NFT — The New Wild West For IP Infringement?
Whether you like it or not, non-fungible tokens (NFTs) have exploded in this universe in the past year. With the advent of Metaverse, the frenzy for NFTs or virtual properties shows no sign of cooling off anytime soon. From art and music to burgers or anything else you can imagine, these digital assets sell like exotic treasures — some for millions of dollars.
However, for the big fashion houses, NFT’s phenomenal growth poses both opportunities and challenges. Famous brands like Luis Vuitton and Burberry have already ventured into the NFT worlds by developing their own digital assets. In the meantime, brand owners are presented with a new and unique challenge in the era of metaverse and NFTs: how to protect their intellectual property rights in the metaverse?
According to The Fashion Law, Hermès recently sent a cease and desist letter to Mason Rothschild, the artist behind the MetaBirkins NFTs. One of the MetaBirkins NFTs is shown below:
The creator of the NFT Birkin bags admits his work is spired by Hermès’ famed Birkin bag. Launched by shopping and social platform Basic Space, the NFT Birkin bag sold for $47,000 USD. Following the inaugural Birkin bag NFT, Rothschild created MetaBirkins, a collection of 100 unique Birkin-inspired NFTs. At this time, Rothschild claims that MetaBirkins has sold over 1.1 million USD, which is an amazing feat but not uncommon in the NFT world.
As one of Hermès’ most famous fashion products, a Birkin bag looks like the one shown below.
The Birkin bag is so famous, Hermès has spared no expense in protecting its most prestigious product design. It not only registered the Birkin name as a trademark but also managed to register at least two design trademarks in connection with the Birkin bag. One is U.S. Trademark Registration №3,936,105 (“‘105 Trademark”), which covers the contour and overall design of the bag (dotted lines are not part of the trademark). Another is U.S. Trademark Registration №1,806,107 (“‘107 Trademark”), which covers the middle belt with a lock. Both design trademarks are shown as follows:
The benefit of a product design trademark is that it could theoretically protect the design of a famous product forever without worrying about the legal expiration of a design patent and copyrighted work.
The question is: do Rothschild’s MetaBirkin bags infringe Hermès’ trademark rights? The simple answer is that it depends. Although Rothschild publicly admitted that his works were inspired by the Birkin bag, it does not necessarily mean he does not have a good defense to his works. One, he could claim fair use of the Birkin bag trademarks because his designs are artworks, not trademark use. Under the U.S. trademark law, Rothschild could also claim exceptions as artistic works protected under the First Amendment, which he rightfully claimed in an open letter response to Hermès. To claim protection under First Amendment, Rothschild likely has to prove that his use of the Birkin trademarks is (1) “artistically relevant” to the work and (2) not “explicitly misleading” as to the source of the content of the work. Whether this defense works, it will be up to the judge and jury should Hermès decide to take this case to court.
The Hermès v. Rothschild ordeal won’t be the only incident for brand owners. With the flooding of NFTs in the Metaverse, brand owners will have to face the challenge of policing their precious IP against those who seek to profit from it in the virtual world.
The MetaBirkin bag NFTs are relatively easy for Hermès to spot. How about millions of other NFTs currently on sale in OpenSea and other NFT platforms? Do brand owners need a virtual operator to help them scout the virtual world for infringement? Detecting infringement in the virtual poses unique challenges for the tech world. Luckily, we are in the age of artificial intelligence. A.I.-powered tools can be adjusted to meet the new challenges for brand owners in the virtual world. For example, the A.I.-based search engine developed by Huski.ai can be applied to detect “virtual” trademark counterfeiters in the Metaverse. The Huski.ai engine proves to be capable of catching the “smart” counterfeiters on the Internet, who use twisted or cropped images to make it difficult for brand owners to detect infringement. The Huski.ai engine can be redeployed in the virtual world to catch “virtual” infringers using the same technologies. In proving the effectiveness of the search engine, Huski.ai quickly indexed all products listed on Hermes.com, which includes about 10,000 images for a wide range of products, such as handbags, shoes, clothes, accessories, home decors, fragrances, makeups, etc. A couple of search results are displayed below. As the results show, Huski.ai’s engine can effectively find similar Hermès products using the MetaBirkins’ NFT as input. As the NFTs are accepted into the mainstream, “virtual” enforcers will undoubtedly play a more significant role for the big IP houses.