Welcome to our NFT litigation roundup. Non-Fungible Tokens (NFTs) are the topic of much debate and interest and the questions, legal issues and disputes around them continue to soar.
When faced with such a high growth phenomenon, the law can take time to catch up. Boodle Hatfield is closely monitoring the developments and will bring you a roundup of the key NFT disputes to be aware of.
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Hermès v Mason Rothschild
The background details of this case are covered in our February, April, May, August / September and October / November roundups. Rothschild has designed 100 NFTs resembling the Hermès Birkin handbag. Rothschild started selling NFTs of the MetaBirkins in December 2021. Hermès claims that Rothschild “rips off Hermès’ famous Birkin trademark by adding the generic prefix ‘meta’ " and saying "There can be no doubt that this success arises from his confusing and dilutive use of Hermès’ famous trademarks.” Rothschild claims his activities are protected by the First Amendment (guaranteeing freedom of speech), with the MetaBirkins being simply a “playful abstraction of an existing fashion-culture landmark.”
UPDATE:
- On 30 December, the Court denied both parties' motions of summary judgment and the trial commenced on 30 January.
- Judge Rakoff held that one of Rothschild's witnesses (Dr Blake Goknip, an Andy Warhol expert) should not be allowed to appear as a witness at trial. Goknip was due to testify that MetaBirkins are akin to Warhol's Campbell's soup cans. Hermès argued, however, that his opinion was not based on any reliable data, and so he should be precluded from testifying. The president and CEO of Hermès Americas also testified.
- Group General Counsel for Hermès (Nicolas Martin), Hermès' expert witness (Kevin Mentzer) and Mason Rothschild all testified the following day. Nicolas Martin highlighted the Birkin bag as one of Hermès' most valuable trademarks. On cross examination, other authorised uses of Hermès' trademarks were looked at.
- When testifying, Rothschild made clear his intention to take credit for the project himself, denying any wish to mislead consumers as to the source of the MetaBirkins.
- On 8 February the jury found that Rothschild was liable for trademark infringement and dilution, cybersquatting and that he is not shielded by First Amendment protections. Hermès was awarded around $133k in damages. Judgment was entered against Rothschild on 14 February.
- On 3 March Hermès filed a motion for an injunction to block Rothschild's promotion and sales of NFTs, and on 14 March Rothschild filed a motion for judgment as a matter of law or new trial, and an opposition to Hermès' motion for an injunction. Within his motion for judgment as a matter of law or new trials, Rothschild argues that the Court got the jury instructions wrong.
Nike v StockX
The background details of this case are covered by our February, April and May roundups. In January last year StockX launched "Vault NFTs". These Vault NFTs can be traded digitally or redeemed for the corresponding physical trainer. However, the NFT can sell for more than the physical trainers. The NFTs include the name and image of Nike trainers, and Nike claims that this is trademark infringement (among other things). The question is whether the NFTs are a product in their own right, or if they are simply an extension of the normal sale process (like a digital receipt would be).
UPDATE:
- The Court held a conference on 14 December to narrow the ongoing disputes raised by the parties.
- The parties are now in the "discovery" phase of the case, a period in which both parties exchange details of evidence and witnesses in preparation for trial. The next case conference is listed for 7 April.
Adonis Real and Adam Titcher et al v Yuga Labs et al
- Yuga Labs (creators of BAYC) are being sued (via a class action lawsuit) for allegedly using celebrities to misleadingly promote NFT collections.
- The claimants believe that the celebrity endorsements artificially boosted prices, and that the celebrities never disclosed financial compensation. The claimants are seeking damages of over $5 million. The named defendants include A-list celebrities such as Justin Bieber, Paris Hilton and Madonna.
- The claim alleges that a talent manager worked with Yuga Labs' team to have celebrities promote their products in exchange for compensation delivered through Moonpay, which has been described as a "PayPal for crypto". This compensation was not disclosed and so potentially violates the requirement that endorsers disclose their material connections with their sponsoring advertisers in clear and obvious language.
- The claimants' lawyers wrote that Yuga Labs violated the Exchange Act “by making false and misleading statements concerning Yuga’s growth prospects, financial ownership, and financial benefits for Yuga securities investors".
- Yuga Labs believes that the claims are "opportunistic", "without merit" and they "look forward to proving as much".
Interested in learning more? Download a copy of our 'Guide to non-fungible tokens (NFTs)' where we provide an introduction to the digital asset and the technology behind it and examine the legal and commercial implications of NFTs. Download the guide here.
