The Ohio State University has been handed a win following several rounds before the U.S. Patent and Trademark Office (“USPTO”) in furtherance of its quest to register the word “THE” as a trademark for use on clothing, including “t-shirts, baseball caps and hats.” Almost three years after the school filed an application for registration for “THE” for use in Class 25, the USPTO has granted the registration, marking the success of Ohio State in overcoming pushback from the trademark office and navigating an opposition battle that it waged against Marc Jacobs in connection with an enduring attempt by the LVMH-owned fashion brand to register the word “THE” for use on its own apparel and accessories. 

The trademark registration for Ohio State follows from an array of rounds before the USPTO, including (most recently) an August 2021 Office Action, in which an examining attorney for the trademark office asserted that the school’s use of the trademark on the specimen that it filed with its application – which consisted of a t-shirt emblazoned with the word “THE” in large type on the front – was “merely a decorative or ornamental feature of [the] clothing.” As a result, it “does not function as a trademark to indicate the source of [its] clothing and to identify and distinguish [its] clothing from others,” the examining attorney held, preliminarily refusing to register the mark.

Ohio State trademark

Specifically, the USPTO’s attorney took issue with the “size, location, dominance, and significance of the alleged mark” as depicted in the specimen, namely, because “the applied-for mark, THE, located directly on the upper-center area of the front of the shirt and the front portion of the hat, where ornamental elements often appear.” Beyond that, the examining attorney stated that “the mark is displayed in a relatively large size on the clothing such that it dominates the overall appearance of the goods,” noting that “with respect to clothing, consumers may recognize small designs or discrete wording as trademarks, rather than as merely ornamental features, when located, for example, on the pocket or breast area of a shirt.” 

Given the size and placement of the mark, the examining attorney determined that “consumers would view [it] as a decorative or ornamental feature of the goods, rather than as a trademark to indicate the source of [Ohio State’s] goods and to distinguish them from others.” 

Early this year, in addition to claiming that its use of the “THE” mark is “not merely ornamental and is worthy of federal trademark registration as it is an indicator of secondary source and sponsorship” thanks to its “use and emphasis on the word ‘THE’… [as] a deliberate, integral, and important element of [its] identity and history,” counsel for Ohio State filed a substitute specimen with the USPTO that showed the mark on a label inside of a t-shirt, prompting the trademark office to publish the mark for opposition and ultimately, issue a registration on June 21. 

As for Marc Jacobs, the fashion brand’s own trademark application for registration for the word “THE” for use on clothing and various types of bags is still pending before the USPTO. Jacobs’ application – which it filed in May 2019 – has similarly faced an uphill battle with the USPTO, with an examining attorney issuing a number of refusals to register the mark, including after the brand switched its filing basis from 1(a) to 1(b) in June 2019. A key issue for the USPTO was that Marc Jacobs was using “THE” as “merely a decorative or ornamental feature of [its] clothing,” making it so that the mark does not actually function “as a trademark to indicate the source of [its] clothing and to identify and distinguish” that it from the offerings of other brands. 

Ohio State trademark

Marc Jacobs’ specimen

Following a final rejection in March 2020, counsel for Marc Jacobs successfully filed a request for reconsideration, and the application was published for opposition in October 2020, and given the green-light by the USPTO by way of a Notice of Allowance in October 2021. (In lieu of Jacobs filing a statement of use, the application is still pending before the USPTO.)

Agreements to Co-Exist

All the while, Ohio State and Marc Jacobs managed to quietly settle the April 2021 opposition that Ohio State initiated before the USPTO’s Trademark Trial and Appeal Board, in which it argued that it has consistently used “THE” as a trademark on athletic merch since at least as early as 2005, more than a decade before Marc Jacobs began to use the mark in connection with its offerings. The opposition fight did not last long, as in the wake of the parties filing amendments to the identification of the goods in their respective applications (Ohio State cited use on clothing “being promoted, distributed, and sold through channels customary to the field of sports and collegiate athletics,” and Jacobs cited use on clothing “being promoted, distributed, and sold through channels customary to the field of contemporary fashion”), counsel for Ohio State alerted the USPTO in August 2021 that it was withdrawing the opposition proceeding that it had previously lodged an effort to block Jacobs’ trademark application for the word “THE” for use on clothing and handbags. 

The parties had seemingly decided that they (and their “THE” trademarks) can, in fact, co-exist in their respective spaces in the market – collegiate sports merch vs. fashion – without confusing consumers.

Such a co-existence agreement of sorts (and the potential for subsequent fallout) is hardly the first of its kind in fashion. Something of a similar arrangement is at the heart of the bi-national legal battle that has pitted Valentino S.p.A. against fellow Italian fashion brand Mario Valentino, with the two unrelated entities entering into a co-existence agreement more than 40 years ago in an attempt to avoid legal complications stemming from their nearly-identical monikers. 

According to Valentino’s trademark-centric complaint, “Because of their similar names and overlapping goods,” it and Mario Valentino “experienced issues of consumer confusion” almost from the outset. Faced with mounting consumer confusion and a respective “desire to avoid public confusion and conflict, present or future, in any part of the world,” the two companies entered into a legally-binding agreement that dictates exactly how they may respectively use the Valentino name and various “V” logos.

In light of Mario Valentino’s alleged breach of the legally-binding agreement as a result of its sale – and marketing – of lookalike products, Valentino filed suit against its smaller and lesser-known counterpart in a California federal court in July 2019. That case, and similar legal proceedings in a Milan court, are still underway.

Beyond that, a coexistence agreement was entered into by 1661, Inc. – the corporate entity resale platform Goat Group – and London-based brand Goat Fashion after the USPTO refused to register 1661, Inc.’s application for “GOAT” for use in connection with its sneaker marketplace (class 35), citing Goat Fashion’s pre-existing registrations for “GOAT” in classes 25 and 35. In furtherance of the consent agreement, which ultimately enabled 1661, Inc., to obtain a class 35 registration, 20-year old Goat Fashion would “continue to use its GOAT mark for goods and services related to clothing, and 1661, Inc. would limit its use of its GOAT mark to services in connection with its online marketplace … ‘athletic and sporting footwear,’ i.e., sneakers.” 

While that agreement appeared to work out for the similarly-named companies for over a year, enabling them to peacefully co-exist in the market, Goat Fashion claimed that things went awry after it refused to consent to 1661’s request to use the GOAT mark on clothing. Instead of agreeing to let 1661 use the mark free and clear, Goat Fashion alleges in the suit that it filed against 1661 in a New York federal court in early 2019 that it “offered to enter into a license agreement with 1661” to enable the company to use the GOAT trademark on clothing.

After Goat Fashion’s motion for a preliminary injunction was granted in September 2020, thereby, barring 1661, Inc. from selling apparel on its buzzy resale marketplace due to the similarity of the two brands’ names and the resulting likelihood that consumers will confuse the two like-named but unaffiliated parties’ goods/services and cause Goat Fashion to suffer “irreparable harm,” the parties settled the suit. On the heels of the parties’ settlement, Goat Fashion founder Jane Lewis revealed that her London-based label would take a new name; it has since become known as Jane.

As for Ohio State’s ability to go after alleged infringers of the “THE” mark, it is limited to the unauthorized use of the mark on related goods in ways that would likely be confusing to consumers as to the source/nature of those allegedly infringing goods. What does that not include? In a tweet on Wednesday, trademark professor Alexandra Roberts stated that Ohio State “certainly can’t enforce against individuals or companies using ‘the’ in regular speech or as part of larger marks, or selling hats branded THE BEST CO. or shirts that say THE QUEEN across the chest, for example.”

Hailey Bieber and her brand-new beauty brand Rhode have landed on the receiving end of a trademark infringement lawsuit. According to the complaint that it filed in a New York federal court on Tuesday, unaffiliated clothing and lifestyle brand Rhode claims that Bieber and her companies RHODEDEODATO CORP. and HRBEAUTY, LLC d/b/a RHODE (the “defendants”) are on the hook for trademark infringement and unfair competition under federal and New York state law for allegedly co-opting the Rhode name, which plaintiff Rhode-NYC, LLC says that it first adopted eight years ago and has been using consistently ever since. 

According to the newly-filed lawsuit, Rhode alleges that it began selling luxury garments under the Rhode name back in 2014 and since then, co-founders Purna Khatau and Phoebe Vickers and their brand have garnered media attention from the likes of Vogue; had their wares carried by retailers like Net-a-Porter, Neiman Marcus, Shopbop, and Saks Fifth Avenue, among others; and garnered fans, such as Beyoncé, Tracee Ellis Ross, and Lupita Nyong’o, while building a business that is on track to generate “sales of approximately $14.5 million for the year 2022 and $20 million in 2023.” 

All the while, New York-based Rhode declares in the 47-page filing that it has amassed trademark rights in – and registrations for – its name for use on apparel and accessories, among other things, with plans to expand into additional categories of goods/services in furtherance of its founders’ aim to build out a fully-fledged lifestyle brand. 

Rhode Lawsuit

Against that background, Rhode claims that on June 15, model-slash-budding beauty entrepreneur Hailey Bieber launched a skincare brand of the same name, a nod to her middle name. (It is worth noting that the tenets of trademark law do not/cannot prohibit individuals from using their names in a personal, non-commercial capacity, but people do not have an unfettered right to use their personal names for commercial purposes, as the court confirmed here and in more that one case involving members of the Gucci family.) 

Not a coincidence, Rhode argues that “there is no doubt that Ms. Bieber and her companies know of [its] superior rights,” as they “previously sought to acquire the RHODE mark, appreciating that the brands could not coexist without confusion.” The plaintiff asserts that in November 2018, on the heels of the defendants filing a trademark application with the U.S. Patent and Trademark Office (“USPTO”) for Rhode for use on clothing, “counsel for Ms. Bieber contacted counsel for Rhode … and offered to buy Rhode’s trademark registration,” having “clearly recogniz[ed] Rhode’s prior rights to the use of RHODE.”

“Given the sacrifices they had made to build the brand, Khatau and Vickers refused [the offer from Bieber],” the complaint states, noting that “the RHODE brand is their most important asset.”

(The defendants’ 2018 application for registration for a stylized depiction of the word “Rhode” for use on apparel was abandoned in 2019. However, counsel for the defendants filed an intent-to-use application for “Hailey Rhode” for use on clothing in 2019 with the USPTO, and two intent-to-use trademark applications, one for a plain RHODE word mark and one for a stylized depiction of the word “Rhode” in February and December 2020, respectively, for use on skincare products, fragrances, etc. Rhode did not oppose any of those applications, and while all three were given a green-light by the USPTO by way of Notices of Allowance, they are still pending before the USPTO in lieu of statements of use being filed.)

Rhode Lawsuit

While Rhode claims that it maintains superior rights in the brand name and “has achieved great success in the competitive and challenging fashion industry and has established a strong brand identity, there is no question that Ms. Bieber’s worldwide fame affords her a more substantial platform from which to [promote and] sell products.” More specifically, Rhode asserts that “Bieber’s new, trademark-infringing brand will quickly swamp [its] market presence, confuse the marketplace, and ultimately, destroy the goodwill and reputation of the RHODE brand.” In the wake of the launch of the defendants’ brand earlier this month, Rhode alleges that it has taken “an immediate hit,” with search engine query results for the word “rhode” being dominated by the defendants’ brand instead of its own. (Awareness for the newer Rhode brand has been boosted by Ms. Bieber’s significant social media following, the plaintiff argues, as well as that of “Ms. Bieber’s husband, Justin Bieber, has promoted ‘rhode’ to his 243 million Instagram followers.”)

In addition to potentially confusing consumers as to the source of Rhode-branded goods, the potential for harm that comes from Bieber’s new brand is significant, per Rhode, which argues that such reverse confusion is “likely to cause Rhode to lose control over its goodwill and reputation, which it has spent nearly a decade building,” and “more than $1 million on brand advertisement” in 2021, alone.

Beyond that, should Bieber be permitted to operate in a similar (of not the same) market as Rhode using an identical name, her brand stands to “erode the value of [the original Rhode brand] as a whole,” Rhode argues, as “no reasonable buyer or investor is likely to purchase or back a brand that’s entire brand identity has been eclipsed by a celebrity brand with an identical name.” It is also “possible,” Rhode claims that “stores and sellers [will] decide it is too confusing to carry both brands, [and] most likely, they would excise [Rhode] in favor of the defendants given Ms. Bieber’s celebrity status,” thereby, leading to lost opportunities/revenue for Rhode. At the same time, Bieber and co.’s use of the “Rhode” mark will “likely make it much more difficult, if not impossible, for Rhode to partner and/or collaborate with other brands in the future” for similar reasons. 

Finally, Rhode argues that the potential for harm is heightened by the fact that “Ms. Bieber’s foray into the world of celebrity-sponsored product empires is very unlikely to stay within the confines of the beauty industry.” Rhode points to a number of the defendants’ recent trademark applications, “which are outside the cosmetics space,” and which it claims “indicate Ms. Bieber’s plans to expand beyond cosmetics into apparel and other fashion-related goods.” In fact, “Ms. Bieber has already indicated that ‘clothes will come,’” Rhode asserts, claiming that “if the defendants “are permitted to use ‘rhode,’ [it] will be unable to enter the beauty and skincare market.” 

Moreover, such an expansion into clothing by Bieber “is expected and anticipated … by consumers,” Rhode contends. Not only are clothing and accessories likely within the zone of natural expansion for beauty and skincare products, particularly, nowadays when most companies have merch (much more about there here), Rhode argues that “other celebrities have done the same,” and turned skincare and/or cosmetics ranges into much larger ventures. For instance, Rhode notes that Gwyneth Paltrow’s brand, GOOP, “markets and sells lifestyle products including, among other things, both fashion and skincare,” and the same goes for Kim Kardashian, Kendall and Kylie Jenner, and Rihanna, the latter of whom “sells cosmetics under the brand name Fenty and undergarments under the label Savage x Fenty.” 

With the foregoing in mind, Rhode sets out claims of trademark infringement and unfair competition in the newly-filed lawsuit and is seeking injunctive relief to bar the defendants using the Rhode “trade name or domain name either standing alone or as part of any other name or mark,” among other things, and to force them to account for and destroy any marketing materials and/or products bearing the Rhode mark. Rhode is also seeking monetary damages to be determined at trial. 

Orrick’s Lisa Simpson, who is lead litigation counsel for Rhode, cited language in the complaint, asserting on Tuesday, “This is a textbook case of reverse confusion, in which a massive junior trademark user threatens to trample a smaller senior user’s market. The magnitude of Bieber’s following and the virality of her marketing will cause immediate, ongoing and irreparable harm to the RHODE brand. And the hardships and public interest weigh overwhelmingly in favor of protecting the nine-year investment of two upstart entrepreneurs over the latest mega-venture by a mega-star.”

A rep for the defendants was not immediately available for comment.

The case is Rhode-NYC, LLC v. Rhodedeodato Corp. et al1:22-cv-05185 (SDNY).

The personal luxury goods market reached €288 billion ($303.9 billion) in value in 2021, and 2022 “started strong,” with sales in the United States and Europe leading growth. Up 7 percent from pre-pandemic 2019, luxury goods sales in 2021 saw a “v-shaped rebound,” according to Bain & Co., benefitting from an “exuberant” 2021 holiday shopping season across regions, continuing to see double-digit growth in China, and experiencing sustained local demand in Western markets like the U.S., which “maintained momentum, even after federal [pandemic] stimulus checks ended.”

Despite rising inflation, geopolitical turmoil, and the striking impact of COVID-19 lockdowns in China, the personal luxury goods market experienced “remarkable performance in the first quarter of 2022,” Bain found, growing by 17 to 19 percent at current exchange rates (13 to 15 percent at constant exchange rates), over the same period in 2021, with the Boston-based management consulting company pointing to a number of key factors that are helping to drive 2022 rises.

The U.S. market, for instance, is experiencing “unprecedented growth as luxury brands are unleashing the real power of diversity and inclusion, discovering the true potential of the entire American customer base.” Sales of luxury goods in Europe are also on the rise thanks to “booming local demand driven by a fierce ‘back to normal’ attitude and a rebound in intraregional tourism,” and “limited consequences [of the Russia-Ukraine war] on global luxury customer sentiment and spending.” (LVMH, for one, revealed this spring that sales in Europe were up 45 percent during Q1 on a year-over-year basis, with its fashion and leather goods brands, as well as jewelry brands like Tiffany & Co., enjoying strong growth in the EU, as well as the U.S. Meanwhile, Kering reported in April that sales at its biggest brand Gucci were driven largely by local customers in North America and Western Europe during the first quarter of the year.)

Spending in China has taken a hit as a result of strict COVID restrictions, but Bain states that “local consumer appetite remains strong and will potentially lead the country to recover between in late 2022 to early 2023.” And still yet, the luxury goods market in South Korea is undergoing a “profound transformation,” increasing in size and cultural relevance and replacing touristic spending with local demand. 

With the foregoing in mind, Bain’s analysts state that the mid-term direction of the luxury market remains unchanged, and the firm estimates market growth to reach €360 to 380 billion by 2025. Optimistically, if the first half of 2022 growth path continues throughout the entire year, the market would reach around €320-330 billion by the end of 2022, growing 10-15 percent over 2021. On the other hand, in a slower pace scenario, which projects a potentially reduced growth pace due to a slower recovery of mainland China and challenged spending in mature markets caused by inflationary pressure and macroeconomic slowdown, the market will reach €305-320 billion by the end of 2022, growing 5-10 percent over 2021.  

In a note of their own dated June 15, Bernstein’s analysts reflected on recovery scenarios across China consumer sectors and in terms of luxury goods, in particular, stated that “early signs indicate that demand is reviving in China, as lockdowns are lifted – with shopping malls in Shanghai reporting sales 80 percent of pre-lockdown levels.” They note that in exiting the existing lockdowns, “demand seems back to an even keel and growth trajectory – equally to what we had seen up to Chinese New Year – despite softer macro-economic conditions.” 

(As for apparel and footwear sales in China, Bernstein analysts have observed that “underlying demand remains strong in China for our sector, and we expect to see a bounce-back as restrictions ease, led by e-commerce, as China distribution centers and last-mile delivery are back on track.”)

Looking forward, Bain’s Claudia D’Arpizio and Federica Levato highlight growth opportunities for luxury brands, which range from “responding to the call of sustainability” by “out-innovat[ing] on sustainability to build a competitive advantage” to making in-roads into the virtual world. In terms of the latter, they note that in addition to growth delivered by traditional luxury products, digital assets and the virtual world (i.e., the metaverse, social media and gaming) “will play an increasingly relevant role in luxury brands’ value propositions.” By the end of 2030, they expect “digital assets and the metaverse [to] comprise 5-10% of the luxury market. Luxury brands have the opportunity to play a key role in shaping the virtual worlds on the rise, acting as creators and builders.” 

Mercedes-Benz topped a list of Europe’s most valuable brands, Brand Finance revealed, with the value of the German car-maker up 6 percent to €52.4 billion ($55.30 billion) despite “only moderate growth in a tough year for automotive brands.” While car companies and service providers like T-Mobile, Allianz and EY, as well as giants, such as Shell and Siemens, are among the most highly ranked on Brand Finance’s new “Europe 500” list, luxury names like Louis Vuitton are not absent, with the LVMH-owned luxury goods brand taking the number 8 spot and touting the greatest “brand value change” – 59.7 percent on a year-over-year basis, putting the 2022 valuation of its brand at €20.2 billion ($21.32 billion).

In furtherance of its “Europe 500” list, Brand Finance examines the 5,000 “biggest brands” across various segments and markets and ranks companies by “brand value.” The London-based consultancy defines its central metric as the value of the “names, terms, signs, symbols, logos, and designs” that a company uses to identify and distinguish its “goods, services or entities” from those of others, thereby creating “distinctive images and associations in the minds of stakeholders and generating economic benefits” for the company as a result.” Put another way, it defines brand value as “the net economic benefit that a brand owner would achieve by licensing the brand in the open market,” whereas brand strength is “the efficacy of a brand’s performance on intangible measures relative to its competitors.” 

Valuable Brands

Aside from Louis Vuitton taking the number 8 spot, Gucci ranked in at 17 (up from 22 last year) with a brand valuation of €15.6 billion; Chanel ranked at 24 (up from 27) with a valuation of €13.16 billion; Hermès fell further down the list at number 30 (up from 34) with a brand valuation of €11.6 billion; Cartier took the number 36 spot (down from 32) with a valuation of €10.7 billion; Dior came in at number 53 (up from 60) with a valuation of €7.78 billion; and Rolex landed in the number 59 spot (down from 58) with a valuation of €7.2 billion (despite falling one spot, its overall brand valuation change was up by 6.5 percent). 

Meanwhile, Burberry took the number 127 spot (from 147 last year), Moncler is up to 165 (from 202), Yves Saint Laurent nabbed 169 (from 207), Prada fell to 172 (from 167), Armani rose to 189 (from 195), Bulgari is down to 197 (from 171), Givenchy is up to 261 (from 274), LVMH-owned Celine is up to 304 (from 349), Bottega Veneta landed at 322 (from 367), Loewe is down to 348 (from 344), Valentino is down to 373 (from 321), Dolce & Gabbana – a new addition to the list – took the number 414 spot, and the last fashion/luxury name is Salvatore Ferragamo, which ranked at 466 (from 424). 

As for non-luxury names, adidas took the number 26 spot (down from 25 last year) with a valuation of €12.6 billion; Zara ranked in the number 32 spot (down from 28) with a valuation of €11.2 billion; and H&M fell to the number 35 spot (from 30) with a valuation of €10.53 billion; and e-commerce retailer Zalando took spot number 78 (up from 113) with a valuation of €5.89 billion.

In addition to calculating brand value, Brand Finance also evaluates “marketing investment, stakeholder equity, and business performance” in order to determine companies’ “Brand Strength.” Ferrari remained the “strongest” European brand for another year in a row with a Brand Strength Index score of 90.9 out of 100 and a corresponding AAA+ rating. Brand Finance notes that Ferrari’s “historic pursuit of controlled growth has helped to preserve its exclusivity within its sector, however, last year, it expanded its target market to a younger demographic by launching a new high-end fashion line.” The aim of creating a brand that can cater to Italian luxury lifestyle in the high-end category is expected to “help expand and strengthen its brand portfolio into new avenues, whilst enhancing brand awareness amongst the younger generation.” 

Valuable Brands

Elsewhere on the top 10 strongest list are LVMH-owned Dior, which rose 112 places from last year, to land in number 6 spot, and Louis Vuitton, which rose 35 spots from last year to take the number 9 position.

In terms of the significance of its annual “Brand Value” and “Brand Strength” rankings, Brand Finance has consistently held that “the most fundamental reason to conduct these valuation analyses is to find out how brands – that is, trademarks and their associated intellectual property – improve the financial performance of a business,” which brands accomplish “by impacting the perceptions that customers, employees and other relevant stakeholders.” The consultancy claims that as a result of its various ranking exercises, it has found that brand-specific elements and assets “consistently make up 20 to 25 percent of the value of listed companies.” Though, it cautions that this figure differs by “type of business, industry, segment, stage of life and many other factors.” 

Brand Finance’s release of the “Europe 500” list comes as sales of luxury goods are likely to grow by at least 5 percent this year helped along by consumers in the United States and Europe, in particular. Bain & co. analysts said on Tuesday that they expect global sales of personal luxury goods to “reach at least 305 billion euros ($320 billion) this year, according to its most conservative estimate — and up to 330 billion euros in a more optimistic scenario — building on its fast rebound from pandemic lockdowns.” This compares with a previous estimate for 300 billion to 310 billion euros, per Reuters.

Virtual goods – including those tied to non-fungible tokens (“NFTs”) – may be capable of infringing others’ trademarks for purely “real” world goods. That is what a New York federal court indicated in a memorandum order last month, in which it refused to toss out the trademark infringement and dilution lawsuit that Hermès lodged against Mason Rothschild, the maker of the MetaBirkins NFTs. Denying Rothschild’s motion to dismiss, Judge Jed Rakoff of the U.S. District Court for the Southern District of New York held that while there may be an “artistic aspect” to the images tied to the MetaBirkins NFTs (making the Rogers test applicable), Hermès has, nonetheless, sufficiently set out allegations that Rothschild’s use of “MetaBirkins” was not artistically relevant or was explicitly misleading and therefore, failed to meet the Rogers test.

Rothschild had pushed for a dismissal of Hermès’ lawsuit on the basis that his “fanciful depictions of fur-covered Birkin bags and his identification of his artworks as ‘MetaBirkins’ are artistically relevant and do not explicitly mislead about their source or content,” and thus, are protected as artistic expression under the First Amendment.

Among the key takeaways from the latest round of the closely-watched MetaBirkins lawsuit – which is one of the very first trademark matters to center on NFTs – is how the court construed NFTs. Relying largely on what Hermès sets out in its amended complaint, the court describes NFTs as “units of data stored on a blockchain that are created to transfer ownership of either physical things or digital media.” When an NFT is linked to digital media, the court states that “the NFT and corresponding smart contract are stored on the blockchain and are linked to digital media files (e.g., JPEG images, .mp4 video files, or .mp3 music files) to create a uniquely identifiable digital media file.” 

Meanwhile, the court noted that “the digital media files to which the NFTs point are stored” – and ultimately, exist – “separately” from the digital tokens, themselves. 

In this same vein, Judge Rakoff stated that “because NFTs are simply code pointing to where a digital image is located and authenticating [that] image, using NFTs to authenticate an image and allow for tradeable subsequent resale and transfer” does not make the image tied to an NFT a commodity cut off from potential First Amendment protection “any more than selling numbered copies of physical paintings would make [them] commodities for the purposes of Rogers.”

MetaBirkins Lawsuit

The court goes further in its discussion of the fundamentals of NFTs (and the different types of assets that can be tied to NFTs), asserting in a footnote that “an NFT could link to a digital media file that is just an image of a handbag” – as is the case here. Alternatively, the judge suggests that an NFT could be associated with “a different kind of digital media file that is a virtual handbag that can be worn in a virtual world,” such as a metaverse platform. This distinction is significant, as it seems to clearly indicate that not all digital images linked to NFTs would invoke the Rogers test. (Under Rogers, the unauthorized use of another’s trademark in an expressive work is shielded from liability under the Lanham Act unless it “has no artistic relevance to the underlying work whatsoever” or has “some artistic relevance, [but] explicitly misleads as to the source or content of the work.”)

While some allegedly infringing works – such as the MetaBirkins images – that are linked to NFTs might warrant an analysis under Rogers because of their expressive nature, Cowan, Liebowitz & Latman’s Eric Shimanoff noted recently that “a traditional trademark analysis might apply if, for example, the MetaBirkins were sold as virtually wearable goods for use in the metaverse, thus, making them more akin to commodities as opposed to artistic works.” 

In a separate footnote, the court asserts that Rothschild “seems to concede” that Rogers “might not apply if the NFTs were attached to a digital file of a virtually wearable Birkin, in which case the ‘MetaBirkins’ mark would refer to a non-speech commercial product.” That is, of course, not at play here since the 100-or-so MetaBirkins consist of static images, and the court does not delve further into this, stating that Hermès’ only contention on this front is that “Rothschild might branch out into virtually wearable ‘MetaBirkins.’” Since the amended complaint does not contain “sufficient factual allegations that Rothschild uses, or will in the immediate future use, the mark to sell such products,” the court did not consider this in connection with the motion to dismiss.

The court’s discussion of what an NFT actually consists of is noteworthy, as it is one of the critical – and largely untested – questions in a number of lawsuits, including the one that Nike has filed against StockX over its sale of NFTs. It also sheds light on the potential for courts to distinguish between the types of media that can be tied to NFTs, which brands and creators should take note of. 

Beyond that, the court’s order seems to suggest that the trademark rights that brands have amassed for use on purely physical goods (and “real” world services) could very well extend into the metaverse and allow for infringement claims in the event that the assets tied to the NFTs – or potentially, just virtual goods themselves that are not tied to NFTs at all – are capable of functioning in the metaverse. Hermès, after all, has yet to make use of the protected Birkin name or trade dress in connection with any virtual products or NFTs, but that seemingly does not stop its existing “real” world rights from extending into the virtual world. (It likely helps, as Hermès has argued – and the court notes in its order – that many other similarly-situated brands are beginning to “branch out into offering virtual fashion items that can be worn in virtual worlds online (most commonly, for now, in the context of video games, but with the potential to expand into other virtual worlds and platforms as those develop), and NFTs can be used to create and sell such virtual fashion items.”)

This takeaway comes as no shortage of brands have lodged metaverse and/or NFT-focused trademark applications for registration (often on a 1(b) basis) with the U.S. Patent and Trademark Office (“USPTO”) and other international trademark offices for marks that they currently use exclusively on goods/services in the “real” world. These applications largely list classes 9, 35, 41, and 42 as among those in which brands intend to use the marks. As TFL previously reported, brands appear to be “hedging” by way of the disparate classes they are filing for, which is an illustration that they are “not quite sure what they are going to do in the metaverse or how the USPTO is going to treat their applications.”

However, at the end of the day, as Martin Schwimmer, a partner in the Trademark and Copyright Practice Group at Leason Ellis, told TFL, with regards to “a company’s main line of work,” a company’s “existing trademark portfolio will probably cover the most predictable of their activities in the metaverse.” 

The case is Hermès International, et al. v. Mason Rothschild, 1:22-cv-00384 (SDNY).