NFTs and Birkin Bags You Kind of Just Look At (Virtually)

By Alan Behr, Phillips Nizer Partner

In their short history of being the greatest advance in art since cave painting, NFTs have raised new questions of esthetics (which sometimes interest lawyers), new questions about the art market (which interests them now and then) as well as new questions of law (which interest them compulsively). As a member of the Copyright Society, the International Trademarks Association and the Association Internationale des Critiques d’Art, I periodically wade across all those streams. I will not, in my capacity as an art critic, go into my analysis of the artistic merit of the images associated with the NFTs that have become prominent so far—other than to share that I have no intention of buying any of them. As a lawyer, what has my interest now are new legal issues arising from the unique technical aspects of NFTs.

As is often reported, NFTs are part of the blockchain—which, like most lawyers, I understand somewhat less than I do the non-volatile memory of a BIOS chip, which I understand not at all. More particularly, the technology that powers NFTs was created as an add-on to the Ethereum cryptocurrency blockchain. A common misconception is that NFT technology is a new medium—as oil on canvas and fingerpaint on construction paper are artistic media. An NFT is actually an electronic certificate of ownership of, typically, a work of digital art that is available in any common format, such as a JPG, TIFF, or MP4. The certificate has been likened to a property deed: The NFT is not property as in the house you own but recognition of holding title to the house found in the document that certifies that you are the one and only owner. More narrowly for art, it is rather like a certificate of authenticity issued by the artist when selling physical art: you pass it along with the art to verify that the art is neither a forgery nor a duplicate.

The technical problem the NFT technology surmounts is that its certification function gives the buyer a mechanism to resolve a core problem plaguing digital art: as with just about any digital file, digital art can be copied with one hundred percent fidelity. A copy of an oil painting is a just copy, not the original; a sculpture chiseled to look like another is not the same sculpture but a variation of it, and so on. To build verifiable uniqueness and thereby identify the “original” of a digital work, something like the NFT had to come along. Anyone can still make a perfect copy of the underlying image for little or no cost, but the art market will see the NFT as the sole, true original.

And so, all manner of NFTs are being attempted as entrepreneurs and even a few artists properly definable as such try to make large sums of money from selling them. The art market being of far greater interest to the American public these days than art itself, you can see the reason for the buzz: contemporary art (the criticism of which is my core mission as an art critic) is an esthetic muddle, but nearly everyone loves to know when and how big money is made.

With that as a predicate, it had to happen that the NFT market would slide willingly into the market for fashion, and as every commercial lawyer knows, when new money enters an old market, litigation will follow. A lawsuit involving fashion and NFTs that is now in its early stages may help clarify what the law will consider an NFT to be. The case, Hermès v. Mason Rothschild, 22 cv 983 (S.D.N.Y.), was recently filed by Hermès International and an affiliate to halt the marketing and sale of NFTs of images of the brand’s signature Birkin handbag. Each of the defendant’s NFT images is unique but all of them depict bags recognizably in the shape of Birkins clad in virtual fur. To stop their sale, Hermès, which owns United States trademark registrations for both the word mark BIRKIN and the famous shape of the bag (that is, its trade dress), has sued for trademark infringement, trademark dilution and associated wrongs.

The defendant filed a motion to dismiss, claiming to be an artist whose “MetaBirkins” “comment on the fashion industry’s animal cruelty and the movement to find leather alternatives.” When you look at the marketing the defendant has done for his creations, that response appears cheeky rather than contemplative—but because anything can be art these days, it is hard to predict how that might resonate with the court.

The defendant’s motion says, as such motions must, that there is nothing to litigate because the facts as pleaded, even if taken as true, do not support a finding in favor of the plaintiffs. To my reading, however, the memorandum in support of the motion appears to raise more triable facts than the complaint itself, making me wonder what the defendant’s strategy might be at this point. The defendant’s legal argument is further complicated by an overreliance on an important case regarding the right of publicity, Rogers v. Grimaldi, 695 F. Supp. 112 (S.D.N.Y. 1988). That case concerned Ginger Rogers, who was a real actress and dancer, not an imaginary handbag that will not hold your hairbrush or car keys. What is possibly more interesting here is the defendant’s statement about what an NFT actually does from a technical point of view:

Nor does the fact that [defendant] is using a new technological mechanism to authenticate his art change the fact that he’s selling art. An NFT is merely code that points to a digital asset…. [T]he NFT is not the digital artwork; it is code that points to a place where the associated digital image can be found, and that authenticates the image.

An important implication of that argument would be that an NFT is not a copy as that term is understood under United States copyright law. There is indeed a line of cases in which courts tried to unravel whether a type of digital technology created an infringing copy of a work protected by copyright. A relatively early such case was Micro Star v.FormGen 154 F.3d 1107 (9th Cir. 1998), for which I served as head of the legal department for the parent company of the party made the defendant in a complaint for declaratory judgement. The plaintiff, Micro Star, argued that its disc incorporating user-made unique levels (i.e., battles) for play with the videogame DukeNukem 3D and sold in violation of the license, did not actually copy the artwork of the game. The argument was that the code in the level discs only contained digital instructions (in what were known as MAP files) for what pieces from the game’s art library were to be accessed to create the combat challenge played by a user. That argument did not prevail, and the disc was found to be infringing. Similar questions of whether actual, fixed expression had been copied and, if so, if the result was infringing, were central in a later Supreme Court copyright case. In American Broadcasting Cos., Inc. v. Aereo, Inc., 573 U.S. 431 (2014), the Supreme Court found that the use of individual, miniature antennas, each dedicated to a single program seen by a single subscriber (as opposed, for example, to a single large server streaming to many) did not overcome the fact that that a broadcast service was illegally performing “publicly” the works held under copyright by others. Although the defendant in Hermès may have raised the issue of the electronic function of NFTs in support of its trademark defense, it is worth considering where that position might lead should copyright become a core issue in the next NFT case.

When that technical issue is tucked for now into its appropriate conceptual corner, the trademark question in the Hermès case remains traditional whether the marketplace would be confused into believing that the NFT of a MetaBirkin originated with Hermès or if the presence on the market of the NFT or the underlying image would dilute the value of the BIRKIN word mark and Birkin handbag trade dress. Looking at it strictly from that point of view, it appears that the plaintiffs have made a compelling case in their complaint.

It is hard to conceive what might happen if the court allows the defendant to keep selling his virtual Birkins (or MetaBirkins, if that is really a distinction). Luxury brands have probably never played such a starring role in popular culture as they do today. They can only do so through the enjoyment of a legal monopoly over their brands—including the trademarks that identify them and the stories that they tell. At The RealReal store in downtown Manhattan, for instance, aspiring luxury consumers troll for secondhand, affordable examples of major luxury products. In the bathrooms, recorded voices coach enthroned shoppers on the correct pronunciation of names of major luxury brands. Through that kind of retailing, social media and all the other instruments of pop culture, luxury has morphed from a reference point for rarified prosperity to a locus of collective aspiration. To allow NFTs to pop up randomly with cagey digital versions of the products of those brands would appear to allow others to control, in part, the messaging of those brands. That would surely cause consumers to confuse the source of the brand’s products with the sources of those NFTs.

Just asking intuitively: if you saw an NFT of a Birkin bag, even a fuzzy one, would you not assume that Hermès was involved? If you did not, the only interest you might have in the image certified by the NFT would have to be for its esthetic value—that is, as proper art. If the artist really had confidence that he could make the artistic power of furry handbags into the driving force behind the commercialization of his vision, why would he bother snipping recognition (and profits) from a famous luxury brand? Would not any handbag, real or fictional, not do quite as well? The point should therefore not be whether MetaBirkins are represent real purses or not or whether they have artistic value or not; the point should be whether the market for the source of all this—real Birkin handbags—would be damaged.


#Influencers?

Social media influencer asking followers to like and subscribe

What do the Special Prosecutor and the New York State Attorney General have in common? If you answered fake social media accounts and social media bots inflating followers, likes, tweets and retweets, you would be correct.

At the end of January, 2019, Attorney General Letitia James announced she had reached a settlement with Devumi LLC, which she described as “the first in the country” to find that selling fake followers and likes on social media is illegal deception and using stolen identities from real people is illegal impersonation. The Attorney General’s investigation began under James’ predecessor in response to an article posted online by The New York Times on January 27, 2018, entitled “The Follower Factory”.  That article is the best source to understand the underlying facts.

Devumi operated a business through which individuals who wished to appear more popular and influential could purchase views on YouTube, plays on SoundCloud, endorsements on LinkedIn, as well as followers, likes and retweets on Twitter and other social media platforms. According to the Times, Devumi’s customers included the model Kathy Ireland, the former pro-football player Ray Lewis and even the Treasury Secretary’s wife. Engagement with the platforms was effected by using computer operated fake accounts, generally referred to as “bots”. In some instances, the social media personas of real people were “cloned” to create multiple accounts in multiple languages to create thousands of other accounts used to promote products or services, so-called “sock puppet” accounts. According to the Times, Devumi supplied customers with over 200 million followers, using 3.5 million accounts.

Reaction to the article was swift and resulted in Devumi ceasing operations when the publicity “caused a major decline in its sales”, according to the Attorney General. But Devumi is hardly the only entity or individual conducting similar questionable operations. A simple search for “Buy Followers” on Google will lead to links for many offering followers or likes for sale. The search is so common that Google has pre-programmed questions and answers related to the search as well as related searches targeted to specific social media platforms.

Fraud and deception related to influence on social media platforms are not limited to purchasing followers and likes. According to an article posed on-line by The Atlantic in December 2018, wanna-be professional “influencers” are also feigning sponsorship deals on-line to convince brands of their credibility as influencers—what the article aptly calls “faking it until you make it”.

While many athletes and performers have entered into lucrative endorsement deals with brands for many years, the influence they sell has been earned through a record of actual accomplishment in their professional fields. Roger Federer, for example, can endorse coffee machines and watches because he justly has earned fame based on long years of actual accomplishment playing professional tennis. The same cannot necessarily be said of professional “influencers” whose only claim to fame is an Instagram following that may or may not have been manufactured. So, when it comes to social media “influencers”, the watch word should be: let the buyer beware.

Credit:  Helene M. Freeman


Brooks Brothers at 200 – Part 3: Lessons

Earlier in this series of posts (here and here), I reported on my interview with Arthur Wayne, the vice president, global public relations of Brooks Brothers. We discussed how the brand maintains continuity throughout hundreds of points of sale (wholesale and retail). In business and legal terms, here is the short and simple version:

  1. Stylistic consistency creates trademark consistency. Brooks Brothers maintains uniformity of cut, pattern, SKUs and style names worldwide. I own suits and jackets in the 1818 line, which is the company’s standard, positioned between its premium Gold Fleece line and Red Fleece bridge line. My pieces are of Italian fabric, sewn, variously, in Italy, Thailand and the company-owned workrooms in Haverhill, Massachusetts. All bear the trademark 1818, all are in the slimmest of the company’s fits, which is branded Milano. As a customer, I know that, wherever I find Brooks Brothers in the world, I can put on an 1818 Milano jacket made in any of three continents and know it will fit just as do the ones in my suitcase. In legal terms: The more consistent the message, generally speaking, and the more clearly a trademark represents just one source of origin, the stronger will be that trademark.
  2. Control the message, but respect regional differences. Japanese customers much prefer the company’s products made in its US factories—which they view as a mark of authenticity. French customers, in contrast, want to experience the brand, but they care relatively little where items they buy are sourced. (Interestingly, offered Mr. Wayne in an aside, when foreign buyers visit, it is the Japanese men who typically have the best interpretation of “American traditional style.”) United States trademark law does not permit the registration of geographically descriptive marks, so from a legal point of view, where it is made is of no matter: if customers get that the brand is about the American experience (reinterpreted and, to my taste, noticeably improved, by Italian ownership), that is what matters most.
  3. As in the movies, story is everything to a brand. Marketers and lawyers do not always see eye-to-eye. Every business day, in multiple places around the world, marketing teams are presenting to their lawyers exciting new trademarks, only to hear the lawyers say that they are unavailable for use. On the importance of story for a fashion or luxury brand, however, there should be no disagreement. Just as the mere mention of Veuve Cliquot brings to mind the story of the taste and luxury of Champagne and the mention of Leica brings to mind the story of precise German optics, so does a reference to Brooks Brothers open a page on a story about the American experience—in style of dress and in style of living. When Ralph Waldo Emerson said, “A foolish consistency is the hobgoblin of little minds,” he omitted any reference to wise consistency. That is the path taken by Brooks Brothers and by other international brands that know that, from consistency comes the strength to endure and prosper in multiple territories, among multiple customer bases.
  4. Newness is the best tradition. “People think of us as a traditional brand,” said Mr. Wayne, “but our founder, Henry Sands Brooks, was a fashion guy—a dandy. Look at what followed: collars with buttons; readymade suits; pink shirts on men. All of these things were innovative in their time—probably even shocking to many.” Tradition, in other words, is what happens when innovation meets inheritable acceptance. And that is the best way a marketer, together with his or her lawyer, can build, expand and ultimately preserve a fashion brand.

Credit:  Alan Behr

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Video: Brooks Brothers | Made in America: Makers and Merchants


Brooks Brothers at 200 – Part 2: Method

In my last post, I offered some of the history of the Brooks Brothers brand provided to me by Arthur Wayne, Vice President, Global Public Relations, during a recent visit with him at the company’s headquarters in New York. Having been to Brooks Brothers stores from Milan to London and beyond, I asked if the styles, brand names and trademarks appurtenant to them were used consistently throughout the world.

“When Claudio Del Vecchio bought the company, in 2001,” explained Mr. Wayne about its Italian owner, “he already ‘got’ the brand. The first thing he did was undertake a comprehensive product review. Under its prior owners, the company wasn’t really looking in its own garden—for quality of construction, tailoring—the core elements of the brand.” Mr. Wayne noted that, in the mid-to late 90s, there was much talk that casual Friday would be the death of tailored clothing, and the result at Brooks Brothers was that too many items were inexpensively made—something that is possible to accomplish credibly with fast fashion but is not possible to do stylishly with most tailored clothing.

“Claudio approached the brand as a customer,” continued Mr. Wayne. “His thinking has always been, ‘If I feel this way about what I am seeing, others must, too.’ He brought back quality tailoring and made sure the stores have a consistent Brooks Brothers look. The review was a long process and not everything was changed, but the initiative made us ready for the next challenge: brands are now in their customers’ hands.”

That was elegantly put and it shows the current problem faced by all brands and their lawyers: a brand in its legal form is its portfolio of trademarks, along with other intellectual property rights. And a trademark is above all an identifier of source of origin. If you see the trademark COCA-COLA on a soda bottle, that means it comes from Coke, not Pepsi—and so on. If someone else uses your mark, you take legal action to prevent that or risk potentially losing control of the mark and its registrations.

But how do you accomplish that in the age of social media, when consumers get to rate a brand’s offerings down to individual products—and when the brand feels obligated to post negative consumer reviews of those products on the very website where it is trying to sell them—and when it must deal as well with influencers, who can influence whosoever they please, on their own terms? Those forces can alter the perception of where a brand stands, rather as the gravity of the sun bends the approaching light of a distant star, changing the perception of the position of that star. Brooks Brothers partners with influencers, and it features two of them—one American and the other Polish—in its anniversary edition of its house lifestyle magazine. It is all about what Mr. Wayne calls, “the importance of creating a dialogue with your customers. This is what matters to them.”

What is a fashion lawyer to do with all these new forces and new demands? In the third and final post in this series, we will consider some contemporary lessons for international branding.

Credit:  Alan Behr


Brooks Brothers at 200 – Part 1: Background

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At a time when the fashion press engages in a group hug with brands over how labels can stay viable in the digital age, it is fitting that we should pause to consider a brand that has been doing just fine, thank you, since James Monroe was president of the United States. Brooks Brothers, which celebrates its 200th anniversary this year, has had different owners and various designers (with Zac Posen now directing womenswear), but has adhered to a consistent philosophy that can be described in abstract terms as “wearable and confident American style.” Brooks Brothers can also be described, more explicitly, as one of the few places where, no matter what you buy, if the color and fit work, you can forget the term “fashion victim.” To celebrate its anniversary, the brand mounted its first show at Pitti Uomo in January. Sixty-one models (including eight women who made the term American style into a synonym for chic) were presented to the accompaniment of a full symphony orchestra; unusual for almost any show anywhere, every piece could have been worn out the door of the Palazzo Vecchio onto the streets of Florence (or New York, London or Tokyo).

As a branding lawyer, constancy in branding message and in legal protection are always on my mind. Managing that from the flagship at the corner of Madison Avenue and E. 44th Street in Manhattan may have been easy enough back when, if someone said he was going to Brooks Brothers, you just assumed that he meant going to that corner and into that store. Keeping consistency in message and legal protection became a bit more complicated when the brand expanded across the USA (eleven stores by the 1970s) and then, in 1979, to its first international location, in the prosperous Aoyama neighborhood of Tokyo. The challenges are global now, with the brand maintaining hundreds of stores in nearly fifty countries, and with a wholesale business that places Brooks Brothers products onto shelves and racks of many third-party retailers.

I sat down recently with Arthur Wayne, the vice president of global public relations at Brooks Brothers, in his office in the tower behind the company flagship, to gain some understanding on how it is done.

The first thing that became clear in speaking to Mr. Wayne is that Brooks Brothers adheres to the strategy (which I fully support in general and for fashion in particular) that a brand is its story made temporal. The Brooks Brothers story is the American experience. There are many examples, but consider just three outlined briefly by Mr. Wayne: when miners landed in New York from around the world and headed (one might say herded) west in 1849 during the gold rush, Brooks Brothers innovated, with the ready-made suit. No need to wait to be measured and return for fittings. Pick one off the table,* let it out or take it in, and off you went to California, well-dressed, with a pickaxe in hand. Then came the Oxford button-down shirt, which has been copied by nearly everyone trying to look American.** And I have gone into detail on these pages about why the stripes of American ties, led by Brooks Brothers, go from right to left instead of left to right, as do the British regimental ties of their inspiration.

In my next post, I will pick up with what brought the company to where it is now—and what it is doing to keep its brand on message.

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* Until comparatively recently in the company’s long history, men’s jackets were neatly folded and presented in stacks on counters.

** American style is about looking effortless; that does not mean it is easy to do. I shared with Mr. Wayne how I once knew the American representative of a renowned British shirtmaker. As he explained it to me, after several failed attempts on Jermyn Street to get that American collar right, he walked over to Madison & 44th, bought two Brooks Brothers button-down shirts off the shelf and sent them back to England with the message to please just copy this.

Credit:  Alan Behr


Toys “R” Us and Fashion

I have been fielding questions from the press and colleagues about the bankruptcy of Toys “R” Us and its challenge to stay in business after shutting many stores in the chain. A leading question, typically asked with evident nervousness and need for reassurance: “It couldn’t happen this way in the fashion business, could it?” The answer: it could and it has. Some points to consider:

The Toys “R” Us model was to put familiar, heavily advertised brands into large stores for one-stop toy and game shopping. That worked in part because children see toy advertisements and play with friends’ toys with such regularity that “shopping” is often simply a matter of picking up what they have requested (over and over) and then fending off enough impulse purchases at least to give the illusion of parental control over the process. Trust me on this: I have an eight-year-old.

And trust me on this as well: pushing a shopping cart through large, undifferentiated corridors, plucking brand-name toys off shelves, is not an adult-friendly experience. Contrast that to the flagship Hamleys shop, which has cleverly positioned itself on London’s Regent Street, in easy walking distance from both my tailor and shirtmaker. Eager, helpful people are constantly demonstrating products, which is how, on my latest visit, I got two wafer-thin model airplanes for £10 that broke up on first crash landing and a coin-trick magic set I haven’t quite got the hang of yet—though I’m working on it. Yet it was a fun visit, which is quite the point. Just as important for the chain, a large portion of its merchandise is private label, which makes part of what they sell both exclusive and retailer-branded. If you want it, that is, you have to go to Hamleys, and when you bring it home, the name on the product reminds you from whence it came.

Providing a quality in-store experience and building a brand through exclusivity and desirability are very much points for any fashion retailer to consider. There is no benefit in falling back on the familiar mantra: “We are working to enhance our presence online.” Consider what, if anything, is unique about the Toys “R” Us website that would bring you there first instead of to Amazon. A certain segment of the population still wants to walk into shops, and what you provide online, at least in the near term, will be seen as an extension of what you provide in-store. Private label is still largely a bricks and mortar play, and it is often a very necessary one to reinforce the power of a brand and to build and hold onto customer loyalty. Private label has so far not had the same impact on fashion websites as it has in-store, in fair part because it is quite challenging to recreate the kind of storytelling experience that the best store brands provide in real space. (Is there any doubt, when you are in an Hermès shop anywhere in the world, that you have entered the Hermès world—one of chic sophistication, style and even, around corners framed by carefully arranged displays, a touch of mystery?) A website can support that experience, but so far, at least, cannot fully replicate it.

So the lesson for fashion retailers is simple: make them want it, and make them want to come in to get it. Which is to say, the lesson is what you already knew. Major bankruptcies are like traffic accidents. You drive slowly by, saddened by the damage; and, although you surely already knew that driving safely is a must, the experience brings the message home with great force.

Credit: Alan Behr