When Faux-Fur Birkin Bags Blur a Famous Mark in the Metaverse
By Marie-Andrée Weiss
A year ago, this blog reported about the Hermès v. Rothschild case, a trademark infringement suit filed by French fashion house Hermès against artist Mason Rothschild.
Rothschild had created in December 2021 the MetaBirkins series, a series of 100 non-fungible tokens (NFTs) featuring digital images of blurry Birkin Hermès bags covered in fake fur. The NFTs, which are retaining digital records of ownership of the images on a blockchain, sold “for prices comparable to real-world Birkin handbags” as noted by Judge Jed S. Rakoff, from the U.S. District Court for the Southern District of New York (SDNY), in his May 18, 2022 Order, denying Rothschild’s motion to dismiss.
On December 30, 2022, Judge Rakoff denied the parties’ cross motions for summary judgment, with opinion to follow.
Plaintiff and Defendant had both asked the Court to answer two questions:
- Should the MetaBirkins be evaluated using the two-part Rogers v. Grimaldi test used when evaluating trademark infringement in artistic works or the Gruner + Jahr test used for general trademark infringement?
- Whichever test is applied, do the MetaBirkins dilute the Hermès’ BIRKIN trademarks?
Judge Rakoff published his opinion on February 2, 2023. He reaffirmed, as he did in his May 18, 2022 Order, that the trademark infringement claim should be assessed under the Rogers v. Grimaldi test. However, as genuine issues of material fact remained, the second question had to be answered by a jury, who had to decide whether Rothschild’s decision to focus the series on the Birkin bag was made for artistic expression purposes or merely to use the BIRKIN trademark.
The Rogers test
Under the Rogers test, there is no trademark infringement if defendant uses a mark as the title of an expressive work, or as part of the expressive work if use of the trademark (1) does not have any artistic relevance whatsoever to the underlying work and (2) is not explicitly misleading.
For Judge Rakoff, the Rogers test must be used in this case because:
“Rothschild’s use of Hermès’ marks did not function primarily as a source identifier that would mislead consumers into thinking that Hermès originated or otherwise endorsed the MetaBirkins collection, but rather as part of an artistically expressive project.”
Judge Rakoff reasoned that the title “MetaBirkins” refered to both the NFT and the digital images with which it is associated and that “MetaBirkins” did not, as argued by Hermès, refer only to the NFTs “separate and apart from the digital images” of the faux-fur bags. The NFTs are artistic expression.
Judge Rakoff noted further that Rothschild “viewed the project as a vehicle to comment on the Birkin bag’s influence on modern society”, stating in an interview that the series was “an experiment to see if [he] could create that same kind of illusion that [the Birkin bag] has in real life as a digital commodity”, and that he had decided to cover the bag in fake fur “to introduce “a little bit of irony” to the efforts of some fashion companies to “go fur-free.” Indeed , the artist wrote that the series“ inspired by the acceleration of fashion’s “fur free” initiatives and embrace of alternative textiles.”
While an artistic expression, the First Amendment could not be a defense. Judge Rakoff quoted the Second Circuit Twin Peaks Prods., Inc. v. Publications 1993 case which held that even if a trademark’s use bears “some artistic relevance” to an underlying artistic work, such use is not protected by the First Amendment if it “explicitly misleads as to the source or the content of the work.”
The Second Circuit noted in Twin Peaks that ”the finding of likelihood of confusion must be particularly compelling to outweigh the First Amendment interest recognized in Rogers” and that the Polaroid factors must be applied to determine whether or not there is likelihood of confusion and thus trademark infringement.
Judge Rakoff explained that “the most important difference between the Rogers consumer confusion inquiry and the classic consumer confusion test is that consumer confusion under Rogers must be clear and unambiguous to override the weighty First Amendment interests at stake.”
The Rogers test was indeed used by a federal jury to determine whether or not the MetaBirkins infringed Hermès’ trademarks, but, following a six-day trial, a jury found on February 14, 2023, that Rothschild was liable on the claims of trademark infringement, trademark dilution, and cybersquatting, that the First Amendment was not a defense, and awarded Hermès $133,000 in damages.
Trademark dilution and blurring
Hermès had also claimed trademark dilution and blurring, which refers to use of a famous trademark in a way which dilutes such famous mark by blurring or tarnishment. A famous mark is defined by the Trademark Dilution Revision Act (TDRA) as widely recognized by the general U.S. consuming public as a designation of source of the mark owner’s goods or services.
The jury found that the BIRKIN mark was blurred by Rothschild’s by blurring the distinctiveness of the famous BIRKIN mark and diminished its capacity to identify and distinguish Hermès’ goods and services, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.
Cybersquatting
The jury also held in favor of Hermès, which had claimed that the <metabirkins.com> domain name was cybersquatting. To prevail on a cybersquatting claim, Hermès had to prove (1) that the BIRKIN mark was distinctive at the time <metabirkins.com> was registered; (2) that the <metabirkins.com> domain name is identical to, or confusingly similar to, Hermes’ s BIRKIN mark; and (3) that Rothschild had a bad faith intent to profit from the BIRKIN mark.
The court’s instructions to the jury explained that when determining whether Rothschild acted in bad faith on this claim, the jury had to consider whether the artist used the domain name in connection with the offering of any goods or products and whether he “intended to divert consumers from the mark owner’s online location to a site that could harm the goodwill represented.”
Trademarks, symbols and humor
While the primary function of a trademark is to indicate the source or a product or service, some trademarks have become symbol and are used by consumers to provide a desired cachet, one of luxury and exclusivity in the case of the BIRKIN trademark.
The Birkin bag created by Hermès was named after actress and singer Jane Birkin. While expensive, they sell well: as noted by Judge Rakoff in its February 2, 2023, opinion, since 1986, Hermès has sold over $1 billion worth of Birkin handbags in the United States, $100 million dollars’ worth in the past ten years. Both parties recognized that it is a “symbol of wealth and exclusivity.”
The MetaBirkins sold in total over $1.1 million through June 2022 and it is likely that at least some bought them as symbol of their wealth, taste, and sense of irony. However, unlike in the case of Jack Daniel’s Properties, Inc. v. VIP Products LLC, a case about dog chew toys resembling Jack Daniels bottles, the use of the BIRKIN mark was not humorous.
The Jack Daniel case is currently pending at the Supreme Court of the United States, which will soon answer the question whether humorous use of another’s mark as one’s own on a commercial product is “noncommercial” under 15 U.S.C.§ 1125(c)(3)(C), and thus bars as a matter of law a claim of dilution by tarnishment under the TDRA. We will keep you posted.
Not For Trademark : Hermès Claims MetaBirkin NFTs Are Infringing
By Marie-Andrée Weiss
On January 14, 2022, Hermès filed a trademark infringement suit against artist Mason Rothschild, claiming that by selling “MetaBirkins” NFTs, Rothschild infringes and dilutes the HERMÈS trademark. Defendant filed a motion to dismiss on February 9, claiming that the First Amendment gives him the right to sell the NFTs. The case is Hermès International, et al. v. Mason Rothschild, 1:22-cv-00384 (SDNY).
NFTs (non-fungible tokens) are unique digital assets. Their authenticity and uniqueness are guaranteed by a blockchain from their creation through transfer of ownership, as the blockchain also record the transfers. As such, NFTs are suited to the art market, and NFTs are popular and sometime expensive. A NFT created by digital artist Beeple sold in auction in March 2021 for 69 million USD.
Hermès is a luxury house having its headquarters in Paris. One of its most famous sacs is the Birkin, named after British actress and singer Jane Birkin. The Birkin bag is a bigger version of the Kelly Bag, itself named after Grace Kelly, the American actress who became Princess of Monaco.
Mason Rothschild is an artist living in California. Last May, he created a “Baby Birkin” NFT, the digital image of a 40-week-old fetus gestating inside a Hermès Birkin bag. The NFT originally sold for 23,000 USD and was resold for 47,000 USD. Rothschild then created the MetaBirkins.com website, which features and sells “a collection of 100 unique NFTs created with faux fur in a range contemporary color and graphic executions.” The complaint alleges that Mason Rothschild “first began advertising the METABIRKINS NFTS under The METABIRKINS trademarks on December 2, 2021, at Art Basel Miami.
A BIRKIN bag may be considered by some as a work of art, at least as a highly collectible item: a bag made from crocodile skin sold at auction in 2016 for HKD 2,320,000 (more or less USD 300,000.00). MetaBirkins are valuable as well: one sold in February 2022 for 3.5 Ether, that is, more or less USD 10,500.
The C&D letter
On December 16, 2022, Hermès International sent a Cease-and-Desist letter (C&D) to Mason Rothschild and carbon copied the OpenSea platform, on which the NFTs were sold. Hermès asked the artist to cease using commercially the Hermès trademarks. Indeed, Hermès owns, among others, U.S. trademark registrations for HERMÈS, BIRKIN, and for the configuration of the Birkin handbag.
The C&D claimed that Mason Rothschild was identifying the NFTs he is selling by using the BIRKIN trademark and that he “employ(s) the HERMÈS trademark to advertise and promote the sale of the Birkin NFTs…”. Hermès also claimed that this use of the marks may dilute them.
After receiving the C&D, as alleged in the complaint, the MetaBirkins.com website was updated to add a disclaimer stating: “We are not affiliated, associated, authorized, endorsed, or in any way officially connected with HERMES, or any of its subsidiaries or affiliates. The official HERMES website can be found at https://www.hermes.com.” The complaint alleges that the disclaimer “unnecessarily” linked to the official Hermes website and “capitalizes the HERMÈS mark” and that “Defendant’s uses of the HERMÈS Mark in conjunction with his uses of the BIRKIN Mark, and the display of the METABIRKINS bags, serves only to create a confusing impression among consumers as to the Hermès’ sponsorship of the METABIRKINS NFTs or the METABIRKINS website.”
In its complaint, Hermès described Defendant as “a digital speculator who is seeking to get rich quick by appropriating the brand METABIRKINS for use in creating, marketing, selling and facilitating the exchange of [NFTs]”.
Hermès claimed that the name MetaBirkin is formed by merely adding “the generic prefix “meta” to the famous trademark Birkin.” Hermès has not registered METABIRKIN as a trademark. Other companies have filed trademark registration applications for trademarks protecting their marks in the meta universe, such as McDonald’s who filed in February 2022 several meta-related trademarks (for instance, MCDONALD’s in Class 43 for “Operating a virtual restaurant featuring actual and virtual goods, operating a virtual restaurant online featuring home delivery”).
The motion to dismiss
On February 9, 2022, Mason Rothschild filed a motion to dismiss, arguing that the trademark infringement claim must be dismissed under Rogers v. Grimaldi. In this case, the Second Circuit held that the Lanham Act must be broadly interpreted in cases when the allegedly infringing product is an artistic expression. Under Rogers, the Lanham Act:
“should be construed to apply to artistic works only where the public interest in avoiding consumer confusion outweighs the public interest in free expression. In the context of allegedly misleading titles using a celebrity’s name, that balance will normally not support application of the Act unless the title has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless the title explicitly misleads as to the source or the content of the work.”
First prong of the Rogers test: artistic relevance
The motion to dismiss argues it does, pointing out that the bags are “depicted as fur covered… [to] commen[t] on the animal cruelty inherent in Hermès’manufacture of its ultra-expensive leather handbags” and further argues that “[t]he First Amendment guarantees [Defendant]’s rights to respond in the marketplace of ideas to the inescapable corporate brand message by which we are bombarded every day, virtually everywhere we look.”
Before Hermès filed its suit, Mason Rothschild had posted on social media a response to both Hermès and Open Sea, writing that “… the First Amendment gives [him] every right to create and based on [his] interpretations of the world around [him].” He also argued that the NFTs he sells “are also a commentary on fashion’s history of animal cruelty, and its current embrace of fur-free initiatives and alternative textiles.” Jane Birkin had asked Hermès a few years ago to stop using her name for the bag after a video released by People for the Ethical Treatment of Animals showing reptiles being skinned or sawed open alive on farms which supplied luxury brands, including Hermès. The parties settled after Hermès showed that the incident was a unique occurrence.
The motion to dismiss argues that the NFTs are “depicted as fur covered… [to] commen[t] on the animal cruelty inherent in Hermès ’manufacture of its ultra-expensive leather handbags” and further argues that “[t]he First Amendment guarantees [Defendant]’s rights to respond in the marketplace of ideas to the inescapable corporate brand message by which we are bombarded every day, virtually everywhere we look.” As such, the Metabirkins could also be considered a parody. The motion to dismiss cites the SDNY Vuitton v. My Other Bag case, where the court found that fabric totes with drawings of famous bags were not infringing nor diluting the Louis Vuitton marks, as they were a parody. Hermès was not a plaintiff, but could have been, as one tote showed a drawing of the Hermès Kelly bag.
Second prong of the Rogers test: not explicitly misleading as to the source
The second prong of the Rogers test is determining whether use of the mark is not explicitly misleading as to its source. The Rogers case was about the title of the Fellini movie Ginger and Fred. The Second Circuit distinguished cases where the title of the product would be an endorsement, giving as example “Jane Fonda’s Workout” (the case is from 1989…). Such titles would be protected by the Lanham Act. However, as explained by the Second Circuit, “Many titles… include a well-known name without any overt indication of authorship or endorsement — for example, the hit song “Bette Davis Eyes,” and the … film “Come Back to the Five and Dime, Jimmy Dean, Jimmy Dean.” Defendant argues that the website clearly identifies that the MetaBirkins are works of art.
Rogers would likely guarantee the motion to dismiss to be granted if Jane Birkin, not Hermès, was the Plaintiff, or if the case would have been filed in the Ninth Circuit. The Ninth Circuit adopted Rogers in its Barbie Girl case, and extending it beyond mere title, as explained in Mattel, Inc. v. MCA Records. In VIP Products v. Jack Daniel’s Properties, the Ninth Circuit held in 2020 that chewy dog toys “Bad Spaniels Silly Squeaker” in the shape of a bottle of Jack Daniel’s Old No. 7 Black Label Tennessee Whiskey were not infringing.
Defendant argues that his images “show luxury with no function but communication, luxury emptied of anything but its own image, calling into questions what it is that luxury lovers actually pay for.” It is an interesting argument but may be weaker because of the nature of the goods protected by the Hermès marks. When trademarks are used logos, used prominently and externally on the product, they may have very well “no function but communication.” Hermès bags are made by highly trained artisans, by hand, and thus the Hermès marks indicate what “luxury lovers actually pay for.”
What if a similar lawsuit would be filed across the Atlantic?
The lawsuit was filed in the U.S., where the Birkin handbag cannot be protected by copyright, because it is a useful article, defined by Section 101 of the Copyright Act as “an article having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information”. Useful articles are not protectable under U.S. copyright laws.
Other countries, such as France, offer bags and other fashion goods protection under their copyright laws. What is an NFT is currently debated by legal scholars and practitioners. The motion to dismiss argues that the NFTs “signify ownership of an image of a handbag.” The defendant does not sell the Hermès handbags, nor does Hermès claim he does. If the Hermès bag would be protected by copyright, Mason Rothschild would have argued fair use. In a country such as France, he would likely not have claimed that NFTs “signify ownership of an image of a handbag”, as such image may be infringing, because there is not a comprehensive “fair use” defense available to the defendant of a copyright infringement suit. The artist would likely claim instead that the MetaBirkin NFTs are parodies, a defense against copyright infringement claims, commenting on the luxury industry or on the use of expensive leather to manufacture the bags.
This case will be an interesting suit to watch, as it is one of the first trademark infringement suit filed against the seller of NFTs. Other cases have been filed, such as one filed on February 3 by Nike v. StockX LLC, also in the Southern District of New York (Nike v. StockX LLC, 1:22-cv-00983, SDNY), which claims that an online resale platform selling NFTs of Nike sneakers is infringing and diluting Nike’s trademarks. The platform claims on its site that the NFTs do “no more than track ownership of a physical Nike product safely secured in its vault” and that buyer can trade the NFT for the associated physical shoes. This case shows that blockchain can be used to authenticate goods. As Hermès and Nike product ‘s are routinely illegally reproduced, they will have at heart to defend the source of any Hermès or Nike NFT, for fear of not being able to use the technology to authenticate their products.
CJEU: Reputation Offsets Likelihood of Confusion of Trademarks
By Gabriel M. Lentner and Dayana Zasheva
On 17 September 2020, the Court of Justice of the European Union (‘CJEU’) ruled that despite the similarities between the ‘MASSI’ and ‘MESSI’ marks, the well-known soccer player Mr. Lionel Messi is authorized to register his name as an EU trademark.
Background
The dispute arose when in 2011 the football player Messi filed an application with the European Union Intellectual Property Office (‘EUIPO’) for registration of his name as a trademark for sports goods falling within Classes 9, 25 and 28 of the Nice Classification. The holder of the previously registered EU trademark ‘MASSI’ for sale of products under the same Classes filed an opposition to Mr. Messi’s application, based on likelihood of confusion of the two marks. Initially the First Board of Appeal of EUIPO upheld the opposition in 2014, but the EU’s General Court overturned this decision in 2018.
The reputation of a latter almost identical to a previous trademark may outweigh their visual and phonetic similarities
On appeal, CJEU concurred with the General Court that the reputation of the owners of the trademarks is a relevant factor, which should be taken into account during the assessment of the likelihood of confusion (paras 46-48). The Court found that the average buyer is informed and would associate the mark ‘MESSI’ with the famous soccer player (para 35). This was held to be enough to eliminate the probability of confusion of the mark with the earlier trademark ‘MASSI’. The CJEU further ruled that, even if a proportion of the relevant consumers are not familiar with Mr. Lionel Messi, this is a negligible proportion, and as such does not meet the threshold for a ‘likelihood of confusion on the part of the public’ as a ground for refusal for the registration of the mark under article 8(1)(b) of Regulation No 207/2009 (paras 35-36).
Well-known facts are not new and do not need to be proven
Although the relevance of the reputation of Mr. Lionel Messi was raised for the first time before the proceeding in the General Court, which was limited only to determining errors of law (para 72), CJEU considered that such well-known facts to the public, which can be discovered through generally accessible sources, are to be considered that were at the disposal of the First Board of Appeal of EUIPO even without them being addressed by the parties and should have been taken should into account in the estimation of the probability of confusion of the two trademarks (para 74).
The General Court applied correctly the case-law established in RuizPicasso and Others v OHIM case
CJEU agreed with the General Court that the Ruiz-Picasso and Others v OHIM case-law is applicable whenever the relevant public recognizes the trademarks as conceptually different due to their established meaning, regardless if such differentiation is due to the reputation of the earlier mark or of the new mark (paras 86-87).
Conclusion
Renowned reputation is the main characteristic that makes the mark recognizable and distinguishable from other signs. This was also the position of the General Court in 2019 in the case Moreira v EUIPO. Relying on the popularity of the Brazilian soccer player Mr. Neymar, the Court found the registered EU trademark of his name ‘NEYMAR’ by a third party to be invalid, because its purpose was to profit illegally from his reputation.
Although such instances of renowned reputation will occur only in unique circumstances, it is nevertheless an important clarification offered by the CJEU.
Will the U.S. Supreme Court Find Ban on Scandalous Trademark Registration Unconstitutional?
By Marie-Andrée Weiss
On 4 January 2019, the U.S. Supreme Court granted certiorari to rule on whether Section 1052(a) of the Trademark Act, which prohibits the registration of immoral and scandalous marks, is facially invalid under the First Amendment. The case is Iancu v. Brunetti, Docket No. 18-302.
In 2011, Erik Brunetti filed an application to register FUCT as a federal trademark, in connection with a clothing line. The U.S.P.T.O. examining attorney refused to register it, considering it to be the past tense of the verb “to fuck,” a vulgar term. The Trademark Trial and Appeal Board (TTAB) affirmed in 2014. Brunetti appealed. While the case was pending, the U.S. Supreme Court issued its Matal v. Tam decision, which found that that the disparagement clause of the Lanham Act violated the First Amendment, because it discriminates based on content.
On December 15, 2017, the U.S. Court of Appeals for the Federal Circuit reversed the TTAB’s holding, and held that Section 2(a) is an unconstitutional restriction on free speech. The court denied the request for a rehearing in April 2018 and in September 2018, Andrei Iancu, the Director of the U.S.P.T.O., filed a petition for a writ of certiorari, which was granted by the Supreme Court.
The Lanham Act prohibits registering immoral and scandalous marks
Section 2(a) of the Lanham Act prohibits registration of immoral and scandalous marks, a prohibition which was first codified by Section 5(a) of the Trademark Act of 1905. The U.S.P.T.O. considers that a mark is immoral or scandalous if a substantial composite of the general public would find it shocking to the sense of truth, decency or propriety, in the context of contemporary attitudes and the relevant marketplace (see for instance In re Mavety Media Group Ltd. at 1371).
The government argued unsuccessfully on appeal that Section 2(a) does not implicate the First Amendment because it is either a government subsidy program or a limited public forum and that, alternatively, if it is speech, it is merely commercial speech. Such speech was defined by the Supreme Court in Va. State Bd. Of Pharmacy, as speech which does “no more than propose a commercial transaction.” It warrants the use of the Central Hudson, four-part test, not the strict scrutiny test.
In Tam, the Supreme Court had used a “heightened scrutiny test.” The Federal Circuit applied the strict scrutiny test, and found that the government had failed to prove that Section 2(a) advances the interests it asserts and is narrowly tailored to achieve that objective.
Trademark as speech
The Federal Circuit found Section 2(a) regulates speech based on its expressive content, and as such, does not merely regulate commercial speech. Indeed, the Supreme Court had noted in Tam that trademarks “often have an expressive content.” The Federal Circuit Court gave several examples of trademark applications using “FUCK” to further a worthy cause, such as FUCK HEROIN, FUCK CANCER or FUCK RACISM.
Brunetti is using the FUCT mark in connection with clothing featuring, as described by the TTAB, “strong and often explicit, sexual imagery that objectifies woman and offers degrading examples of extreme misogyny.” The Federal Circuit Court judges wrote in conclusion that they found “the use of such marks in commerce discomforting, and are not eager to see a proliferation of such marks in the marketplace.” Yet, it is speech which must be protected by the First Amendment.
The Lanham Act does not define what is a scandalous or immoral mark
The Federal Circuit found that there is no “reasonable definition” of what is “scandalous” and “immoral” and thus Section 2(a) is not construed narrowly enough to be found constitutional. Obscenity is not protected by the First Amendment, and the Supreme Court has provided a definition of it in Roth v. United States, “material which deals with sex in a manner appealing to the prurient interest.” In a concurring opinion to Brunetti, Judge Dyk explained that rather than finding Section 2(a) unconstitutional, he would have limited the scope of the clause to obscene marks.
In his Respondent brief, Brunetti added another question for the Supreme Court, whether Section (2)(a) is unconstitutionally vague under both the First and the Fifth Amendment.
The Supreme Court is likely to offer a definition of what is an immoral or scandalous mark
The Director of the USPTO argued in its petition to the Supreme Court that Section 2(a) merely prohibits the registration of scandalous marks, such as those using vulgar terms and graphic sexual image. However, what is “vulgar,” or what is “graphic” is not easily agreed upon, especially in a country as big as the U.S., which is home to many different opinions and beliefs. For example, there are no “Do Not Cuss” signs in New York restaurants, but there are still some in the South.
Whether or not the Supreme Court finds Section 2(a) unconstitutional, the court is likely to provide a definition of what is “scandalous” or immoral. ”
Hakuna Matata: Trademarks and Cultural Appropriation
By Marie-Andrée Weiss
Disney Enterprises has owned since March 2003 the HAKUNA MATATA trademark, registered in class 25 for t-shirts. Disney filed the application in August 1994, shortly after the U.S. release of its widely successful “The Lion King” animated movie, which has been adapted as a musical comedy. A live-action reimagining version of the animated movie, using CGI technology, will be released this year.
In the movie and the musical comedy, and, most certainly, in the upcoming film, a character is singing the “Hakuna Matata” song, urging the young Lion King not to worry. Indeed, “Hakuna Matata” means “no problems” or “no worries” in Swahili. An article written by Cathy Mputhia in November 2018 noted that “Hakuna Matata” is “widely used in East Africa.”
Disney now faces backlash over this trademark registration. An online petition published by Shelton Mpala is asking Disney to cancel the HAKUNA MATATA trademark arguing that its decision to register it was “predicated purely on greed and is an insult not only the spirit of the Swahili people but also, Africa as a whole.” The petition has gathered more than 180,000 signatures.
Can Hakuna Matata be registered as a trademark?
The online petition claims that “Disney can’t be allowed to trademark something that it didn’t invent.” If this would be true, thousands and thousands of trademarks would be cancelled.
Indeed, it is not necessary to create a term to able to register it as a trademark; unlike a work protected by copyright, a trademark can be protected even though it is not an original work. What matters is that it is distinctive enough, since the function of a trademark is to identify the source of a product or service. Trademarks which are arbitrary, fanciful, or suggestive can be protected without having to show secondary meaning. Generic trademarks cannot be protected.
Few people in the U.S. knew the “Hakuna Matata” expression before the release of The Lion King in 1994. Indeed, Google Ngram Viewer shows that the word was first used in the English language corpus in the Nineties. However, as noted by The Guardian, “[t]he phrase was popularised in 1982 by the Kenyan band Them Mushrooms, whose platinum-selling single Jambo Bwana (Hello, Mister) featured the phrase hakuna matata.”
When the expression was trademarked in 1994, the U.S. public associated it with the movie, which was a blockbuster, complete with derivative products, some using the “Hakuna Matata” phrase. As such, this combination of words was an efficient trademark, because the general public believed that the phrase had been invented by Disney and thus perceived the trademark as being arbitrary or fanciful.
Disney’s trademark application stated correctly, however, that the two words have a meaning in another language and were not invented. As such, HAKUNA MATATA is a suggestive trademark, a term which “requires imagination, thought and perception to reach a conclusion as to the nature of the goods,” as explained by the Second Circuit in Abercrombie & Fitch Co. v. Hinting World.
Nevertheless, the public in East Africa perceives this trademark as a mere common phrase, and generic terms cannot be registered as trademarks. Therefore, “Hakuna Matata” cannot be registered as a trademark in East Africa but can be in the U.S. or in other Western countries because the public there does not perceive it as a common expression. Research on WIPO’s Global Brand Database reveals that the term is registered as trademark almost only in Western countries, with a few exceptions such as Egypt, Thailand, and Korea.
Under trademark law, a term can only be registered if it is not commonly used in the country or geographical areas where it is registered. This practice, while legal, can be perceived by the country from which the term originated, however, as cultural appropriation.
Trademark and cultural appropriation
Even if it is legal to register “Hakuna Matata,” it may not be advisable. Cultural appropriation is now a well-known concept, but it had just started to be recognized when Disney registered the trademark in 1994, as shown by this Ngram Viewer.
Shelton Mpala told CNN that that he had started the petition “to draw attention to the appropriation of African culture and the importance of protecting our heritage, identity and culture from being exploited for financial gain by third parties.”
This issue is addressed by WIPO, which established in 2000 the Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore (IGC). The Committee’s mandate is to work towards reaching an agreement on one or more intellectual property international legal instruments which would protect traditional knowledge and traditional cultural expressions.
One of the IGC’s background briefs noted that “[t]he current international system for protecting intellectual property was fashioned during the age of enlightenment and industrialization and developed subsequently in line with the perceived needs of technologically advanced societies.”
Could a bar to register traditional knowledge and traditional cultural expressions be in the future?
Can this practice be regulated, and how? Cathy Mputhia suggested in her article that “relevant governments or communities [could] apply for expungement of already granted trademarks,” but noted that “there are certain thresholds that ought to be met for expungement of marks that contain heritage.”
These “expungement thresholds” will probably not be legal, but societal. If such expungement occurs for HAKUNA MATATA, it will be a business decision made by Disney designed to protect the company’s public image by acknowledging that the trademark hurts too many Africans. In this regard, Shelton Mpala chose a possible viable path towards his desired result.
One can imagine that a party could petition the TTAB to cancel the HAKUNA MATATA trademark registration under Section 2(a) of the Lanham Act which prohibits registration of immoral, scandalous, and disparaging marks. However, seems unlikely, as the U.S. Supreme Court held in 2017 in Matal v. Tam that Section 2(a)’s prohibition to register disparaging marks violates the First Amendment. The Court may soon rule similarly about scandalous and immoral marks, as it has accepted to review the In Re: Brunetti case, after the Federal Circuit held that the First Amendment also protects registration of such marks.
Section 2(b) of the Trademark Act bars the registration of a mark which consists of or comprises the flag or other insignia of the US, or any state, or municipality or foreign nation. Could the law be amended one day to add symbols of traditional knowledge and traditional cultural expressions? This would require a WIPO treaty protecting them, and the very hypothetical U.S. accession to the treaty.
A Study in Trademarked Characters
By Marie-Andrée Weiss
The characters created by Disney, Marvel, and LucasFilms are valuable intellectual property and are protected both by copyright and by trademark. However, a recently decided case in the Southern District of New York (SDNY), Disney Inc. v. Sarelli, 322 F.Supp.3d 413 (2018), demonstrates that preventing the unauthorized use of such characters may not be as easy as expected.
In this case, Plaintiffs are Disney Enterprises, Marvel Characters and LucasFilm, all of which own copyrights and trademarks in many of the most famous characters in the world, such as Mickey Mouse, Hulk, and Chewbacca. These characters were first featured in movies like Frozen, The Avengers or Star Wars, and are now licensed or featured in derivative products such as comic books, video games, or theme parks. Their exploitation is highly lucrative.
When visiting Plaintiffs’ theme parks, one has a chance to meet the characters “in person.” This experience is also offered by Characters for Hire, a New York company offering, as the name implies, character hiring services. The company’s principal owner is Nick Sarelli (Defendant). Characters for Hire offers a service wherein actors dressed in costumes entertain guests during birthday parties or corporate events. For example, actors have allegedly dressed as Mickey, Elsa and Anna from Frozen, Captain America and Hulk from The Avengers, and Luke Skywalker and Darth Vader from Star Wars.
The contracts Defendants provided to their clients contained disclaimer language, stating, for example, that Defendants do not use trademarked and licensed characters. The contracts also warned clients that the costumes may differ from those seen in movies “for copyright reasons,” adding that “[a]ny resemblance to nationally known copyright character is strictly coincidental.”
These disclaimers did not appease Plaintiffs, who sent several cease and desist letters to Defendants before filing a federal copyright and trademark infringement suit and a New York trademark dilution suit.
While Judge Daniels from the SDNY granted Defendants’ motion for summary judgment and dismissed Plaintiffs’ claim for trademark infringement on August 9, 2018, he denied the motion to dismiss the copyright infringement claim and the trademark dilution claim.
The descriptive fair use defense failed
Plaintiffs claimed that the use of their trademarked characters to advertise and promote Defendants’ business, along with their portrayal by costumed actors, was likely to confuse consumers as to the origin of the services.
Defendants argued that their use of Plaintiffs’ characters was descriptive and nominative fair use, and that there was no likelyhood of confusion.
Descriptive fair use is an affirmative defense to a trademark infringement suit, as Section 33(b)(4) of the Trademark Act allows “use… of a term or device which is descriptive of and used fairly and in good faith [but] only to describe the goods or services of such party, or their geographic origin.” In other words, a defendant can use plaintiffs’ trademarks in a descriptive sense, or to describe an aspect of his own good or service.
For such a defense to succeed in the Second Circuit, a defendant must prove that the use was made (1) other than as a mark, (2) in a descriptive sense, and (3) in good faith (Kelly-Brown v. Winfrey at 308). This defense failed in the present case, as Defendants had not made a descriptive use of Plaintiffs’ marks. Instead, Judge Daniels found that their ads “were specifically designed to evoke [Plaintiff’s marks] in consumers’ minds…”
The nominative fair use defense also failed
Defendants also claimed that they used Plaintiffs’ marks to describe their own products. Such nominative fair use is a defense to a trademark infringement suit if such use “does not imply a false affiliation or endorsement by the plaintiff of the defendant” (Tiffany v. eBay at 102-103). But this nominative fair use defense also failed, as Defendants used Plaintiffs’ marks to identify their own service, which is hiring out characters for parties, rather than Plaintiffs’ trademarked characters.
Defendants’ use of characters was not trademark infringement
Judge Daniels used the eight-factor Polaroid test used by the Second Circuit in trademark infringement cases to determine whether Defendants’ use of Plaintiffs’ marks were likely to confuse consumers.
While Plaintiffs’ marks are undoubtedly strong (first factor), the similarity of the marks (second factor), weighed only slightly in Plaintiffs’ favor because Defendants used different names for their characters than Plaintiffs’ trademarked character names, e.g., “Big Green Guy,” “Indian Princess,” and “The Dark Lord” instead of Hulk, Pocahontas and Darth Vader.
The third and fourth Polaroid factors, the proximity of the goods and services, and the possibility that the senior user will enter the market of the junior user, were found to weigh in Defendants’ favor. There was no evidence that Plaintiff has plans to expand into the private entertainment service industry.
The fifth Polaroid factor, evidence of actual confusion, also weighed in Defendants’ favor, as there was no evidence that Defendants’ customers used the names of Plaintiffs’ trademarked characters when referring to Defendants’ services in online reviews or otherwise. Plaintiffs could not provide a survey proving customers’ confusion either.
Judge Daniels found the sixth factor, Defendants’ intent and evidence of bad faith, to also be in Defendants’ favor, since Defendants had put customers on notice that their services were not sponsored by or affiliated with Plaintiffs by using altered versions of Plaintiffs’ characters’ names and by removing Plaintiffs’ characters’ names in their online reviews.
The seventh Polaroid factor, the quality of Defendants’ products, was also in Defendants’ favor, as Defendants’ services, being of a lesser quality than Plaintiffs’, makes it likely that consumers will not be confused as to the source of the services.
The eighth Polaroid factor, consumer sophistication, also was in favor of Defendants, as Plaintiffs did not prove the sophistication level of Defendants’ relevant consumers.
Balancing these eight factors, the SDNY found no likelihood of consumer confusion and denied Plaintiffs’ motion for summary judgment on their trademark infringement claim.
Trademark dilution
Plaintiffs chose to claim trademark dilution under New York trademark dilution law, Section 360-1 of New York Business Law, and not under the Federal Trademark Dilution Act. This choice may have been made because the New York law does not require a mark to be famous to be protected, and a plaintiff only needs to prove the mark’s distinctiveness or secondary meaning.
Judge Daniels found that there was a genuine issue of fact as to whether Defendants’ use of Plaintiffs’ marks is likely to dilute Plaintiffs’ marks by tarnishment. A court will have to determine if Defendants provide services of poor quality.
Copyright
Plaintiffs argued that Defendants had “copied and used the images, likenesses, personas, and names of Plaintiffs’ characters…to promote and advertise its services online.” Defendants argued in response that the characters in which Plaintiffs own copyrights are based on prior works that are part of the public domain.
Both parties will have more chances to pursue their arguments as Judge Daniels denied the motion for summary judgment on copyright infringement. He found that Plaintiffs had presented as evidence screenshots from Defendants’ website and videos allegedly published by Defendants which had not been properly authenticated. More specifically, they had not been authenticated by someone “with personal knowledge of reliability of the archive service from which the screenshots were retrieved,” citing Specht v. Google, a 2014 Seventh Circuit case.
It is likely that the parties will settle out of court.
Selective Distribution and Online Marketplace Restrictions: the EU Coty Prestige case
By Giuseppe Colangelo
The online sales phenomenon – and all the issues deriving from vertical restraints – has attracted significant attention in recent years in several EU Member States. This attention arises mainly from a question regarding the extent to which restrictions limiting the ability of retailers to sell via online marketplaces are compatible with competition rules.
The findings of the recent E-commerce Sector Inquiry [COM (2017) 229 final] indicate that absolute marketplace bans should not be considered to be hardcore restrictions within the meaning of Article 4(b) and Article 4(c) of the Vertical Block Exemption Regulation (330/2010). However, as recalled by the Commission, this approach has been affirmed pending the CJEU’s decision in the Coty Prestige case.[1] Indeed, the Higher Regional Court of Frankfurt am Main essentially asked the EU Court of Justice (CJEU) whether a ban on using third party platforms in a selective distribution agreement is compatible with Article 101(1) TFEU and whether such a restriction constitutes a restriction of competition by object.
No wonder Coty was so anticipated. The judgment is expected to shape the future of EU e-commerce affecting online markets, the luxury industry and Internet platforms.
The request for a preliminary ruling has been submitted in the context of a dispute between a supplier of luxury cosmetics (Coty Germany) and its authorized distributor (Parfümerie Akzente), concerning the prohibition, under the selective distribution agreement, of the use of third-party undertakings for Internet sales. In particular, Parfümerie Akzente distributes Coty goods both at its brick-and-mortar locations and over the Internet. In the latter case, sales are carried out partly through its own online store and partly via the Amazon platform.
According to Coty, the selective distribution system is required in order to support the luxury image of its brands. In this respect, the selective distribution agreement, as it pertains to Internet sales, provides that the authorized retailer is not permitted to use a different name or to engage a third-party undertaking which has not been authorized. The dispute at issue arose when Parfümerie Akzente refused to sign amendments regarding Internet sales activity. They prohibited the use of a different business name and the recognizable engagement of a third-party undertaking which is not an authorized retailer of Coty Prestige. Thus, according to these amendments, the authorized retailer is prohibited from collaborating with third parties if such collaboration is directed at the operation of the website and is affected in a manner that is discernible to the public.
In response to the action brought by Coty to prohibit Parfümerie Akzente from distributing products via Amazon, the German court of first instance found that, in accordance with Pierre Fabre ruling (C-439/09), the objective of maintaining a prestigious image of the mark could not justify the introduction of a selective distribution system which restricts competition. Further, according to the national court, the contractual clause at issue constituted a hardcore restriction under Article 4(c) of the Regulation. It did not meet the conditions for an individual exemption, since it has not been shown that the general exclusion of Internet sales via third-party platforms entails efficiency gains that offset the disadvantages for competition that result from the clause. Moreover, the court considered such a general prohibition unnecessary, since there were other equally appropriate but less restrictive means, such as the application of specific quality criteria for the third-party platforms.
In these circumstances, the Oberlandesgericht Frankfurt am Main requests a preliminary ruling asking: (i) whether selective distribution networks aimed at preserving the image of luxury goods are caught by the prohibition laid down in Article 101(1) TFEU; (ii) whether, in the same context, Article 101(1) precludes a contractual clause which prohibits authorized distributors from using, in a discernible manner, third-party platforms for Internet sales, without consideration of whether there is any actual breach of the legitimate requirements of the manufacturer in terms of quality; (iii and iv) whether Article 4(b) and (c) of the Regulation must be interpreted as meaning that such a third-party platform ban constitutes a restriction by object of the retailer’s customer group or of passive sales to end users.
The questions reflect the diverging interpretations of Pierre Fabre by the national competition authorities and courts. Thus, the case provides the CJEU with the opportunity to clarify the meaning of Pierre Fabre.
Sidestepping Pierre Fabre
By answering the first question, the CJEU recalls that since Metro (C-26/76 and C-75/84), the Court has recognized the legality of selective distribution networks based on qualitative criteria. Notably, according to the conditions set by the case law to ensure the compatibility of a selective distribution network with Article 101(1) TFEU, resellers must be chosen on the basis of objective criteria of a qualitative nature, which are determined uniformly for all potential resellers and applied in a non-discriminatory manner; the characteristics of the product necessitate such a selective distribution network in order to preserve its quality and ensure its proper use; the criteria defined must not go beyond what is necessary.
In the context of luxury goods, it follows from the case law that, due to their characteristics and their nature, those goods may require the implementation of a selective distribution system in order to preserve their quality and to ensure that they are used properly. Indeed, as highlighted by the Copad judgment (C-59/08), the quality of luxury goods is not just the result of their material characteristics, but also of their allure and prestige. As prestige goods are high-end goods, the aura of luxury they emanate is essential in that it enables consumers to distinguish them from similar goods and, therefore, an impairment to that aura is likely to affect the actual quality of those goods. For these reasons, the characteristics and conditions of a selective distribution system may preserve the quality and ensure the proper use of luxury goods. The CJEU in Copad held that the establishment of a selective distribution system which seeks to ensure that the goods are displayed in sales outlets in a manner that enhances their value contributes to the reputation of the goods, and therefore contributes to sustaining the aura of luxury surrounding them.
Therefore, once the Metro criteria are met, a selective distribution system designed primarily to preserve the luxury image of those goods is compatible with Article 101(1) TFEU. This outcome is not challenged by Pierre Fabre. The assertion contained in paragraph 46 of that case (“The aim of maintaining a prestigious image is not a legitimate aim for restricting competition and cannot therefore justify a finding that a contractual clause pursuing such an aim does not fall within Article 101(1) TFEU”) is confined to the context of that judgment and consequently does not alter the settled case law. Notably, that assertion is related solely to the goods at issue (“the goods covered by the selective distribution system at issue in that case were not luxury goods, but cosmetic and body hygiene goods”) and to the contractual clause in question in Pierre Fabre (a general and absolute ban on Internet sales). Therefore, the selective distribution system in its entirety was not at issue.
The same line of reasoning guides the CJEU’s answer to the second question, which is related to the lawfulness of a specific clause prohibiting authorized retailers from using, in a discernible manner, third-party platforms for Internet sales of luxury products.
The contractual clause must be evaluated in light of the Metro criteria. The CJEU recalls that it indisputable that the clause at issue: i) pursues the objective of preserving the image of luxury and prestige of the contractual goods; ii) is objective and uniform; iii) is applied without discrimination to all authorized retailers. Therefore, the lawfulness of the third-party platforms prohibition is a matter of proportionality. Hence, an assessment is required as to whether such a prohibition is appropriate for preserving the luxury image of the contractual goods and whether it goes beyond what is necessary to achieve that objective.
As regards the appropriateness of the prohibition at issue, the CJEU considers the contractual clause justified by the need to preserve the luxury image of the products in light of three arguments. Indeed, the third-party platforms ban is coherent with the aim of: i) guaranteeing that the contract goods will be exclusively associated with authorized distributors; ii) monitoring the qualitative criteria according to which the products are sold (the absence of a contractual relationship between the supplier and third-party platforms prevents the former from being able to require compliance with the quality conditions imposed on the authorized retailers); iii) contributing to the high-end image among consumers (those platforms constitute a sales channel for goods of all kinds, while the chief value of a luxury good lies in the fact that it is not too common).
With regard to the question of whether the prohibition goes beyond what is necessary to achieve the objective pursued, the clause at issue is clearly distinguished from the one sanctioned in Pierre Fabre, since it does not contain an absolute prohibition on online sales. Indeed, authorized retailers are allowed to distribute the contract goods online via their own websites and third-party platforms, when the use of such platforms is not discernible to consumers.
The CJEU also relies on this argument to answer the third and fourth questions raised by the referring court. Even if the clause at issue restricts a specific kind of Internet sale, it does not amount to a restriction within the meaning of Article 4(b) and (c) of the Regulation, since it does not preclude all online sales, but only one of a number of ways of reaching customers via the Internet. Indeed, the contractual clause even allows, under certain conditions, authorized retailers to advertise on third-party platforms and to use online search engines. Moreover, it is not possible ex ante to identify a customer group or a particular market to which users of third-party platforms would correspond. Therefore, the content of the clause does not have the effect of partitioning territories or of limiting access to certain customers.
In summary, in line with the position expressed by the Commission in the Sector Inquiry, the CJEU states that absolute marketplace bans should not be considered as hardcore restrictions since, contrary to the restriction at stake in Pierre Fabre, they do not amount to prohibition on selling online and do not restrict the effective use of the Internet as a sales channel.
Some open issues
Despite the clarity of the CJEU’s findings, there is a matter of interpretation related to the potential limitation of the judgment solely to genuine luxury products. Indeed, the CJEU also distinguishes Coty from Pierre Fabre on the grounds that the latter did not concern a luxury product: “the goods covered by the selective distribution system at issue in [Pierre Fabre] were not luxury goods, but cosmetic and body hygiene goods. … The assertion in paragraph 46 of that judgment related, therefore, solely to the goods at issue in the case that gave rise to that judgment and to the contractual clause in question in that case”.
In that respect, the wording of the CJEU is unfortunate. First, the proposed exclusion of cosmetic and body hygiene products from the luxury landscape is far from convincing. Further, the uncertainty about the scope of the ruling may generate litigation over the prestige of some goods, since national enforcers may adopt different approach and manufacturers would seek protection against online marketplace sales for products whose luxury features are questionable. Indeed, the CJEU does not define the notion of luxury, but relies on Copad, stating that the quality of such goods is not just the result of their material characteristics, but also of the allure and prestigious image which bestow on them an aura of luxury. That aura is essential in that it enables consumers to distinguish them from similar goods.
A few days after the Coty judgement, the German Federal Court of Justice, in evaluating ASICS’s online restrictions, stated that sports and running shoes are not luxury goods.[2] Previously, on 4 October 2017 the District Court of Amsterdam, referring to the Opinion of Advocate General Wahl in Coty, reached a different conclusion about Nike shoes and ruled in favor of Nike in an action against a distributor (Action Sport), which had not complied with the selective distribution policy.[3]
A narrow interpretation of the Coty judgement would be at odds with the settled case law, which holds that it is the specific characteristics or properties of the products concerned that may be capable of rendering a selective distribution system compatible with Article 101(1) TFEU. As pointed out by the Advocate General, the CJEU has already made clear that irrespective even of whether the products concerned are luxury products, a selective distribution system may be necessary in order to preserve the quality of the product. In the same vein, according to the Commission’s Guidelines, qualitative and quantitative selective distribution is exempted regardless of both the nature of the product concerned and the nature of the selection criteria as long as the characteristics of the product necessitate selective distribution or require the applied criteria. It is the properties of the products concerned, whether they lie in the physical characteristics of the products (such as high-quality products or technologically advanced products) or in their luxury or prestige image, that must be preserved.
However, the mentioned ambiguity does not seem to have a significant impact in practice. Indeed, whether or not an online marketplace ban should be considered as hardcore restrictions within the meaning of Article 4(b) and (c) of the Regulation does not depend on the nature of products. Since, according to the CJEU’s finding, absolute marketplace bans are not hardcore restrictions, a case-by-case analysis of effects will be required for both luxury and non-luxury goods.
[1] Coty Germany GmbH v. Parfümerie Akzente GmbH (C-230/16).
[2] Case KVZ 41/17.
[3] Case C/13/615474 / HA ZA 16-959.
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