The highly anticipated verdict in the fight between Hermes and Mason Rothschild, the creator of a collection of “Metabirkins” NFTs, is in. On 7 February 2023, the jury determined that Rothschild’s use of Hermes’ BIRKIN mark in the title of his NFT collection was not entitled to be protected as free speech under the First Amendment, but instead constituted trademark infringement, trademark dilution and cybersquatting. Hermes was awarded USD 133,000 in damages. Its claim for injunctive relief has yet to be decided.
For more background facts, see here.
The verdict has been widely billed as an affirmation that trademark rights in the real world can extend into the virtual world, but has also provoked fears of a chilling effect on creativity, especially for artists making forays into the digital realm. As it may be some time yet before a similar fight reaches our sunny shores, we examine two key themes in the case and how these could potentially be approached by the Singapore courts.
Can real world rights reach into the virtual world and, if so, how far?
A key challenge that Hermes faced was that its BIRKIN mark was only registered for real-life goods, but not for virtual goods or NFTs. It is also not using the mark for virtual goods or NFTs and so could not claim use-based rights. Hermes argued that virtual goods and NFTs nevertheless fell within the ‘natural zone of expansion’ of its trademark registrations – as evidenced by the fact that many fashion brands have entered the metaverse and its own plans to launch NFTs and virtual bags, such that it was entitled to protection in this realm as well.
In the US, the ‘natural zone of expansion’ doctrine states that a trademark owner who cannot prove use of its mark in the disputed area can nevertheless claim rights over that area by establishing that it falls within the zone of his probable or natural expansion. The doctrine has been relied on to extend the protection conferred by a trademark registration to goods and services not covered by the claimant’s registration, as well as to a different geographical area.
The ‘natural zone of expansion’ doctrine is not part of Singapore law. However, that is not to say that a Singapore trademark registration cannot confer protection on goods or services not covered by the registration. The protection conferred by a Singapore trademark registration can extend beyond the goods or services covered by the registration in two ways:
- First, the protection extends to goods or services which are “similar” to those covered by the registration, including to goods or services falling in a different class as long as this criteria is satisfied. The determination will ultimately be based on factors such as the uses and users of the respective goods or services, the trade channels through which they reach the market, and the extent to which they are competitive. For instance, applying this test, the Singapore High Court (in Allergan, Inc and another. v. Ferlandz Nutra Pte Ltd. [2016] SGHC 131) has found a trademark registration for pharmaceutical preparations in Class 5 to be infringed by a cosmetic product in Class 3.
- Secondly, a trademark owner could also obtain extended protection by proving that his trademark is “well known” in Singapore, at least to a relevant sector of the public (e.g., actual or potential customers of the goods or services, or businesses dealing with the same). The protection conferred on well known marks extends to all goods and services, subject to a showing that the defendant had used a sign that is identical or similar to the well known mark, and that such use would “indicate a connection” between the defendant’s goods or services and the trademark owner and is likely damage the latter’s interest. If the mark is well known to the public at large, then connection and damage need not be shown and it is sufficient that the defendant’s use would cause dilution in an unfair manner, or take unfair advantage, of the distinctive character of the well known mark.
Would our law assist Hermes if the fight had taken place in Singapore?
The first way in which protection could be extended – that is, to argue that the Metabirkins NFTs are “similar” to the real world goods covered by Hermes trademark registrations, is unlikely to be helpful to Hermes. Quite clearly, it would be a tall order to convincingly argue that the virtual handbags depicted in the Metabirkins NFTs have the uses, users and trade channels as real life handbags, or would compete with the latter.
Hermes would likely be more successful arguing that its BIRKIN mark is “well known” in Singapore, and therefore should be accorded protection even for dissimilar goods. A key challenge would be to meet the high evidential threshold required to prove that a mark is “well known”. However, Hermes’ BIRKIN mark would likely cross the bar seeing as it enjoys a high degree of recognition – at least amongst actual and potential consumers of luxury products, and businesses dealing in the same.
If so, then subject to any applicable defences, Rothschild’s liability for infringement will turn on Hermes being able to demonstrate that Rothschild’s use of “Metabirkins” will suggest that his NFTs originate from or are somehow licensed or endorsed by Hermes, and will damage its interests. Hermes is likely to succeed on this score as well given that, at trial, Hermes had adduced evidence of actual consumer confusion, including results of a market survey and media reports which mistakenly linked the NFT collection to Hermes.
Are there any defences available to Rothschild?
Before the US District Court, Rothschild had argued that his acts qualified as protected speech under the First Amendment because his artworks and associated NFTs are art and commentary on Hermes’ Birkin handbag. To support his arguments, Rothschild sought to draw parallels between his NFT collection and pop artist Andy Warhol’s paintings of Campbell soup cans.
Warhol’s paintings (32 in all, one for each flavour of the soup Campbell was selling in the 1960s), which were displayed at a Los Angeles art gallery, had similarly been created without Campbell’s permission. However, Campbell never took legal action against Warhol, but instead embraced his use of its trademarks given the positive publicity which it generated. As such, the legality of Warhol’s actions had never been examined by a court.
To succeed in his defence, Rothschild had to satisfy the test established in Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989) (affectionately known as the “Rogers test”), which requires that two conditions be met – the use of the trademark must both (1) have artistic relevance to the work; and (2) not be explicitly misleading as to the source of the work. Rothschild argued that his work had artistic relevance as a commentary on “the fashion industry’s history of cruelty to animals,” and was not explicitly misleading because he had included a disclaimer on the Metabirkins website stating that the NFT collection is unconnected with Hermes.
The jury was unconvinced. It determined that the Roger test had not been satisfied, concluding based on the evidence adduced at trial that Rothschild had chosen the name “Metabirkins” in order to capitalise on Hermes’ goodwill. The jury also determined that NFTs were more akin to commodities than artwork, so that a stricter application of trademark laws was warranted in this space.
In Singapore, trademark infringement is a statutory tort so that only statutory defences apply. The possible defences are set out in section 28 of the Singapore Trade Marks Act (Cap. 332) and these do not include any defence which is based on or linked to either the right to free speech or ‘artistic relevance’. The closest equivalent would be the defence of use of a mark for the purpose of news reporting or news commentary, but this is clearly of limited scope and a commentary on “the fashion industry’s history of cruelty to animals” is unlikely to fit the bill as this can hardly be said to be “news”. There also does not appear to be any other potentially applicable defence.
Game on!
Based on the analysis above, it appears that Hermes would also have prevailed if the case had been fought in Singapore (and possibly other jurisdictions with similar trademark laws). Good for Hermes, but are there any lessons that brand owners draw from this? Quite a few, in fact:
- First, brand owners would do well to seek registration of their trademarks for NFTs and virtual goods – whether in Singapore or elsewhere, even if they are not ready to make forays in this space. One of the key hurdles Hermes faced was in proving that NFTs and virtual goods fell within its ‘natural zone of expansion’, and that could have been avoided if it had registered rights for these items. By the same measure, in Singapore, registration would obviate any need to prove similarity of goods or “well known” status in order to justify an extension of protection to the digital realm – particularly for lesser-known brands which would have trouble showing that they are “well known”.
- Apart from NFTs, a brand owner seeking to register its trademark in the digital realm would typically file for virtual versions of the real world goods he is trading in. The filings would also be driven by potential collaboration opportunities in the space. However, a trademark registration will eventually be subject to non-use cancellation if the mark has not been put to genuine use in relation to the goods or services covered by the registration. One concern with pre-emptive filings for NFTs and virtual goods before there are concrete plans in place is therefore the risk of non-use cancellation down the line. Even so, the existence of a registration – which serves as an indication of prima facie rights – will help to deter infringement and increase the chances that any infringer will comply with a cease-and-desist letter. Also, there is a “grace period” of either 3 or 5 years (depending on the territory) before any non-use cancellation action may be filed, which provides some time to act before the risk materialises.
- So far so good, but what recourse does a brand owner have if it has yet to secure trademark registration for NFT and virtual goods and envisages difficulty showing that its mark is “well known”? One possibility is to explore a claim based on the common law tort of passing off, which is premised on misrepresentation. For trademark infringement, the Singapore courts will apply a step-by-step approach where the three requirements of similarity of marks, similarity of goods or services, and likelihood of confusion arising from the two similarities, are assessed individually and in turn (Staywell Hospitality Group Pty Ltd v Starwood Hotels & Resorts Worldwide, Inc [2013] SGCA 65). For passing off, on the other hand, there is no requirement to show that the goods are similar. Rather, similarity of goods is just one factor to be considered in the round when assessing whether there is misrepresentation. This being the case, unlike for a trademark infringement claim, a failure to prove similarity of goods would not be fatal to the claim. This is not to suggest that a passing off claim would be a shoo-in for the brand owner, only that it could potentially have better merits in such a scenario.
- Separately, vigilance in monitoring NFT trading platforms and other virtual platforms for infringement, and prompt action (by issuing take down notices or cease-and-desist letters) if infringement is detected to prevent brand dilution cannot be overemphasised. If a brand is prevalently used by unauthorised third parties in the virtual space, it will be much harder to convince the courts that use by any particular third party will give rise to a likelihood of confusion or misrepresentation, and ought to be enjoined. A registration for NFTs and virtual goods would also be useful for supporting take-down requests made to these platforms.
- A final word of advice – Be mindful of being trigger-happy. A brand owner’s feathers would inevitably be ruffled when it learns of unauthorised use of its mark. However, it is helpful to take a step back and consider if the use could generate positive publicity for the brand (such as in Campbell’s case), so that the response could be modulated accordingly. Admittedly, it is a fine line to thread, particularly since potential bad press / reputational concerns need to be borne in mind as well.
For further information, please contact:
Lorraine Tay, Partner, Bird & Bird
lorraine.tay@twobirds.com
