NFTs and Trademark Law – Protecting IP Rights in the Digital Space

By on April 3, 2023
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For much of human history, we have defined ourselves by the things we wear. From trying to win the latest pair of Air Jordan shoes on the “drop” to high-end designer brands, what we choose to wear is often a form of self-expression. As blockchain technology and NFTs have become more widespread, fashion brands have sought to take advantage of this emerging technology by “beginning to create and offer digital replicas of their real-life products to put in digital fashion shows or otherwise use in the metaverse.”[1] As with many advancements with the internet, the emergence of NFTs has led to instances of cybersquatting and potential infringement of trademarks, but until February 8, 2023, no U.S. court had made any ruling to answer this question.

Overview of the Dispute

In December 2021, Mason Rothschild created a series of non-fungible tokens (NFTs) titled “MetaBirkins.”[2] These NFTs depicted an image of a faux-fur-covered bag that resembles the world famous Hermès Birkin bag. Rothschild described his NFTs as “a tribute to Hermès’ most famous handbag, the Birkin, one of the of most exclusive, well-made luxury accessories.”[3] Rothschild told Yahoo Finance “for me, there’s nothing more iconic than the Hermès Birkin bag… I wanted to see as an experiment if I could create the same kind of illusion that it has in real life as a digital commodity.”[4] Rothschild created and sold 100 NFTs, some selling for tens of thousands of dollars.[5]

On January 14, 2022, Hermès International filed a complaint in the U.S. District Court for the Southern District of New York against Rothschild for trademark infringement, trademark dilution, and cybersquatting.[6] In March 2022, Rothschild moved to dismiss Hermès’ amended complaint for failure to state a claim upon which relief can be granted under the Federal Rules of Civil Procedure.[7]

In determining whether the NFTs infringed on the Hermès trademarks, the court agreed with Rothschild that the test outlined in Rogers v. Grimaldi[8], under which the First Amendment protects artistically expressive use of a trademark (and is thus not infringement) should be applied as opposed to the Gruner + Jahr[9] test for which Hermès advocated.[10] Rothschild argued that his NFTs satisfied both prongs of the two part Rogers test because: the use of the trademark (1) had some artistic relevance and (2) was not explicitly misleading in serving as a source identifier of the NFTs.[11]

On this initial motion to dismiss based on the artistic relevance prong of the Rogers test, the court found that Hermès’ complaint contained “sufficient allegations that Rothschild entirely intended to associate the ‘MetaBirkins’ mark with the popularity and goodwill of Hermès’ Birkin mark, rather than intending an artistic association.”[12] Regarding the explicit misleadingness prong, the court found that, similar to the artistic association prong, Hermès’ complaint contained sufficient allegations of explicit misleadingness for the court to deny the motion to dismiss the trademark infringement claims against Rothschild.[13] As for the other claims of trademark dilution and cybersquatting, the court held that they rose and fell with Rothschild’s First Amendment defense of the infringement claims and so denied the motion to dismiss on similar grounds.[14]

Both Hermès and Rothschild filed cross-motions for summary judgment, which were denied on December 30, 2022.[15] In ruling on these cross-motions, the court again used the Rogers test to evaluate the claims of trademark infringement.[16] In explaining the Rogers test, the court said that, consistent with holdings from other district courts, “as long as the plaintiff’s trademark is used to further plausibly expressive purposes, and not to mislead consumers about the origin of a product or suggest that the plaintiff endorsed or is affiliated with it, the First Amendment protects that use.” Id. The court reasoned that Rothschild’s MetaBirkins could be seen as constituting a form of artistic expression, and for that reason, the Rogers test was proper.[17]

The court first analyzed the case using the “artistic relevance” factor from the Rogers test. This is a bar easily met, as “it is met ‘unless the [use of the mark] has no artistic relevance to the underlying work whatsoever.”[18] However, when a trademark is used purely to exploit its public value, the relevance prong will not be met.[19] Because it was not clear as a matter of law that the mark was used for exploitative purposes, the court denied both parties’ summary judgment motions on this issue.[20]      

Next, the court analyzed the case under the “explicitly misleading” prong.[21] A work will be explicitly misleading when it leads the public to believe that the work was the creation or authorized work of the trademark holder.[22] Courts use the factors for likelihood of confusion under Polaroid[23]  to make the determination as to whether the work was explicitly misleading.[24] The court again denied the cross-motions for summary judgment on this issue, concluding that the Polaroid factors are fact intensive, and there were genuine issues of material fact.[25]

After both parties’ motions for summary judgment were denied, the case went to trial before a jury. On February 8, 2023, a nine-person jury returned the first-ever verdict in a trial involving the intersection of NFTs and trademark rights.[26] The jury found in favor of Hermès, finding Rothschild liable for trademark infringement, trademark dilution, and cybersquatting.[27] The jury also determined that the First Amendment did not protect the MetaBirkin NFTs.[28]

On March 13, 2023, Rothschild filed a motion for judgment as a matter of law or new trial.[29] In this motion, Rothschild claims that the district court judge gave the jury improper instructions, which resulted in the findings against him.[30] It is expected that, should this motion be denied, Rothschild will appeal his case.

Implications

As with many landmark cases, the question for most people is how this decision affects them. While a victory for Hermès, many questions remain unanswered when it comes to intellectual property rights in the virtual space. One takeaway is that the same intellectual property rules that govern goods in the physical world exist in the metaverse.[31] And many companies, particularly the more well-known brands, have applied for or obtained trademark registrations of their names in classes of goods that include those in the virtual world, like NFTs.[32]

[1] Hermès Int’l v. Rotchschild, 603 F.Supp.3d 98, 101 (S.D.N.Y. 2022).

[2] Id.

[3] Id.

[4] Id.

[5] Tori Lathan, Yahoo Finance, Hermès Won Its Case Against an Artist Who Sold NFTs of Its Iconic Birkin Bags, https: //www.yahoo.com/now/herm-won-case-against-artist-233000462.html (Last visited Mar. 23, 2023).

[6] Hermès Int’l v. Rotchschild, 603 F.Supp.3d 98, 101 (2023).

[7] Id. at 100.

[8] 875 F.2d 994 (2d Cir. 1989).

[9] 991 F.2d 1072 (2d Cir. 1993).

[10] 603 F.Supp.3d at 103.

[11] Id.

[12] Id. at 105.

[13] Id. at 106.

[14] Id.

[15] Hermes Int’l v. Rothschild, No. 22-CV-384 (JSR), 2023 WL 1458126, at *1 (S.D.N.Y. Feb 2, 2023).

[16] Id. at *4.

[17] Id.

[18] Id. at *7.

[19] Id. at *8.

[20] Id.

[21] Id.

[22] Id. at *9.

[23] Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492 (2d Cir. 1961).

[24] Id.

[25] Id.

[26] Isaiah Poritz, Bloomberg Law,  Hermès Defeats MetaBirkins in the First NFT Trademark Trial,  https://news.bloomberglaw.com/ip-law/hermes-gets-win-over-metabirkins-in-first-nft-trademark-trial (last visited Mar. 30, 2023).

[27] Id.

[28] Id.

[29] Isaiah Portiz, Bloomberg Law, MetaBirkin NFT Artist Seeks New Judgment After Loss to Hermès, https://news.bloomberglaw.com/ip-law/metabirkin-nft-artist-seeks-new-judgment-after-loss-to-hermes?context=search&index=1 (Last visited Mar. 23, 2023).

[30] Id.

[31] Andrew Comer, Bloomberg Law, How the Hermès NFT Case Will Impact Expression and Enterprise, https:// news.bloomberglaw.com/us-law-week/how-the-hermes-nft-case-will-impact-expression-and-enterprise?context=search&index=8 (Last visited Mar. 23, 2023).

[32] Id.

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A Generic.com Term is Not Per Se Generic

By on July 15, 2020
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Author: Julia Whitelock

A generic term combined with a non-source-identifying term is just a generic term, right?  In United States Patent and Trademark Office v. Booking.com B.V., Case No. 19-46, 2020 U.S. LEXIS 3517, 591 U.S. ___ (June 30, 2020), the U.S. Supreme Court rejected a sweeping rule that the combination of a generic word with “.com” is automatically generic and, therefore, unregistrable per se.

Procedural History

Booking.com, a digital travel company that provides travel-related services under the brand “Booking.com,” filed applications to register the mark “Booking.com.”  A USPTO examining attorney and the Trademark Trial and Appeal Board (“TTAB”) concluded that the term “Booking.com” was generic for the services offered and denied registration.  According to the Trademark Manual of Examining Procedure (“TMEP”) (Oct. 2018), “[portions of the uniform resource locator (‘URL’), including the beginning, (‘http://www.’) and the top-level Internet domain name (“TLD”) (e.g., “.com,” “.org,” “.edu,”) indicate an address on the World Wide Web, and therefore generally serve no source-indicating function.”  TMEP § 1209.03(m).  Because “.com” “generally indicate[s] the type of entity using a given domain name, and therefore serves no source-indicating function, their addition to an otherwise unregistrable mark typically cannot render it registrable.”  Id.  TTAB found that “booking” was a generic term for “making travel reservations” and “.com” only served to identify a commercial website.  It therefore concluded that “Booking.com” is unregistrable because it is generic or, in the alternative, descriptive and lacking secondary meaning.

The U.S. District Court for the Eastern District of Virginia and the U.S. Court of Appeals for the Fourth Circuit disagreed with the PTO.  Generic terms are the “common name of a product or service itself.”  Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455, 464 (4th Cir. 1996).  The District Court, relying on Booking.com’s new evidence of consumer perception, concluded that the compound term “Booking.com,” as opposed to “Booking,” is not generic.  Instead, consumer perception evidence indicated that “Booking.com” is descriptive and had acquired secondary meaning as to hotel-reservation services.  The USPTO appealed only the District Court’s ruling on genericness.  The Fourth Circuit affirmed the District Court’s determination that “Booking.com” is not generic, finding no error in its assessment of consumer perception and rejecting the USPTO’s contention that combining a generic term with “.com” is “necessarily generic.”  The Fourth Circuit applied the three-step test for genericness: “(1) identify the class of product or service to which use of the mark is relevant; (2) identify the relevant consuming public; and (3) determine whether the primary significance of the mark to the relevant public is as an indication of the nature of the class of the product or services to which the mark relates, which suggests that it is generic, or an indication of the source or brand, which suggests that it is not generic.”  Booking.com B.V. v. United States Patent and Trademark Office, 915 F.3d 171, 180 (4th Cir. 2019) (citing Glover v. Ampak, Inc., 74 F.3d 57, 59 (4th Cir. 1996)).

The Supreme Court’s Ruling Reaffirms the Primary Significance Test for Analyzing Genericness

The Supreme Court affirmed the Fourth Circuit, concluding that “Booking.com” is not generic.  The Court held, “[w]hether any given ‘generic.com’ term is generic…depends on whether consumers in fact perceive that term as the name of a class or, instead, as a term capable of distinguishing among members of the class.”  2020 U.S. LEXIS 3517, *16.  The Supreme Court’s ruling rejected the USPTO’s assertion of a blanket rule that deemed all “generic.com” terms as generic.

The Booking.com Court’s holding does not materially change the test for genericness as announced in Kellogg Co. v. Nat’l Biscuit Co., 305 U.S. 111, 118, 83 L. Ed. 73, 59 S. Ct. 109 (1938).  In Kellogg, the Supreme Court stated that the owner of the mark “must show that the primary significance of the term in the minds of the consuming public is not the product but the producer.”  Id.  In Booking.com, the Supreme Court held that the owner of the mark must show that “consumers in fact perceive that term…as a term capable of distinguishing among members of the class.”  Accordingly, the Booking.com opinion reinforces the primary significance test in determining whether a mark is generic or descriptive in the context of a generic.com term.  To do so, the Court necessarily had to reject the USPTO’s position that a generic term combined with a generic corporate designation (in this case “.com”) is basically per se an unregistrable generic term.    

In Goodyear’s India Rubber Glove Mfg. Co. v. Goodyear Rubber Co., the Court held that “Goodyear Rubber Company” was not “capable of exclusive appropriation.”  128 U.S. 598, 602, 32 L. Ed. 535, 9 S. Ct. 166 (1889).  “Goodyear Rubber” was a class of goods and the combination of a generic term with “Company” “only indicates that parties have formed an association or partnership to deal in such goods.”  Id.  In Booking.com, however, unlike a generic term combined with “company,” a generic term combined with “.com” refers to a specific entity due to the exclusivity of domain name ownership.  2020 U.S. LEXIS 3517, *14.  Therefore, “consumers could understand a given ‘generic.com’ term to describe the corresponding website or to identify the website’s proprietor.”  Id. *15.  The Booking.com Court clarified Goodyear’s principles, in conjunction with the subsequent enactment of the Lanham Act, as “A compound of generic elements is generic if the combination yields no additional meaning to consumers capable of distinguishing the goods or services.”  Id. *15-16.  However, “[a] ‘generic.com’ term might also convey to consumers a source-identifying characteristic: an association with a particular website.”  Booking.com, 2020 U.S. LEXIS 3517, *14.  The point is that a court must look at consumer perception to determine whether the combined “generic.com” term identifies a class of goods or a particular producer. 

Impact

The decision may increase the cost of trademark prosecution.  The ruling seemingly opens the gates for an onslaught of generic.com applications.  However, applicants will need to show consumer perception that the generic.com term identifies a brand, not a class of goods.  The Booking.com Court provided a non-exhaustive list of support for consumer perception of a term’s meaning, to include: “consumer surveys, but also dictionaries, usage by consumers and competitors, and any other source of evidence bearing on how consumers perceive a term’s meaning.”  2020 U.S. LEXIS 3517, *16 n.6.  Compiling such evidence may be costly to trademark applicants seeking to register facially generic terms.

The decision may create a path for federal registration for other combination generic terms and non-source-identifying terms.  The Booking.com Court’s holding specifically identifies the factual circumstances for which to apply its rule – when analyzing whether a “generic.com” term is generic.  However, the analysis could likely be extended to other generic terms that lack a source-identifying term (such as other TLDs like “.org” or “.net”, or # or HASHTAG).

While a generic.com mark may be registrable (assuming proof of the mark’s primary significance as source to consumers), Booking.com does not alter the tenets of trademark law – likelihood of confusion and fair use.  “[E]ven where some consumer confusion exists, the doctrine known as classic fair use, [4 McCarthy] § 11:45, protects from liability anyone who uses a descriptive term, ‘fairly and in good faith’ and ‘otherwise than as a mark,’ merely to describe her own goods.”  2020 U.S. LEXIS 3517, *18 (citing 15 U.S.C. §1115(b)(4); KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111, 122-23, 125 S. Ct. 542, 160 L. Ed. 2d 440 (2004)).   

However, the decision may ultimately increase the instance of trademark bullying.  Even though a generic.com mark is registrable, as the Court explains and Booking.com concedes, the mark is a weak descriptive mark with a more difficult path to showing likelihood of confusion.  First, Booking.com concedes that “Booking.com” is a weak mark and as a descriptive mark, it is “harder…to show a likelihood of confusion.”  2020 U.S. LEXIS 3517, *18 (quoting Tr. of Oral Arg. 42-43, 66).  Second, Booking.com accepts that close variations of “Booking.com” are unlikely to infringe.  Id.  And finally, the federal trademark registration of “Booking.com” “would not prevent competitors from using the word ‘booking’ to describe their own services.”  Id.  However, it is conceivable that a generic.com trademark owner could and would use its federal registration to scare users of the generic term into ceasing use for fear of a costly, protracted legal battle.

About the author: Julia Whitelock is a partner in Gordon Rees Scully Mansukhani’s Intellectual Property and Commercial Litigation Practice Groups.  Her practice focuses on litigating matters involving trademarks, copyrights, trade secrets, commercial disputes, and consumer claims, and advertising & e-commerce law.

Filed under Patent, Patent Trial and Appeals Board, Trademark, Trademark Trial and Appeal Board, Uncategorized