Birkin up the Wrong Tree?: NFTs & Trademark Protection

For my final project, I will examine a trademark infringement case about NFTs and its potential implications on Canadian IP law.

What are NFTs?

Non-fungible tokens, commonly known as NFTs, are digital tokens with a unique, one-of-one identifier distinguishing them from any other blockchain token.¹ In recent years, NFTs have blossomed as novel digital assets. Items sold as NFTs range from artworks, collectibles, domain names to even real estate.² The values of NFTs derive from the fact that they are “non-fungible”, which means they are not interchangeable with different tokens and therefore limited in supply. ³ NFTs must be created through minting, a process that turns digital files into non-editable digital assets on the blockchain.⁴ Buyers can purchase NFTs through programs known as “smart contracts”.⁵

Two Competing Views on NFTs & IP

Owning an NFT does not automatically amount to owning the underlying asset. This is somewhat analogous to someone buying a signed copy of an artwork without owning the proprietary right of the original work.⁶ As such, some may argue that since NFTs are just “a string of numbers generated with a work”, they could not be considered a reproduction of the work but simply a proof of ownership.⁷ It follows that NFTs cannot generate original work protected by law, nor can they infringe the IP rights of the underlying works.

By contrast, others recognize NFTs as an “enhanced type of art”.⁸ In simpler terms, they are works built upon the original physical or digital works. Under this view, since NFTs usually contain “still and video imagery, likeness of a well-known figure, or a recognized trademark”,⁹ they transcend the form of data and have significant commercial values that make them pertinent in IP issues. Sometimes artwork itself can be on the ledger and become part of the NFT – known as “on-chain” – then such NFT is better defined as a combination of the artwork and its derivative codes.¹⁰

The Legal Battle over MetaBirkin

As there is no Canadian jurisprudence on this topic, the seminal U.S. case of Hermès International v. Rothschild may shed light on how NFTs are scrutinized by trademark law. ¹¹ In this case, the defendant, Mason Rothschild, created and sold NFTs depicting Hermès’ classic Birkin handbags covered in colourful fur on his website branded MetaBirkins.¹² Rothschild profited roughly $125,000 from selling NFTs and collecting royalties from secondary sales.¹³ The artist wrote on his website that the works were (ironically?) “inspired by the acceleration of fashion’s ‘fur-free’ initiative and embrace of alternative textiles” together with a disclaimer saying “We are not affiliated, associated, authorized, endorsed by, or in any way officially connected with the HERMES [sic], or any of its subsidiaries or its affiliates”. ¹⁴ Hermès, the registered trademark owner of Birkin in the U.S., alleged Rothschild ripped off their trademark by adding the generic prefix “meta” to it.¹⁵

In February 2023, a federal jury found Rothschild guilty of trademark infringement and dilution because the mark MetaBirkin was deemed confusing.¹⁶ In the decision issued later that year, the judge permanently banned Rothschild from selling his MetaBirkin NFTs and rejected the defendant’s claim of freedom of speech protected by the First Amendment. While the judge acknowledged that the MetaBirkin NFTs are artistic works, he held that their use was not artistically relevant to the works and was misleading the source or content of the work.¹⁷ As a result, the court determined that the defendant’s conduct failed the test in Rogers v. Grimaldi that exempts certain expressive work from copyright infringement. ¹⁸

This is the first time a court probed into the trademark issues of NFTs and the decision, unsurprisingly, was received with mixed reactions.¹⁹ Rothschild appealed the decision. As of today, the U.S. Court of Appeals for the Second Circuit has not rendered its judgment.

Viewing NFTs through the Canadian IP Lens

The tale of MetaBirkin may be told differently north of the border. Hypothetically, assuming Rothschild was also sued in Canada, the case might have been distinguished on two major aspects discussed below.

First, after a quick search in the database Canadian Intellectual Property Office (CIPO), it appears that the word “Birkin” is a registered trademark of a Chinese company producing construction materials.²⁰ Hermès’ registration of “DESSIN DU SAC BIRKIN” only relates to the design (get-up) of the bag.²¹ This may complicate its trademark claim if Hermès wishes to sue Rothschild on his MetaBirkin in Canada because the word “Birkin” is registered by a third party. (It is equally interesting to see how Hermès deals with this squatting issue). As a result, Hermès would most likely have to rely on the tort of passing off. In Ciba-Geigt, the SCC outlined three elements to establish the tort claim, namely, the existence of goodwill, deception of the public due to a misrepresentation, and actual or potential damage to the plaintiff.²² Although the first element can be easily established given the reputation of Hermès in Canada, the company may face some hurdles in making out the other two elements. 

On the issue of misrepresentation, the court will ask whether MetaBirkin is likely to confuse customers. Here, the artist could argue that the MetaBirkins, although similar in shape to Birkins (a utilitarian feature), are covered in faux fur, suggesting a low degree of resemblance. Purchasers of the NFTs should at least be able to tell them apart from the real Birkins sold in brick-and-mortar or online stores where physical handbags are displayed. In addition, because a MetaBirkin costs between $13,000 and $65,000, whereas real Birkins can cost between $40,000 and $500,000,²³ such a price difference would be immediately noticeable for luxury-good shoppers who often spend more time inspecting what they buy. Customers could also realize the difference given the disclaimer on the website. Regarding damage, while it can be easily proven that the artist profits from creating these NFTs, it is debatable how Hermès suffers or will suffer losses in its goodwill. On the one hand, Hermès may allege that the artists substantially altered the look of their renowned bags and undermined their fame. On the other hand, Rothschild can argue that because the artistic creation does not associate Birkins with low-quality products or controversial content, he does not harm Hermès’ goodwill. Consequently, on a balance of probabilities, the court will likely find no passing off.

Second, if in an alternate reality, Hermès has registered the word Birkin, then it may claim trademark infringement under section 20(1)(a) of the Trademarks Act, which prohibits the use of confusing trademarks.²⁴

Hermès will likely establish a prima facie infringement since the word mark MetaBirkin is used by the defendant in association with their goods. Regarding confusion, Hermès will also have some strong arguments to make. Applying the hurried customer test, there is a likelihood such a person will be misled to believe that the source of MetaBirkins is Hermès. Moreover, Birkin is not a common name and has been customarily associated with the bags, which fulfills the requirement for inherent distinctiveness under s 6(5)(a).²⁵ Finally, Hermès has used continuously the mark Birkin for nearly two decades, whereas MetaBirkin only emerged fairly recently. On the defendant’s side, perhaps the only counter argument he can make is that Birkins and MetaBirkins are distinct items sold on different channels, so the likelihood of confusion is relatively low. 

In the likely event that Hermès successfully establishes its s. 20 claim, Rothschild may consider bringing the fair dealing defence into play. This will be, no doubt, a history-making feat because unlike fair use in the U.S., fair dealing is not available in the Trademarks Act. However, given the tension between the interests of corporate trademark owners and the public to exercise their right of free speech, it might be a good opportunity for the court to address this issue by allowing fair dealing to become a common law defence to trademark infringement. Canada already takes a more liberal approach to fair dealing in copyright law compared to the U.S. concept of fair use.²⁶ Parliament may as well wish to step in to align trademark law with it.

Conclusion

Regardless of which side wins this hypothetical lawsuit, the litigation will be meaningful for law students and professionals in IP law. Not only will the courts need to determine the extent to which the commercial interest of businesses with deep pockets is protected vis-à-vis people’s freedom of expression, protected by the Charter, but they also have to consider what changes will be made to cope with the proliferation of NFTs that induces novel challenges. In any event, Parliament and the judiciary will grapple with the new digital environment of this emerging technology and reshape the landscape of Canadian IP jurisprudence.

Acknowledgment: The cover image was generated using Chat GPT4 with the prompt: A digitalized Birkin bag sitting in a Canadian courtroom

1. Chainlink, “What Is an NFT (Non-Fungible Token)?” (14 August 2024), online: <https://chain.link/education/nfts> ↩︎
2. Ethereum, “Non-fungible tokens (NFT)” (last visited 19 December 2024), online: <https://ethereum.org/en/nft/> ↩︎
3. Farah Mukaddam, “NFTs and Intellectual Property Rights” (October 2021), online: <https://www.nortonrosefulbright.com/en/knowledge/publications/1a1abb9f/nfts-and-intellectual-property-rights#section2> [Mukkadam].  ↩︎
4. Shira Brand, “NFTS – A New Threat to Intellectual Property Rights: An analysis of non-fungible tokens, copyright and trademark infringement” (02 November 2022), online: <https://www.cba.org/Sections/Intellectual-Property/Resources/Resources/2022/NFTS-%E2%80%93-A-New-Threat-to-Intellectual-Property-Right.> [Brand]. ↩︎
5. Ibid. ↩︎
6. Mukkadam, supra note 3 ↩︎
7. Andres Guadamuz, “The Treachery of Images: Non-Fungible Tokens and Copyright” (2021) 16:12 J Intellectual Property L & Practice 1367 at 1378. ↩︎
8. Megan Noh, Sarah Odenkirk & Yayoi Shionoiri, “GM! Time to Wake Up and Address Copyright and Other Legal Issues Impacting Visual Art NFTs” (2022), 45:3 Columbia JL & Arts, online: <https://doi.org/10.52214/jla.v45i3.10007> 315 at 317. ↩︎
9. Mark Conrad, “Non-Fungible Tokens, Sports, and Intellectual Property Law Issues: A Case Study Applying Copyright, Trademark, and Right of Publicity Law to a Non-Traditional Ownership Vehicle” (2022) 32 J Leg Aspects Sport 132 at 135-136. ↩︎
10. Brand, supra note 4. ↩︎
11. Hermès Int’l v. Rothschild, 678 F. Supp. 3d 475 (S.D.N.Y. 2023). ↩︎
12. Harper Johnson, “Case Review: Hermès International v. Rothschild” (7 May 2024), online: <https://itsartlaw.org/2024/05/07/case-review-hermes-v-rothschild/#post-64652-footnote-26>. ↩︎
13. Ibid. ↩︎
14. Taylor Dafoe, “Hermès Is Suing a Digital Artist for Selling Unauthorized Birkin Bag NFTs in the Metaverse for as Much as Six Figures” (26 January 2022), online: <https://news.artnet.com/art-world/hermes-MetaBirkins-2063954> [Dafoe]. ↩︎
15. Ibid. ↩︎
16. Mikaela Keegan et al., “MetaBirkins Post-Trial Ruling Clarifies Line Between Trademark Infringement and Free Expression and Grants Broad Injunctive Relief” (29 June 2023), online: <https://www.jdsupra.com/legalnews/MetaBirkins-post-trial-ruling-clarifies-4534594/>. ↩︎
17. Ibid. ↩︎
18. Ibid. ↩︎
19. Ibid. ↩︎
20. Government of Canada, Birkin — 1548497 (last visited 20 December 2024), online: <https://ised-isde.canada.ca/cipo/trademark-search/1548497?lang=eng&payload=%7B%22domIntlFilter%22%3A%221%22%2C%22searchfield1%22%3A%22all%22%2C%22textfield1%22%3A%22Birkin%22%2C%22display%22%3A%22list%22%2C%22maxReturn%22%3A%22500%22%2C%22nicetextfield1%22%3Anull%2C%22cipotextfield1%22%3Anull%7D&pageNum=0&pageLen=50>. ↩︎
21. Government of Canada, DESSIN DU SAC BIRKIN — 1414879 (last visited 20 December 2024), online:<https://ised-isde.canada.ca/cipo/trademark-search/1414879?lang=eng&payload=%7B%22domIntlFilter%22%3A%221%22%2C%22searchfield1%22%3A%22all%22%2C%22textfield1%22%3A%22birkin%22%2C%22display%22%3A%22list%22%2C%22maxReturn%22%3A%22500%22%2C%22nicetextfield1%22%3Anull%2C%22cipotextfield1%22%3Anull%7D&pageNum=0&pageLen=50> ↩︎
22. Ciba-Geigy Canada Ltd v Apotex Inc, [1992] 3 SCR 120, 95 DLR (4th) 385 at 132 [Ciba-Geigt]. ↩︎
23. Dafoe, supra note 14. ↩︎
24. Trademarks Act, RSC 1985, c T-13, s 20(1)(a). [TMA] ↩︎
25. TMA, s 6(5)(a). ↩︎
26. Michael Rosen, “Fair Use After Bill C-11: The Development Of The Parody and Satire Defenses In Canadian, US, and International Copyright Law” (last visited 20 December 2024), online:<https://canliiconnects.org/content/documents/26542>. ↩︎