News Flash: Trademark Infringement is No Laughing Matter

The Bad Spaniels and MetaBirkin cases clarify that artistic expression is no foolproof defense to trademark infringement.

Brand owners welcomed the decision the US Supreme Court rendered in Jack Daniel’s Properties Inc. v. VIP Products LLC wherein the Court rejected an expansive view of the interplay between the First Amendment and the Lanham Act, that would have made it more difficult for brand owners to enforce against so-called parody products based on trademark infringement.

The closely watched case involved a dog toy designed to mimic the Jack Daniel’s liquor bottle. The toy shared the same shape as the iconic bottle, and replaced various branding and trade dress elements with references to dogs. In particular, the toys displayed BAD SPANIELS in a similar font and location as the JACK DANIEL’S mark, and replaced the classic “Old No. 7 Tennessee Whiskey” slogan with the phrase “The Old No. 2 On Your Tennessee Carpet.”

In the course of litigation, VIP conceded that it used the “Bad Spaniels” trademark and trade dress as source identifiers, as it had done with other, similar “parody” products.

This case has been working its way through the courts for over six years; Jack Daniel’s won on its trademark infringement argument in Arizona federal court in 2017, but the Ninth Circuit overturned the ruling in 2020, finding that the toy was a parody and thus speech protected by the First Amendment.

Specifically, the Ninth Circuit found that VIP’s product was automatically entitled to protection under the Rogers test, which traditionally applies to creative works, and allows trademarks to be used without permission if used as part of a work that is “artistically expressive” and doesn’t “explicitly mislead” consumers. Traditionally, the Rogers test applied to cases where the trademark is used solely for some expressive purpose within a creative work (such as a movie or artwork), versus used to identify the work’s source. Moreover, the Rogers test usually does not insulate use of trademarks as trademarks from infringement or dilution scrutiny. In this case, the Ninth Circuit instead expanded the traditional application of Rogers, and did not consider a likelihood of confusion analysis once it had determined that the product was entitled to protection under the Rogers test.

Not unexpectedly, brand owners were relieved when the Supreme Court disagreed with the Ninth Circuit’s expansion of the Rogers analysis, aptly noting that, “On that view, few trademark cases would ever get to the likelihood-of-confusion analysis.” The Court elaborated that when a mark is used as a source identifier, the First Amendment does not demand a threshold inquiry. On dilution, the Court similarly held that parody or other commentary does not shield use that is source identifying. The Lanham Act ensures that consumers can tell where goods come from.

That said, the Court was quick to clarify that although VIP’s effort to parody Jack Daniel’s does not justify use of the Rogers test, it may make a difference in the standard likelihood of confusion analysis. The Court remanded the issue to the courts below, noting that beyond source designation, VIP also uses the marks at issue in an effort to “parody” or “make fun” of Jack Daniel’s, which is relevant to the likelihood of confusion analysis, “because consumers are not so likely to think that the maker of a mocked product is itself doing the mocking.”

For brand owners, it is a relief to know that infringing marks are not exempt from an infringement analysis, just because they may convey a humorous message.

The Bad Spaniels case comes on the heels of the February decision in Hermès International SA v. Rothschild, in which Hermès sued digital art creator Mason Rothschild, alleging unlawful use of its HERMÈS trademark, BIRKIN trademark, and BIRKIN trade dress in connection with sale of NFTs. NFTs are digital works of art and are often auctioned as collectibles; Rothschild alleged that his designs communicated an artistic commentary on animal cruelty in the world of luxury fashion. The NFTs at issue depicted the coveted Birkin handbag design covered in colored digital “fur” or unusual graphics instead of standard leather.

In terms of the applicability of the Rogers test, the jury instructions took the Rogers test into account by imposing an elevated burden on Hermès to convince the jury, by a preponderance of evidence, that there was actual intent to confuse consumers. This standard required Hermès’ to demonstrate to the jury that Rothschild’s MetaBirkin NFTs were intentionally designed to mislead potential customers because mere likelihood of confusion was not enough to trump First Amendment protections.

The jury found that even under the stricter Rogers standard, Hermès met its burden to establish infringement. The jury found for Hermès on all counts, including trademark infringement, dilution, cybersquatting, and unfair competition. Finding that Rothschild intended to confuse potential consumers, and that the First Amendment did not shield him from liability, Hermès was awarded $133,000 in damages. On June 23, the court granted Hermès’ request for a permanent injunction.

The case was the first to address intellectual property infringement in the digital world, and helped create a road map for where courts would consider the line between artistic expression and trademark infringement for blockchain-enabled digital assets. Contrasting Rothschild’s activities with those of artists like Andy Warhol vis-à-vis his famous Campbell’s soup can images, the court noted that the Rothschild created 100 NFTs featuring the Birkin design. In other words, the MetaBirkin NFTs were more commercial in nature versus a single piece of artwork.

It is a win for brand owners to hear that intellectual property concepts relating to trademark law and the First Amendment were (as they should be) analyzed in the metaverse as they are in the physical world. And, taken together, the Hermès and Bad Spaniels cases demonstrate that, no matter the context or the modern nature of the product, use that has the potential to confuse consumers, and that trades on the goodwill of brands for commercial profit, can still constitute “old fashioned” trademark infringement.

This article appeared in the June 2023 issue of MarkIt to Market®. To view our past issues, as well as other firm newsletters, please click here.