This document discusses the impact of NFTs on trademark rights for fashion brands. It provides background on NFTs and discusses the rise of digital-only fashion items represented as NFTs. The document considers whether established fashion brands could have claims for trademark infringement or passing off against creators of digital fashion items that copy their brands. It analyzes these claims under EU and UK trademark law and common law. It concludes that passing off claims have the highest likelihood of success, while direct trademark infringement claims face obstacles regarding dissimilar goods. Inconsistent standards for proving economic harm also impact anti-dilution claims.

1. Impact of NFTs on trade
mark rights of fashion
brands
LL.M (MIPLM) THESIS 2022
SACHIN SESHADRI

2. Non-Fungible Tokens (NFTs)?
 Non-fungible – unique and irreplaceable (such as the original Mona Lisa)
 Tokens registrable on the blockchain
 Authentication receipt for digital / physical goods/services
 Verifiable – NFTs embedded in a “smart contract”, containing data on creator etc.
 Economic & non-economic value due to scarcity
DIGITAL BALL
(MINT ME!)
NFT receipt
Xxxxx
Yyyyy
zzzzz

3. The rise of digital-only fashion (DOF)
 Clothes for our digital personas in the metaverse
 Evolved from in-game clothing items, pioneered by brands like LV, Burberry, Hermes etc.
 Rise of new creator economies & democratization of fashion - sell DOF items as NFTs
 Cost of production of DOF items much lower than analog fashion
 Strengthening of brand-consumer bonds & a new route to build brand loyalty

4. DOFs go rogue !
 DOFs from one brand must still be distinguishable from any other brand
 Tempting for DOF creators to free-ride on the goodwill of established brands
Hermes has TMs in classes 18 , 26 Digital counterfeits - MetaBirkin NFTs
What recourse does Hermes have against Rothschild?

5. Research questions
 Can physical fashion brands succeed against digital counterfeiters in claims of:
1. Trade mark infringement under Art 10(2)a or 10(2)b TMD / s10(1) or 10(2) UK TMA
2. Trade mark infringement under Art 10(2)c / s10(3) UK TMA
3. Common law of passing off
in the absence of TM registrations for DOF items

6. Methodology
 EU and UK statutes
 EU and UK case law
 Extrapolate to research problem using a common sense approach
 Use Hermes-Rothschild as an exemplary – transplant facts from US & use assumptions
No reinvention of the legal wheel – can existing TM laws work for DOF disputes?

7. Infringement via Art10(2)a or 10(2)b
TMD/ s10(1) or 10(2) UK TMA
 Use in the course of trade; and
 Use in relation to goods/services; and
 Identical marks & identical goods; or
 Identical marks & similar goods resulting in a likelihood of confusion; or
 Similar marks & identical goods resulting in a likelihood of confusion; or
 Similar marks & similar goods resulting in a likelihood of confusion
Gate-keeping criteria

8. Are marks on DOFs used in the course of trade ?
Marks on DOF-NFTs highly likely to be used in the course of trade
Principles from case law Implications for DOF-NFTs
Commercial activity to gain economic
advantage
Sale of DOF-NFTs on Rarible/OpenSea qualifies
Individuals – volume, frequency Private creators like Rothschild qualify; sale of <100
MetaBirkin NFTs qualifies
Even transhipment for eventual sale is use Display of DOFs on metaverse fashion shows may
qualify
Private use exempted Exchange of DOF designs on Whatsapp exempted

9. Are DOF marks used in relation to goods ?
Marks on DOF NFTs highly likely to be used in relation to goods
Principles from case law Implications for DOF-NFTs
Use in a “trade mark sense” (origin function),
preferably affixed to goods
Use of Nike Swoosh on StockX Vault sneaker NFTs
qualifies
Marks as “tribute/homage/disclaimers” not
exempted
Rothschild has no defence for his “homage to
Hermes” argument

10. Luxury handbag & digital handbag –
identical?
 Infringing good has to fall within scope of registration of registered mark
 Hermes has registered TMs for class 18 (leather goods & saddlery) & 26 (buckles & zippers)
 A digital handbag does not fall under this scope
Digital MetaBirkin bags not identical to Birkin bags

11. Luxury handbag & digital handbag –
similar?
 3 tests in UK/EU case law – British Sugar , Canon , complementarity test in Swatch
British Sugar factors Canon factors Complimentarity test
Respective uses of goods Complimentary like watch
dials & leather straps
Respective users of goods
Nature of goods
Respective trade channels
Sold on same shelves
Competing goods

12. Application of goods similarity tests
Similarity factors Physical fashion DOF
Uses Decency, Protection & Status signaling Status signaling
Users Everyone Niche – millennial gamers
Nature Physical Digital
Trade channels Brick & mortar , e-commerce Only online through blockchain
Competing? Sneakers help footballer play & protect from
injury
Digital sneaker cannot compete
Complimentary? Birkin carries consumables & signals high status MetaBirkin unnecessary for Birkin’s
functions
DOFs dissimilar to physical fashion

13. Should we consider likelihood of
confusion?
 UK TMA explicit - likelihood of confusion MUST arise from similar marks AND similar goods
 Applied in British Sugar – no confusion from dessert sauces & toffee spreads
 CJEU in Canon Opposition & Puma vs Sabel indicated the same obligation of marks similarity
AND goods similarity
No likelihood of confusion from DOF & physical fashion & hence no infringement

14. Can the anti-dilution provisions overcome the
dissimilar goods obstacle?

15. Infringement via Art10c TMD/
s10(3) UK TMA
 Registered mark has repute / is well-known; and
 Use of similar mark by 3rd party in the course of trade & in relation to goods/services; and
 Goods can be identical / similar / dissimilar; and
 Said use is without due cause; and
 Detrimental to the repute or distinctive character of mark (Dilution & tarnishment); or
 Takes unfair advantage of distinctive character/ repute of the mark (Free-riding)

16. Repute & mental link to a dissimilar good
 Repute – level of knowledge of mark amongst general or specialized public
 Birkin mark - consumers of luxury leather goods & Nike - general public
 Market share, intensity & duration of use of mark, investments in promoting mark
 Easy case for Hermes & Nike in most developed countries
 Links can be formed between dissimilar goods – brand extension
 Body Shop vs OHIM – mineral water extendible to cosmetics
Anti-dilution provision available for dissimilar goods via brand
extension principle

17. Can physical fashion extend into DOF-NFTs?
 Brand extensions common in luxury industry
 Gucci homeware, Ferrari clothing & perfume, Hermes app, mobile game & WeChat popup
 Carlings launched the Carlings Digital Collection of digital clothing
 Nike acquired RFTKT, the leading digital sneaker brand
 Plausible that Hermes can extend brand into DOF-NFTs
 Intel factors – similar marks, highly distinctive reputed mark, repute transcends goods
Encounter of MetaBirkin likely results in a link to Birkin

18. Types of injury to the Birkin mark
MetaBirkin dilutes, tarnishes & free-rides on Birkin
Injury Effect Main consideration from case law Finding
(YES/NO)
Dilution Disperses the hold of the mark
in the minds of consumers
Stronger case for distinctive & unique marks YES
Tarnishment Reduces power of attraction
of mark
Trivializing effect , unpleasant associations YES
Free-riding Unfair advantage of
distinctiveness/repute
Intention of defendant YES
Luxury brands susceptible to all forms of injury (Swatch vs Samsung)

19. Is there an actual/serious likelihood
of economic harm?
 Inconsistencies found in EU/UK case law
 Soft approach based on speculation / hypothetical view of economic harm
 Citicorp – serious likelihood of economic injury implicit in a finding of blurring
 Hard approach based on high fact-threshold & extraneous factors
 Enteprise Holdings – Facts insufficient to make a “legitimate inference”
Success for Hermes may depend on the type of approach by the court

20. The common law of passing off
 “A man is not to sell his own goods under the pretence that they are the goods of another man”
 Finding based on trinity of goodwill, misrepresentation & damage
 Goodwill – “attractive force that brings in custom” mark/get-up (jeans)/ shape(coffee-machine)
 Misrepresentation – mislead consumers into thinking that the 2 traders have a “connection in
some way” or “plaintiff responsible for defendant’s business”
 Damage to the goodwill – actual / likely damage
 Passing off protects goodwill, NOT the mark per se

21. Can the tort of passing off overcome the dissimilar
goods obstacle?

22. Can dissimilar goods lead to deception by
misrepresentation?
 A common field of activity NOT a requirement for misrepresentation!
 “Elderflower Champagne” fruity drink misrepresented the goodwill of champagne houses
 LEGO irrigation equipment misrepresented the goodwill of LEGO toy-maker
 Dunhill sunglasses misrepresented the goodwill of Dunhill cigarettes
 NUTELLO coffee drink misrepresented the goodwill of NUTELLA chocolate products
 Plausibility of “natural extension” into second field of activity considered
Unlike TM infringement, passing off available for dissimilar goods

23. Are DOF-NFTs a natural extension of
physical fashion?
 Trend of physical fashion brands extending into digital fashion
 Carlings launched the Carlings Digital Collection of digital clothing (2018)
 Gucci’s collab with Genies, an avatar software, to enable users to try digital clothing (2018)
 Ralph Lauren collab with Zepeto, an avatar sim app, to launch a digital collection (2021)
 Nike acquired RFTKT, the leading digital sneaker brand (2021)
Goodwill of physical fashion brands may be misrepresented by DOF NFT traders
& cause likely damage by restricting entry into digital fashion

24. Conclusions
TYPE OF ACTION LIMITING FACTOR
PASSING OFF NA
INFRINGEMENT VIA ART 10(2)(c) / s10(3)
TMA
Inconsistent standards for determination
of likelihood of economic harm
INFRINGEMENT VIA ART 10(2)a,b / s10(1)
,(2)
Existing goods similarity tests yield a
dissimilar goods finding
DESCENDING ORDER OF LIKELIHOOD OF SUCCESS FOR PHYSICAL FASHION BRANDS

25. Thank you