Trademark Lawsuits from Hermès and Bored Ape Yacht Club Could Shape the Future of NFTs

Two unprecedented trademark cases are set to define whether NFTs should be classified as artwork or assets.

Row of NFTs displayed on screens in a gallery
Lawyers say current cases could have major effects on the future of digital art. (Photo by Stanislav Kogiku/SOPA Images/LightRocket via Getty Images)

Artists and attorneys are keeping a close eye on two trademark lawsuits brought forward by luxury company Hermès and Yuga Labs, the creator of Bored Ape Yacht Club non-fungible tokens (NFTs), which are both poised to have major implications within the new realm of digital artwork.

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In a trial that began earlier this week in New York federal court, Hermès is suing artist Mason Rothschild over his collection of 100 “MetaBirkin” NFTs, which digitally depict Hermès’s Birkin handbag covered in furry material. Meanwhile, Yuga Labs is currently embroiled in a lawsuit with Ryder Ripps, who created his own collection of Bored Ape NFTs entitled “Ryder Rips Bored Ape Yacht Club.”

A central question at the heart of these cases is whether NFTs are assets or works of art, according to Jeremy Goldman, a Los Angeles-based intellectual property attorney who has previously worked for Yuga Labs. “Are they more like merchandise or a product, or more like art?” he said. “Where NFTS fall on that spectrum is an open question and will depend on the NFT, but also could help define what NFTS are.”

If defined as artwork, NFTs would be granted much more leeway when it comes to trademark infringement, said Goldman. This is the position Rothschild has taken against Hermès, arguing that his “MetaBirkins” are an artistic expression and should therefore be protected under the First Amendment.

Meanwhile, it’s more likely that Ripps’s defense in the Yuga Labs case will focus on the argument that his collection didn’t cause consumer confusion and was different enough from the Bored Ape NFTs to not compete with them, said Goldman.

Ripps has also more directly challenged the credibility of Yuga Labs itself, said Moish Peltz, a New York City-based lawyer focused on cryptocurrency and NFT issues. The artist claims his NFT collection is a protest against Yuga Labs, which he alleges has incorporated racist and neo-Nazi symbols into its work.

“To the extent that a judge or jury makes a finding on these arguably defamatory claims being true, that would certainly have a negative impact on Yuga Labs and perhaps the NFTs associated with them,” said Peltz.

Companies rush to file trademarks

The lawsuits have already made waves among companies, said Max Vern, a lawyer at New York intellectual property firm Amster, Rothstein & Ebenstein, who has seen a flurry of brands filing for NFT trademark registrations, even if they don’t typically sell digital products.

“The cases have made companies be more proactive in their trademark protection,” said Vern. “They don’t want entrepreneurial types trying to steal from them.”

If the cases are ruled in the favor of Hermès or Yuga Labs, this would likely have implications on marketplaces which sell NFTs, like OpenSea, said Vern. “An indication that NFTs will be construed as an asset and protected by the existing laws and decisions of the courts on trademark matters would be a strong indicator for platforms selling NFTs to be very careful to not sell alleged counterfeits.”

In the past, sellers like Amazon and eBay have been sued for selling counterfeit or knock-off items. If the same logic began to apply for NFT marketplaces, these types of platforms would likely become much more proactive in barring sellers with the potential for trademark infringement, said Vern.

Meanwhile, a decision for Rothschild or Ripps could see digital artists feeling more emboldened to use appropriation in their work and push the envelope, with companies being more conservative in moving to protect their rights, said Goldman.

While these two cases are the first to provide guidance on trademark law regarding NFTs, they still won’t provide a clear or definitive answer on how to approach issues of trademark in digital art, according to Peltz. Although all cases are different and are governed by varying facts and legal arguments, a decision in either of the cases will likely be used as a reference in the future, he said.

Trademark Lawsuits from Hermès and Bored Ape Yacht Club Could Shape the Future of NFTs