General / Musings

Dealing with trademarks in the metaverse – Hermes Wins MetaBirkins Lawsuit

By Nicole Vossius, contributor and Alan Behr, Partner and Chair, Fashion Practice, Phillips Nizer

As has been reported, the luxury design house of Hermès has prevailed in its trademark infringement lawsuit against the artist Mason Rothschild over his “MetaBirkins” NFT  project, providing much-needed guidance on how to find a balance between trademark protection under the Lanham Act and artistic freedom of expression guaranteed by the First Amendment.  It is important, however, to take a moment to reflect on how new technology and traditional crafts (such as the handwork on a luxury bag) intersect within the ever-changing digital sphere.

We should consider the nature of NFTs (non-fungible tokens).  An NFT is a digital certificate that “authenticates” a digital asset, such as a digital drawing or a video, as the authentic piece associated with the certificate.   Digital certification helps bring value to digital items that can be easy to copy perfectly: a copy not certified by an NFT is just a copy; only the digital file “traveling” with the NFT is the authorized original. 

NFTs rapidly became business news.  In February, 2021, an NFT of a collage by the digital artist Beeple entitled Everydays: The First 5000 Days was sold at auction by Christie’s for $69.3 million.  In contrast, the most Beeple had ever sold a print for before experimenting with NFTs was $100.  Of course, profit in the digital world can be a question of timing and even perspective.  The purchaser, who is said to have had an interest in driving up the value of the artist’s works, actually paid for the piece with a cryptocurrency that has since plummeted in value.  The prices subsequently paid for NFTs have become more modest.

In November, 2021, however, the artist Mason Rothschild launched sales of his “MetaBirkins”—one hundred NFTs, each associated with a unique digital image based on the famous Hermès’ Birkin handbag.  Some versions had the bags covered in colorful fur or smile emojis; more eccentric variations depicted a reproduction of a fetus in different stages of development.  According to Rothschild, his “MetaBirkins” serve as an “ironic nod” to the renowned brand in an “artistic experiment” that intends to examine how society places value on status symbols.  Hermès sent a demand letter without effect and then it sued Rothschild in the United States District Court for the Southern District of New York (case No. (22-cv 384 (JSR)), in New York City.

IN the course of the litigation,  Rothschild’s legal team offered a First Amendment defense, relying in good part on the case of Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989), in which the federal Court of Appeals for the Second Circuit determined that a film entitled Fred and Ginger (about a pair of Italian cabaret singers whose routine emulated cinematic performances by Fred Astaire and Ginger Rogers), did not infringe upon the trademark rights of the Ginger Rogers.  That holding is the foundation of what has come to be known as the “Rogers test,” which, arguably broadened over time, has been used to support a finding of non-infringement in cases in which trademarks were used in the course of artistic expression.

In deciding against granting summary judgment to either side, and while the trial was already in progress, the judge, Jed S. Rakoff, did agree that Rothschild’s MetaBirkins were in at least some respects works of artistic expression subject to the Rogers test: “Because NFTs are simply code pointing to where a digital image is located and authenticating the image, using NFTs […] does not make the image a commodity without First Amendment protection any more than selling numbered copies of physical paintings would make [them] commodities for the purposes of Rogers.”

Days later, however, the jury sided with Hermès, finding that, by using the BIRKIN word trademark and the trade dress mark for the shape of the bag in his NFTs, Rothschild purposefully utilized and commercialized the marks for his own profit and explicitly misled consumers as to the source of the goods.  As Rothschild himself put it so bluntly in text messages that came out during discovery: he was “sitting on a gold mine.”

The parties are still in litigation over the judgment and further legal challenges, but the decision, for now, leaves important legal questions unanswered.  Key from a business-risk perspective is to what extent a digital token can be said to infringe upon marks for real-world objects.  From a legal perspective, there is a question as to how far precedent based on the facts of (a celebrity objecting to the use of her name in a film title) can be pressed into service in deciding cases in which claims of artistic expression come into conflict with claims of trademark rights.  As is often the case, personal (a performer’s name) or something useful (a carry bag) can make new law.

By Fashion Industry Law Blog

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