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January 16, 2024 Feature

Freedom of Expression and the Artistic Relevance of NFTs

Matthew D. Asbell

©2024. Published in Landslide, Vol. 16, No. 2, December/January 2024, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

Is circumstantial evidence of bad faith intent in adopting another’s mark enough to disregard an artist’s First Amendment right to freedom of expression? A jury determined it was when they found a non-fungible token (NFT) creator liable for trademark infringement, dilution, and cybersquatting, and the judge did not disagree.

The artist and entrepreneur known as Mason Rothschild, Sonny Estival, found inspiration in the iconic handbag and symbol of wealth and exclusivity called the Birkin, designed and produced by the luxury fashion brand Hermès. Perhaps Rothschild was encouraged by a perfect storm of facts: the fact that Hermès sells each of its Birkin bags usually for tens of thousands of dollars; the fact that Hermès offers a miniature version of the bag, calling it a Baby Birkin; and the fact that Hermès had not yet entered what was at the time the hot new market for NFTs and associated them with its products.

Whatever the motivation, Rothschild worked with digital artist Mark Berden to depict his own so-called Baby Birkin, a digital image of the famous handbag having the shadowy profile of a fetus gestating from within it, and sold the image and its associated NFT for $23,500. Clearly thinking that he was onto a good thing, Rothschild thought he was “sitting on a gold mine” when he worked with Berden a few months later on 100 images of blurry, faux-fur-covered Birkin bags that he christened “MetaBirkins” and presold on his registered domain NFTs that he later associated with each unique image.

Relying in large part on its registered trademarks for BIRKIN, registered trade dress for its handbag design, and established reputation in the market, Hermès brought claims of trademark infringement and trademark dilution under the Lanham Act and cybersquatting under the Anticybersquatting Consumer Protection Act against Rothschild in the Southern District of New York. Rothschild’s motion to dismiss was denied on May 18, 2022. A jury then found the defendant liable on all three counts despite a long history of cases in the same jurisdiction (and elsewhere throughout the country) that prioritize freedom of expression under the First Amendment of the U.S. Constitution over violations of the Lanham Act. Hermes moved for a permanent injunction on March 3, 2023, and Rothschild filed a motion for judgment as a matter of law on March 14, 2023. The Southern District of New York ruled on the motions on June 23, 2023.

Relying on the Rogers Test

As it turns out, Rothschild’s reliance on Rogers v. Grimaldi and its progeny was ill-founded, but the reasons for that have been a moving target. In that case, Ginger Rogers unsuccessfully sued the producers of a film called Ginger and Fred, about two Italian cabaret performers named Pippo and Amelia whose routine emulated the famous dancing duo. The district court found for the defendant, and the Second Circuit affirmed, holding that the Lanham Act should not restrict an artistically relevant work of expression from use of the trademark in its title “where the title does not explicitly denote authorship, sponsorship, or endorsement by the celebrity or explicitly mislead as to content.” The court established a two-part test to determine whether the creative expression protected by the First Amendment could nonetheless infringe a trademark. The test first inquires whether the work met a low threshold for artistic relevance, and then determines if use of the trademark was explicitly misleading. If the work was not artistically relevant or the defendant used the trademark in a manner that was explicitly misleading, the court would then turn to an analysis of the relevant factors in its jurisdiction to determine if there was a likelihood of confusion.

Over the course of several decades, courts throughout different parts of the country have adopted Rogers, parsing and interpreting the language of the holding in less than obvious ways. They considered whether a work used for commercial purposes was sufficiently artistic. They evaluated whether the Rogers test could extend beyond titles to artistic content. They extended the meaning of “explicitly misleading” to all sorts of nonexplicit uses. Some characterized the test as a threshold before the likelihood of confusion analysis could occur, while others performed the likelihood of confusion analysis to support the second prong of the test, that a use was “explicitly misleading.” Despite variations in interpretation and application of Rogers, the case has stood as a pillar and counterbalance to prevent liability for trademark infringement in the name of constitutional freedom of expression.

U.S. Supreme Court Limiting the Applicability of Rogers

Perhaps Rothschild was lured into a false sense of security by the case law, which seemed to suggest that his digital images and corresponding NFTs were protected speech and thus could not infringe Hermès’s trademarks. Or maybe it was just poor timing because while Rothschild was defending against Hermès’s claims, a manufacturer of novelty dog toys found itself before the U.S. Supreme Court attempting to rely on its own parodies of Jack Daniel’s whiskey and its distinctive label and bottle design.

The defendant in that case, VIP Products, itself must have had a false sense of security from its successes in registering trademarks for dog toys parodying other well-known brands. After all, if the U.S. Patent and Trademark Office would allow VIP Products to obtain registrations and the presumptions of validity that accompany them, surely their uses could not be infringements. That security may have been bolstered by case law recognizing that Louis Vuitton could not stop another party from using “Chewy Vuiton” for its dog toys, and that “Charbucks” did not infringe or dilute Starbucks. Additionally, a case in which The North Face sued the creator of “The South Butt” on infringement and dilution grounds settled in the days prior to a preliminary injunction hearing.

But the Supreme Court, siding with the plaintiff and not distracted by the “humor” of “Old No. 2 on Your Tennessee Carpet,” took the opportunity in Jack Daniel’s to limit the applicability of Rogers and reserved the right to limit it even further in subsequent cases. The Court rejected the premise that the Rogers test should be applied in cases where the defendant uses the trademark as a source indicator for its own goods or services. “Without deciding whether Rogers has merits in other contexts,” the Court held that a stringent threshold test is “not appropriate when the accused infringer has used a trademark to designate the source of its own goods—in other words, has used a trademark as a trademark.” The Court characterized this kind of use in “the way the Lanham Act most cares about” as not protected by the First Amendment.

So, it is one thing to refer to the brand owner and its products or services in a title, like Ginger and Fred apparently did. It is something else to refer to the brand owner and its products or services in expressive content in the defendant’s own offering, like the “Pig Pen” in Rockstar Games’ Grand Theft Auto: San Andreas video game. It is even further afield to allude to the brand owner and its products or services, as VIP Products did when using “Bad Spaniels,” “Old No. 2,” and a dog toy in the shape of Jack Daniel’s distinctive bottle as its own offerings. And so, the extent of Rogers’s scope is now in question, and MetaBirkins and the digital graphics alluding to and parodying Hermès’s famous handbags do not get to hide behind the U.S. Constitution.

Rogers Not a Defense

Hermès was initially decided on February 2, 2023, before Jack Daniel’s was decided on June 8, 2023. Promptly after the decision in Jack Daniel’s issued, on June 23, 2023, the Southern District of New York ruled on the motion for permanent injunction by Hermès and the motion for judgment as a matter of law by Rothschild. Rothschild appealed the ruling to the Second Circuit on July 24, 2023, and that appeal remains pending.

The district court instructed the jury to consider first whether Rothschild was liable for trademark infringement, trademark dilution, and/or cybersquatting, before considering whether Rothschild’s legally protected right of artistic expression nonetheless barred him from such liability. This suggestion that the Rogers test would apply only after the likelihood of confusion analysis seemed flawed under the then prevailing law of the Second Circuit. Most cases of this nature in this jurisdiction initially required a determination under the Rogers test that the use met the low threshold required to be considered artistically relevant. The second step of the Rogers test was then to determine if the use was explicitly misleading. If so, the analysis would then turn on the likelihood of confusion factors in Polaroid Corp. v. Polarad Electronics Corp. Second Circuit case law subsequent to Rogers muddied things when it brought the likelihood of confusion analysis into the second step of the Rogers test to determine if, in the absence of evidence of explicit efforts to mislead consumers, the probability of confusion would mandate a circumstantial finding that the use was nonetheless explicitly misleading. But the court in Hermès did not appear to even follow that law. Rather, it instructed the jury to decide on the issues of infringement, dilution, and cybersquatting first before turning to Rogers as a defense. As Rothschild asserted, this may have had some impact on the jury because once they had decided that confusion was likely, they may have been less inclined to think of Rothschild’s works as art and expression and to excuse him from liability. However, in denying Rothschild’s motion for judgment as a matter of law, the Southern District of New York ruled that its “instructions to the jury were entirely correct” and relied on the Supreme Court decision in Jack Daniel’s to minimize the importance of the Rogers test.

The district court first pointed to Rothschild’s previous agreement to the instructions as waiver and then defended its instructions, stating that “[n]owhere in these instructions did the Court refer to the First Amendment protection as a ‘defense’ or ‘excuse’ to liability,” and further commenting that regardless of the order in which it asked the jury to consider the issues, the “burden remain[ed] with [Hermès] at all times.” It refuted Rothschild’s limited evidence of a juror’s opining post hoc on social media of “‘no need to hide under the cloak of the 1st amendment’ so long as they kept . . . ‘the goodwill of the brand and the consumer in mind’” as “accurately predict[ing] what the Supreme Court would hold a few months later, in Jack Daniel’s.” The court stated that the use of another’s trademark to designate the source of his own goods “is precisely what the defendant, with his ‘MetaBirkins’ NFTs and ‘MetaBirkins’ website, did here.”

However, this suggests that if Rogers v. Grimaldi were considered today, the Second Circuit might find for the plaintiff because the movie title Ginger and Fred was not necessary to convey the artistic expression that was the subject of the film and was surely selected with the intention to attract the attention of fans of the dancers.

In its May 2022 order on the motion to dismiss, the Hermès court—in contrast to its statements in the order of June 23, 2023—acknowledged that Rothschild’s “digital images of handbags . . . could constitute a form of artistic expression” and that Rothschild’s use of

the title of the artwork for social media and online accounts dedicated to selling the artwork is just like the marketing and advertising approved in Rogers. And Rogers is not inapplicable simply because Rothschild sells the images—the movie studio defendant in Rogers sold the film at issue. Neither does Rothschild’s use of NFTs to authenticate the images change the application of Rogers: because NFTs are simply code pointing to where a digital image is located and authenticating the image, using NFTs to authenticate an image and allow for traceable subsequent resale and transfer does not make the image a commodity without First Amendment protection any more than selling numbered copies of physical paintings would make the paintings commodities for purposes of Rogers.

The court appears to struggle with the intertwined nature of the use being both artistically relevant and commercial, and with the proper role of the Rogers test in weighing freedom of expression against source-identifying use.

The court further pointed out that “[w]hether the Rogers test even properly applies to a case like this one has now been cast in doubt.” It characterized Rothschild’s “references to Hermès’ registered ‘Birkin’ trademarks” as “explicit and central to Rothschild’s venture.” Should they not be? Does the court’s mention of the term “explicit” correspond to the use being “explicitly misleading”? Apparently so—at least according to the jury—but one can readily see how Rothschild’s adoption of the “MetaBirkins” title was an explicit reference to Hermès’s mark and corresponding goods as much as it also referred to the defendant’s goods. By definition, the prefix “meta-” is “added to the name of something that consciously references or comments upon its own subject or features” (though others have suggested anecdotally that the prefix refers to the metaverse). So, the inclusion of that prefix in the defendant’s use should have made clear to consumers and the jury that he was referring to Hermès’s brand. Could this not be distinguished from Jack Daniel’s because “Bad Spaniels” only alluded to the Jack Daniel’s marks in parody without the use of terminology in the mark to make the puns explicit?

The Hermès court went on to say that its instructions to the jury, delivered prior to the decision in Jack Daniel’s, were actually overly favorable to the defendant because they advised the jury that the works qualified as artistic expression as a matter of law and they defined “explicitly misleading” as “not only objectively misleading but also intentionally misleading.” If the “explicitly misleading” prong of the Rogers test is not limited to situations where the defendant’s trademark itself rather than what can be inferred circumstantially about the defendant’s intent is what causes the likelihood of confusion, courts need only pay lip service to the First Amendment. They have greater discretion to determine when expressive freedom should and should not trump likely confusion. This makes outcomes less predictable and could chill expression because an artist’s intention in referring to a third-party trademark could almost always be “explicitly misleading” under this standard. At the very least, the broad interpretation of the second prong of the Rogers test should strongly suggest to those who may wish to allude to a known brand in their own marks that they should be very careful in all statements they make about either product.

Achieving a Proper Balance

The Rogers test should not solely be about the defendant’s intent and should not allow courts to circumstantially infer a bad faith intent to mislead with such ease. While bad faith is relevant to a likelihood of confusion analysis, the Polaroid factors should not be imported wholesale into the analysis of what is “explicitly misleading” as the law currently allows. Courts could better achieve a proper balance between freedom of expression and infringement by limiting the importation of the Polaroid factors to the second prong of the Rogers test and instead requiring only actual confusion by a significant proportion of consumers of the defendant’s goods as to source or endorsement. In other words, if Rogers v. Grimaldi will remain the law of the land, it should not be something that courts only acknowledge before they determine that artistic expression is nonetheless infringing. Rather, Rogers’s second prong should truly protect some First Amendment expression by requiring not only that the use is “explicitly misleading” as that phrase has been fine-tuned over the decades, but also that a substantial proportion of consumers have been, in fact, misled.

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    Matthew D. Asbell

    New York Practitioner

    Matthew D. Asbell is an attorney and adjunct professor in New York, New York, where he focuses on intellectual property law.