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.
The bill, if signed into law in its current form, would add a new §399-mm to the State’s General Business Law to require that any fashion company with more than $100 million in “annual worldwide gross receipts” disclose on its website “its environmental and social due diligence policies, processes and outcomes, including significant real or potential adverse environmental and social impacts and disclosure targets for prevention and improvement.”
The effect is something like an accountability value added tax, passing disclosure and remediation along the supply chain as goods mature from “raw material to final production.” A compliant company would have to address not merely the environmental impact issues implicit in the name of the bill but information on workforce wages of suppliers and the disclosing company’s “approach for incentivizing supplier performance on workers’ rights…”
The penalty for noncompliance would be a fine of up to two percent of annual global revenues of $450 million dollars or more—not mere profits but revenues, and not simply revenues in New York but total worldwide revenues, regardless of profitability. The New York State attorney general would be charged with enforcement, but private citizens could also start lawsuits. Fines paid would go to a new “community benefit fund” administered by the New York State Department of Environmental Conservation and would be used for “environmental benefit projects that directly and verifiably benefit environmental justice communities.
The intentions of the Fashion Sustainability and Social Accountability Act are clearly noble, but it is hard to read the text of the current bill without seeing it as a high-minded legislative scold. Read the full article for some key points.
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.
In my last post, I reported on my conversation in London with Simon Crompton, who runs the website Permanent Style (www.permanentstyle.com), which is devoted to the world of bespoke (custom-made) menswear. We discussed elements of style for men, but when the conversation moved to the topic of how a website proprietor protects his own intellectual property, Mr. Crompton had some decidedly pragmatic ideas.
Permanent Style is authored almost entirely by Mr. Crompton, who, last year, was finally able to devote his full professional time to it. The site features the latest developments in bespoke, from tailoring to shirtmaking to shoemaking, around the world. It is supported by advertising, and it also promotes its own limited line of products, from surprisingly stylish watch caps (ski caps) to Oxford shirting for readers to provide their bespoke shirtmakers. Prominent on the site are reviews of makers of bespoke clothing and shoes, with Mr. Crompton serving as live mannequin and photographer’s model throughout, reporting on each step of the process.
I asked Mr. Crompton what kind of legal protections he employs for his work. Because his writing originates in Britain and not the USA, he is spared the unique (and to those of us who have done it for clients or ourselves, often frustrating) requirement of registering his copyrights. His pragmatic view: “It isn’t as if it is a novel or song lyrics. Anything on the site obviously comes from me, and no one is going to run out and say I’m Simon, I wrote this.”
As for protecting his brand, he holds to an equally pragmatic approach: be first out, keep a solid reputation, and you win. “The site has been up just over ten years, and it is well-known. That’s a very good position in the world relative to others who might be trying to establish themselves.”
Mr. Crompton also noted a key advantage to prose authored in Internet time: “What I write is so fast-changing, and there is such a high volume of it that it’s not that easy to protect, but at the same time, there is not much virtue in somebody copying. I already have the biggest traffic. If someone were to start copying my articles, that would never generate much traffic for him. He would still have to attract readers and then subscribers by offering something different, and unless that should happen, I would always do better on search engine optimization.”
That goes to the heart of a key debate in copyright circles—what utility is legal protection in a world in which almost everyone can read just about anything, and anyone can publish just about whatever he or she chooses to write, on platforms from Twitter on up? Registering the copyright, to say nothing of suing to stop infringement, can look old-fashioned in the context of a business (and social-media) model that values “reach,” often by free access, and loyalty for the generation of revenue more than it does traditional legal protections.
In short, Mr. Compton is conducting a very contemporary business to promote many very traditional crafts. If by so doing he helps craftsmanship flourish, we can only commend him-even if the model depends more on lawyers reading about dressing well (and, we hope, attempting to do so) than on offering legal advice. When it comes to what we do, however, lawyers can only continue to recommend to their clients that they reach out and consult with their counsel whenever making important decisions about their intellectual property. If you do not make these decisions yourself, the marketplace will very likely make them for you.
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.
Readers of our blog have probably noticed my interest in custom-made clothing. There is a professional reason: because we represent so many different brands of ready-made clothing, wearing something more esoteric allows me not to show favorites.
For over ten years, Simon Crompton has been reporting online, in his website Permanent Style (www.permanentstyle.com), about the refined world of custom-made menswear—which, in British English, is known as bespoke (as in, asked for in advance). Mr. Crompton may be familiar to intellectual-property lawyers from his years of service as the lead writer for the International Trademark Association’s annual meeting newsletter—among other publications. I recently sat down with him at a café in London, and we talked about lawyers, protection of his own intellectual property and the finer things in menswear.
“I like the fact that lawyers seem to man the last bastion of dressing a little bit formally—because that’s generally what you want from your lawyer,” said Mr. Crompton, echoing the advice of the American tailor and author Alan Flusser. And he agreed on the reason: it is all about building a sense of trust. He hastened to add, however, that it is not about conformity: “All over the UK, and I’m sure it happens in the US as well, you see young lawyers outside of a pub on a Friday night, and eighty percent of them will be wearing a navy suit, white shirt and black lace-up shoes. It looks completely predictable. There is no expression of individuality.”
Bespoke, he explained, is about looking smart but in your own way: all fine tailors have a “house style,” but within what is typically quite a broad range, the customer in effect participates in designing what he will wear. Indeed, I had just come to Mr. Crompton from visiting my own London tailor, Henry Poole & Co., where I was able to plan a future suit as purposefully as a chef planning a meal: a gray pin-dot cloth in wool and cashmere. A peak or a notch collar? This time, the notch. Lining: abjure the bold prints for something more reserved, a contrasting gray pattern, but still quite unique. And a collared vest (called here a waistcoat)—because, as a transplanted New Orleanian, I still am not quite used to New York winters and because, to be frank, it adds a touch of style. That is what bespoke is all about.
Our next topic was dear to my editorial heart: I have delved several times on these pages into the mysteries of the necktie—that one item of a man’s workday dress that has absolutely no discernible function except to make him look better. It also relates to a very important fact about the male physique: a well-cut suit jacket forces the eye upward, to the neck and then the face. Having it pass along a v-shaped crop of chest hair does not support an impression of a man of consequence. “A suit without a tie can work sometimes,” Mr. Crompton offered, “if it is a very casual suit, but most times, it just looks as if something is missing.”
Indeed, although Mr. Crompton was wearing a dark green Neapolitan suit (by the tailor Ettore de Cesare) made of corduroy—that ribbed cotton cloth that is the winter-weight mirror to the informality of linen for summer—he was quite correct that it would have worked far less successfully without his blue woolen knit tie by Trunk Clothiers of London.
But what about those—relatively speaking—more casual days even lawyers are sometimes afforded? “I think it is important for a lawyer to try to master the art of wearing sports jacket and trousers,” said Mr. Crompton. His use of the word master was not an accident. Most professional men wear that outfit often; doing it in a stylish way, however, is a challenge to many. “Start off with Navy jacket and gray trousers and start experimenting slightly—with brown trousers and a different kind of jacket with subtle patterns.” In other words, make it stylish, but make it your own—even if every bit of it was purchased off-the-rack. Remember that bespoke customers also buy most of what they wear, from jeans to raincoats, ready-made.
And that is what bespoke is really about: doing it smart, doing it stylishly and most important, doing in a way not necessarily done by others.
In my next post, I will explore how Mr. Crompton looks to protect his own intellectual property.
