In the first trial involving non-fungible tokens, or NFTs, trademark rights and a First Amendment defense, a jury in New York City earlier this month found an artist had violated the trademark rights of Hermés, the iconic French fashion house.

At issue was the artist’s NFT depictions of Hermés’ Birkin bags and his use of the BIRKIN mark in connection with his art. NFTs are digital depictions of art that reside not on walls or shelves of collectors but in the cloud, accessible via the owner’s computer.

This is the latest collision of the worlds of art and trademark, the First Amendment and the right of an owner to protect its famous mark from dilution and confusion. The news would have been far greater importance if the jury had found the artist’s work was artistic expression protected as a fair use by the First Amendment and that it trumped Hermés’ rights in its BIRKIN mark and trade dress.

The NFT art was released at Art Basel in Miami a couple of years ago, and was represented by a limited edition of 100 non-fungible tokens, each unique and transferrable and each then selling for $450, far, far less than a real Birkin bag that starts at $8,500 and can reach $300,000.

In the words of the movie “A Few Good Men,” Hermés strongly objected but the artist paid no heed. Instead he published Hermés’ cease and desist letter on the internet.

Hermés claims that the artist’s depiction of his fur-covered BIRKEN bags resulted in customer confusion, whether source or affiliation, and dilution of its famous mark, a cause of action independent of confusion. It claimed that by registering the BIRKIN as part of a domain and using the mark on the internet, the artist was a cybersquatter.

NFT can be art, fashion, or really anything. Nike is pursuing a seller of NFTs depicting its sneakers. For those collectors who choose to buy their art in digital fashion, such as Elon Musk, the purchase resides on the collector’s computer instead of the wall or in the closet. Each NFT is a unique piece, each can be resold with a certificate of authenticity, like art, sometimes for much more than the issue price.

But is it art or infringement? Is it merely commercial, entitled to only the most scant First Amendment protection? And, can an artist launch valuable expression on the back of a famous mark?

The BIRKIN bag artist unsuccessfully defended on the grounds he was using the art and name to comment about Hermés’ animal rights violations resulting from production of these expensive bags. He claimed his work was a protected parody. I think the jury disbelieved him.

An application Rogers v. Grimaldi test did not prevail. Under Rogers his use of the Hermés mark would only be permitted if it was relevant to the artist’s work (commentary about animal rights and Hermés’ abuse) and does not denote authorship, sponsorship or endorsement or explicitly mislead as to content.

Confusion is almost always a question of fact, here for the jury to decide. And the jury found there was a likelihood that consumers would believe that there was an association between the artist and Hermés, thus ending the parody defense. Not surprisingly, confusion surveys were presented and rebutted by experts hired by both sides. Because the jury decided that the BIRKIN mark and design were not fairly used as artistic expression it found that the artist had diluted these famous items.

Andy Warhol painted giant Campbell Tomato Soup cans and they sold for millions. He painted Brillo boxes, and they sold for millions. On the other hand, Campbell and Brillo never claimed it was going to create and sell art. Hermés said it intends to sell NFTs of its more famous products.

But really, that’s not the point. The question for the jury, after hearing the evidence, was whether the artist’s use of the trade dress and the mark BIRKIN were likely to deceive an appreciable number of potential consumers into believing Hermés had endorsed or was somehow affiliated with the artist’s project and his NFTs. The jury did, awarding Hermés $133,000.

While this decision from a New York District Court is precedent anywhere, and it was fact intensive, the case is watched carefully by both the art community and owners of famous brands. No doubt it will be appealed. There are other trademark decisions in favor of parodists, and others in favor of brand owners. A case is even pending before the U.S. Supreme Court seeking to affirm the 9th Circuit’s expansion of Grimaldi where the unauthorized use of another’s mark is ‘funny,’ and deserving of enhanced protection.

That case may affect cases like this as well because the court is being asked to decide whether commercial uses with a modicum of expression should be tested under the statutory and traditional likelihood of confusion standard. As is the internet, this area of law is transitory. Stay tuned.

Jim Astrachan teaches trademark and unfair competition law and Second Amendment law at University of Baltimore Law School. He is a partner at Goodell, DeVries, Leech & Dann, LLP, and the views expressed are his own.

This article was originally published in The Daily Record.