Nigeria: Hermès v. Rothschild: A Case Study Of Trademark Infringement In The Metaverse

The metaverse is here – it seems, to stay. NFTs, such as virtual clothes and bags, are flying off the proverbial shelves of the internet, sporting logo marks that bear suspicious resemblance to established brands, making said brands scramble to protect their trademarks in this previously abstract space. But what exactly is the metaverse? And how can one protect their trademark from dilution² in this emerging space?

The good news is that Hermès and Yuga Labs, in separate suits, successfully filed suit and won against individuals infringing their trademark rights in the metaverse. We will be examining these cases shortly.

Metaverse Related Trademark Cases

Hermès v Rothschild³

Facts of the case

In December 2021, Mason Rothschild, the creator of the collection of NFTs known as Meta Birkins, was issued a cease and desist letter from Hermès with respect to the use of their trademark, and the trade of Meta Birkins in general. In light of Rothschild's unwillingness to abide by the cease and desist letter, Hermès filed suit on 14^th January 2022⁴alleging trademark infringement, trademark dilution, cybersquatting, and unfair competition. Rothschild's defense was that the order to desist infringed his rights under the First Amendment⁵ which protects⁶ artistic interpretation. However, said statute would protect Rothschild if he was not intentionally misrepresenting to the customers that Hermès was endorsing Meta Birkins – a condition which Rothschild did not meet. Consequentially, the courts granted a permanent injunction, against Rothschild, stopping him from selling the Meta Birkins and using the Birkin marks. Furthermore, the courts ordered that the NFTs, the Meta Birkin site, and the income accrued from the Meta Birkins from the start of the proceedings should all be remitted to Hermès.

Yuga Labs v Ryder Ripps⁷

Facts of the case

Similarly, judgment was given for Yuga Labs, in its suit against Ryder Ripps, where Yuga Labs alleged that Ryder Ripps was copying its NFTs – the Bored Ape Yacht Club ("BAYC") NFT series. Ryder Ripps's defense was that the pieces of its Ryder Ripps Bored Ape Yacht Club ("RR/BAYC") Collection, the alleged copies, were satirical and not cheap dupes of the Bored Ape Yacht Club NFT series. The courts did not agree with this reasoning, as even the Ryder Ripps branding of the NFT websites containing the alleged dupes was confusingly similar to the Yuga Labs' BAYC marks.

According to the ruling from US District Judge, John Walter: "The Court concludes that Defendants acted with a bad faith intent to profit," Additionally, he stated: "The RR/BAYC NFTs do not express an idea or point of view, but, instead, merely point to the same online digital images associated with the BAYC collection.⁸"

An interesting argument put forth by Ryder Ripps was that Yuga Labs had transferred its trademark to the buyers of its BAYC collection. The Court, dissenting from this argument, held that Yuga Labs' terms and conditions cannot be interpreted as issuing trademark licenses to use the BAYC marks.

Both suits, which ran almost simultaneously, are landmark cases for the crypto art space. They underscore the paramount importance of safeguarding trademarks – a fundamental right that is frequently violated, especially in our rapidly evolving world.

What is a trademark?

WIPO defines a trademark as "a sign capable of distinguishing the goods or services of one enterprise from those of other enterprises⁹".

According to Section 67 of the Nigerian Trademark Act 1990,

' "trade mark" means, except in relation to a certification trademark, a mark used or proposed to be used in relation to goods for the purpose of indicating, or so as to indicate, a connection in the course of trade between the goods and some person having the right either as proprietor or as registered user to use the mark, whether with or without any indication of the identity of that person, and means, in relation to a certification trade mark, a mark registered or deemed to have been registered under section 43 of this Act;'

A trademark therefore covers branding, logos, and any mark that can be used to associate a company with its goods. Trademarks could also cover phrases and slogans such as Nike's "Just do it", or the brand name of a product like Kleenex.

The contentious trademarks in the case of Hermès v Rothschild¹⁰ are the "BIRKIN" in "METABIRKIN", and the type and style of the NFT bags as they bore such obvious similarities to the famous Birkins, that they were held to have made reference to the original bags. Additionally, the incorporation of the word "Birkin" into the site address "www.metabirkins.com" amounted to cybersquatting, which is a form of trademark infringement.

Understanding NFTs

An NFT or a "Non-Fungible Token" is a form of blockchain exchange that has no equivalent. Digital currencies, like Bitcoin and Ethereum, are fungible, because, for example – 1 bitcoin is equivalent to 1 bitcoin. However, an NFT is Non-Fungible because it does not have a set equivalent value. Non-fungible tokens are primarily used within the realm of digital art, commonly referred to as the "crypto art space." However, they have the versatility to represent various digital assets, including drawings, music, stickers, videos, and more. In 2021, Jack Dorsey sold his tweets as an NFT for $2.9 Million (now the tweets are valued at $2,000¹¹).

The value of an NFT is really in the eye of the beholder. To stakeholders, it might seem a profitable market worth millions, and to others, NFTs might be worthless. After all, why pay $69 million for a video that can just be downloaded off the internet by a right click of my laptop trackpad?¹² This same rationale applies to traditional artwork – ownership. Anyone can download an image of a Van Gogh painting and display it in their home, but it will not be the original Van Gogh painting, and ownership of the painting cannot be claimed by such person, nor can profit be made from it.

The concept of the Metaverse

The metaverse is an idea that people can live on the internet – a parallel reality of sorts. It is the next phase of development from the current media-based interactions that have taken over the internet space, by the use of 3D Technology¹³. It is majorly accessed through Virtual Reality and Augmented Reality and allows for a more immersive internet experience. So, if the internet is my house, then I can hang my crypto art on its walls – this seems to be the idea behind crypto art.

Some examples of the metaverse are; virtual nights out, virtual concerts, 3D games, holographic projections, virtual worlds where users can buy plots of land and build on them, etc. Another example would be the site where Rothschild sold the NFTs called "Basic Space", a site described as one "where you can experience and buy things in the 'metaverse.' ¹⁴"

Protecting Trademarks in the Metaverse

Metaverse-related Trademarks are being filed under Class 9 of the Nice classification ("NCL"), under the heading; downloadable files. Gucci and Prada are currently challenging the applications of certain individuals who seek to use their logos in Metaverse-related areas such as "downloadable virtual goods", virtual worlds, and virtual clothing used in virtual spaces¹⁵.

The NFT craze has led companies to begin filing for trademarks to cover the metaverse space because generally, your trademark rights can only cover the classes that you have filed for trademark protection over¹⁶. Brands like Jay Z, Sketchers, and McDonalds among others have filed for protection in this new space¹⁷.

Nigeria uses the NCL of Trademark rights, and although it does not list NFTs per se, a few categories may apply such as:

Class 35 – provision of advertising services via the internet; Class 36 – provision of financial services via the internet; Class 38 – Telecommunications services; chat room services; portal services; e-mail services; providing user access to the Internet; radio and television broadcasting, and Class 42 – provides for protecting marks involving scientific and technological services and the creation, maintenance and hosting of websites¹⁸.

According to Davidson Oturu and Agboola Dosunmu¹⁹, where a trademark consisting of an invented work or invented works has become so well known that its use would connote a connection to a certain proprietor, such proprietor has the right to register a trademark to prevent market dilution even when he does not intend to use it. The registration of a defensive trademark does not prejudice further registration of a normal trademark at a later time. Defensive trademarks are provided for under Section 32(1) of the Nigerian Trademark Act.

Furthermore, a person can seek trademark protection under a common law rule called the natural zone of expansion where he failed to register a trademark before its infringement. If unable to establish current use, a proprietor may be able to prevail over a subsequent good faith trademark user who seeks to use his trademark for related goods and services under the principle of natural zone of expansion i.e. that he would, in time, naturally have started offering related goods and services. In Accu Personnel Inc v Accustaff Inc²⁰, it was held that to establish a natural zone of expansion, one must show that he, at the time of the infringement, had plans to expand into the realm that he was seeking protection over. It is also worthy of note that one of the jury's considerations in Hermès v Rothschild²¹ is the likelihood that Hermès would start selling its own NFT bags.

Conclusion

The internet is abuzz with the metaverse craze, and while it can be exciting, businesses must be wary of this new development, as it has created a loophole in trademark rights that may give way for trademark dilution. If a business fails to protect its metaverse-related trademark rights by filing for protection and taking legal action against scammers who seek to profit off the goodwill of its business, it stands to lose not just money – but face.

Footnotes

1. S Joshi "What Is the Metaverse? An Explanation for People Who Don't Get It." Available at

https://www.vice.com/en/article/93bmyv/what-is-the-metaverse-internet-technology-vr (accessed 18 September 2023)

2. According to the International Trademarks Association, trademark dilution refers to "the unauthorized use of and/or application for a trademark that is likely to weaken the distinctive quality of or harm a famous mark" [seen in A. Adewale "Do You Need To File A Defensive Trademark? What Are The Rules For Filing Defensive Trademarks In Nigeria" Available at https://www.mondaq.com/nigeria/trademark/1300172/do-you-need-to-file-a-defensive-trademark-what-are-the-rules-for-filing-defensive-trademarks-in-nigeria (accessed on 19 September 2023)]

3. Hermès v Rothschild [2023] 22-cv-384 (JSR) Available at https://casetext.com/case/Hermès-intl-v-rothschild-12/ (accessed at 18 September 2023)

4. Hermès v. Rothschild: A Timeline of Developments in a Case Over Trademarks, NFTs available at https://www.thefashionlaw.com/Hermès-v-rothschild-a-timeline-of-developments-in-a-case-over-trademarks-nfts/ (accessed 18 September 2023)

5. US Const. Amdt1.2.2.7 ( Constitutional Convention, Ratification, and the Bill of Rights)

6. The First Amendment protects the right to freedom of expression, and artistic interpretation by extension

7. Yuga Labs v Ryder Ripps [2023] 2:23-cv-00010-APG-NJK Available at https://casetext.com/case/yuga-labs-v-ripps-2?__cf_chl_tk=KDyhVgwwOfnLMLqglHzM1Ry9WTCn2dAtTGhoK.xgDqU-1694604846-0-gaNycGzNDGU (accessed 13 September 2023)

8. R Whiddington, "Yuga Labs Has Won Its Lawsuit Against Artist Ryder Ripps for His Copycat Versions of Bored Ape Yacht Club NFTs" Available at https://news.artnet.com/art-world/yuga-labs-lawsuit-tradmark-bayc-ryder-ripps-2290175 (accessed 13 September 2023)

9. WIPO Lex, "Trademarks" Available at https://www.wipo.int/trademarks/en/#:~:text=What%20is%20a%20trademark%3F,protected%20by%20intellectual%20property%20rights (accessed 13 September 2023)

10. Ibid, at 3

11. Jack Dorsey's first tweet NFT now has a paltry price of less than $2,000 available at https://economictimes.indiatimes.com/tech/technology/jack-dorseys-first-tweet-nft-now-has-a-paltry-price-of-less-than-2k/articleshow/102051925.cms?from=mdr (accessed on 18 September 2023)

12. Jacob Kastrenakes, "Beeple sold an NFT for $69 million" Available at https://www.theverge.com/2021/3/11/22325054/beeple-christies-nft-sale-cost-everydays-69-million (accessed on 18 September 2023)

13. S Joshi "What Is the Metaverse? An Explanation for People Who Don't Get It." Available at

https://www.vice.com/en/article/93bmyv/what-is-the-metaverse-internet-technology-vr (accessed 18 September 2023)

14. A. Zanes "Basic.Space: Own the Future" available at http://officemagazine.net/basicspace-own-future#:~:text=we%20have%20Select.-,Basic.,they%20live%20around%20the%20world. (accessed 4 October 2023)

15. D Oturu and A Dosunmu, "The Metaverse – Considering Trademarks and Brand Protection for Virtual Goods & Services" available at https://businessday.ng/news/legal-business/article/the-metaverse-considering-trademarks-and-brand-protection-for-virtual-goods-services/ (accessed 13 September 2023)

16. Section 4 of the Nigerian Trademarks Act

17. Ibid, at 16

18. D Oturu and A Dosunmu, "The Metaverse – Considering Trademarks and Brand Protection for Virtual Goods & Services" available at https://businessday.ng/news/legal-business/article/the-metaverse-considering-trademarks-and-brand-protection-for-virtual-goods-services/ (accessed on 13 September 2023)

19. Ibid, at 15

20. Accu Personnel, Inc. v. Accustaff, Inc. Civ. A. No. 93-30 MMS (seen ibid, at 15)

21. Ibid, at 3

Originally Published 27 October 2023

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.