Luxury French brand icon Hermès has commenced legal proceedings in the United States District Court of New York against an American artist over virtual artworks depicting their world-renowned “Birkin bags”. Luxury brands are some of the most vigilant protectors of their brand so this action by Hermès is not unexpected. In this case Mason Rothschild created digital artwork, which is sold as non-fungible tokens, known as NFTs. The recent explosion of NFTs has left many wondering, what are they, and what is the point of owning one? This article explains what an NFT is and how they work, as well as some intellectual property considerations.
What is an NFT?
A non-fungible token (NFT) is a non-interchangeable unit of data that is stored within a form of digital ledger, known as blockchain, which can be traded and sold. Due to the “non-fungible” nature of the NFT, they are considered unique and rare. In contrast, bitcoin is fungible, so trading a bitcoin for another bitcoin leaves the person with the exact same thing. The non-fungible nature of NFTs means the owner has a “one-of-a-kind trading card”, which if traded, results in the person owning something entirely different. Purchasing an NFT is akin to purchasing an original artwork; prints of the same artwork may be produced, but you are the only one who owns the original.
How do NFTs work?
The surge in NFTs may be seen as an evolution of collecting fine art, albeit in digital format. Most NFTs are part of the Ethereum blockchain. Ethereum is another form of cryptocurrency, like bitcoin, however the blockchain also supports NFTs. NFTs can be anything that is digital and commonly includes music, videos, digital art and collectibles, however a lot of the recent excitement associated with NFTs is related to the use of technology to sell digital artworks.
The hype around NFTs has left many people confused and asking why someone would pay such a high price for a digital file, when it can be copied as many times as desired, including the artwork that is part of the NFT. However, NFTs are designed to provide a person with something that cannot be copied, which is the ownership of the work. Anyone can buy a print of the Mona Lisa, but only one can own the original artwork.
Some examples of NFTs that have attracted high prices include:
- a 50-second video by Grimes, which sold for almost $390,000 USD;
- the Nyan Cat, which sold for $560,000 USD;
- a video by Beeple, which sold for $6.6million USD; and
- Everydays: the First 5000 Days artwork, which sold for a record $69.3million USD.
Hermès v Rothschild
The French luxury brand Hermès recently commenced legal proceedings against Mr Mason Rothschild (Rothschild), an American artist, over virtual artworks inspired by the brand’s famous Birkin bags. Hermès alleged that Rothschild was trying to profit from its trade mark through the sale of NFTs depicting Birkin bags, which are called “MetaBirkins”. Hermes owns the word mark “Birkin”, registration number 2991927.
In its complaint, Hermès said the MetaBirkins brand rips off the famous Birkin trade mark through the addition of the generic prefix “meta”. Rothschild responded stating he was not creating or selling fake Birkin bags, but rather was making art works that depict imaginary, fur-covered Birkin bags, and that such art was freedom of expression protected by the United States Constitution. In an online post, Rothschild compared the situation to Andy Warhol, who was found to have the right to make and sell art depicting Campbell’s soup cans. Rothschild stated that the fact that he sold the art using NFTs doesn’t change the reality that it is still art created in an artistic medium and displayed in an art setting. Hermès have declined to comment further whilst the matter is still before the Court.
NFTs and intellectual property rights
When purchasing an NFT, the rights being sold may vary across different platforms and between products. Purchasing an NFT does not give an automatic right to use it for your own commercial purposes or to display it. Creating an NFT and thereby copying, publicly displaying and/or selling the works without authorisation from the original creator may constitute copyright or trade mark infringement, as well as potentially infringing other IP rights.
With regard to copyright, the unauthorised creation and sale of an NFT relating to an asset may result in infringement of the reproduction right, such as the restriction against reproducing copyright works. In Australia, section 38 of the Copyright Act 1968 (Cth) refers to the infringement of copyright by sale and other dealings. Generally, the original author of a work owns its copyright, and such rights may be transferred only by the creator. Therefore, the sale of a work subject to copyright can constitute an infringement. That said, this will of course depend on the terms of the NFT in question.
Similarly, trade mark infringement may arise where an NFT linked to an underlying protected asset is created by an unauthorised party without the owner’s permission and is then offered for sale or is sold featuring a registered trade mark. Section 120 of the Trade Marks Act 1995 (Cth) states that a person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered.
Takeaways
NFTs are emerging and present various opportunities (and risks) for purchasers and businesses that use them. When purchasing an NFT, be sure to check who owns the underlying asset. The terms of sale of an NFT should clearly outline what is permitted with respect to intellectual property rights, including those listed on the platforms selling NFTs. The legal issues surrounding NFTs are still evolving, and with several large brands currently initiating proceedings against artists, the only thing that is for sure is change.
Links and further references
Legislation
Further information about intellectual property disputes
If you need advice on intellectual property disputes, contact us for a confidential and obligation-free discussion:
Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au
Disclaimer
This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.
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