Imitation may be the sincerest form of flattery, but not when it comes to the increasingly lucrative market of digital collectibles, determining what crosses the line into wrongful conduct will be a tricky matter.
Nike (NKE) is the latest to file a lawsuit, accusing online sneaker reseller StockX of selling unauthorized images of its shoes in the form of non-fungible tokens (NFTs).
In the suit, Nike (NKE) accuses StockX of minting and marketing NFTs containing trademarked Nike material without authorization or approval. Nike is attempting to block further sales and asking for unspecified monetary damages. In a funding round led by Altimeter Capital last April, StockX raised $255 million at a $3.8 billion valuation.
Another high profile case involves the French luxury designer brand Hermès, which is suing Mason Rothschild for creating NFTs of its famous Birkin handbags called “MetaBirkins.” For the moment, the MetaBirkin NFTs have been removed from the OpenSea marketplace after Hermès served Rothschild with a cease-and-desist letter, reports The Fashion Law.
With the recent trend of luxury fashion brands launching NFTs expected to gain momentum through 2022, so will the heavy scrutiny on NFTs imitating those brands. Of the StockX case in particular, Trace Schmeltz, co-chair of the Fintech Practice Group at law firm Barnes & Thornburg, expects the company to respond to the Nike suit by claiming “fair use” as each NFT sold is just a digital version of the physical shoes purchased by customers.
Speaking more generally about the idea that artists might seek First Amendment protection, Schmeltz says they need to establish that what they are doing is in fact, arka. “To say that your work is protected as arka, like Warhol’s use of the Campbell’s Soup label, misses the fact that the First Amendment gives less protection to commercial speech, particularly when it infringes on intellectual property rights.”
Read more: What Are NFTs and How Do They Work?