judgment stages, that the Rogers test potentially protected the defendant's NFTs. Hermès International v. Mason Rothschild, 22-CV-384 (JSR) (U.S. Dist. Ct., Southern District of New York, Feb. 2, 2023).
In contrast, in Yuga Labs v. Ripps, CV-22-4355-JFW-JEM (U.S. Dist. Ct., Central District of California, Dec. 16, 2022), NFT makers tried to justify their use of plaintiff's "Bored Ape" trademarks as commentary against plaintiff's alleged racist tendencies, but the court rejected the defendants' attempt to dismiss the case on free speech grounds under Rogers. The court held that defendants failed to make the threshold legal showing that their use of the marks was part of an expressive work because the defendants' NFTs merely pointed to the same digital images that made up plaintiff's NFT collection, and because defendants' sale of their NFTs amounted to "commercial activities designed to sell infringing products, not expressive artistic speech protected by the First Amendment."
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