Hermès International’s ongoing lawsuit involving “MetaBirkins,” a non-fungible token (NFT) inspired by the fashion brand’s luxury handbags, is just the latest example of the novel legal questions raised by the blurred lines between the digital and physical world.
In its suit, Hermès alleges that artist Mason Rothschild’s MetaBurkin NFTs infringe on the design house’s trademark, charactering the NFTs as “digital knockoffs.” Meanwhile, Rothschild maintains that the digital bags are a non-infringing artistic expression. Accordingly, the court’s decision in Hermes International et al. v. Mason Rothschild is expected to establish much-needed precedent regarding how courts should balance trademark rights and First Amendment concerns in the growing NFT marketplace.
Hermès Allegations of Trademark Infringement and Dilution
Creating digital versions of “real life” commodities is a growing industry. Several leading fashion companies, including Tommy Hilfiger, Adidas, Gucci and Dolce and Gabbana have taken the plunge by creating online games, launching NFTs and selling virtual clothing collections. Many fashion brands are also preemptively seeking trademark registrations for use of their marks in connection with virtual products and services.
The Hermès suit centers on NFTs, which are unique, non-fungible digital assets, such as PDFs, gifs or videos which recorded on a blockchain (a type of distributed ledger). NFTs have a wide range of uses, which include enabling owners to access specific digital content associated with the NFT. When NFTs are created (also known as “minted”), they are listed on an NFT marketplace where they can be sold or traded in accordance with “smart contracts” that govern the transfers.
In 2021, Mason Rothschild created a series of digital images featuring faux fur-covered Hermès Birkin bags, which he called “MetaBirkins.” The two-dimensional images are linked to corresponding NFTs, which Rothschild promoted online through websites and social media.
“As of January 6, 2022, total volume of sales for the MetaBirkins NFTs surpassed $1.1 million, with a floor price of $15,200, and the highest sale at $45,100,” claim court documents.
Hermès subsequently filed a lawsuit for trademark infringement and dilution, alleging that Rothschild was exploiting the clout and popularity of its brand.
“Rothschild sought to capitalize on the goodwill associated with Hermès’s Birkin mark,” the luxury brand argues.
In further support of its suit, Hermès cites confusion among consumers, sophisticated commentators and even intellectual property attorneys who believed that the “MetaBurkins” NFTs were somewhat affiliated with, authorized or sponsored by the company.
First Amendment Protection for NFTs
In defense of the suit, Rothschild contends that his MetaBirkins are artworks protected by the First Amendment. Under Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989), use of a trademark in a work of art does not constitute infringement provided that (i) the name is artistically relevant to the work and (ii) the use of the trademark does not explicitly mislead as to the source or content of the work.
In support of his argument that the NFTs are not simply reproductions of the famous Birkin bags, Rothschild cites an expert report by art critic Blake Gopnik, which compared Rothschild’s work to artists like Andy Warhol and Marcel Duchamp. Citing Gopnik, Rothschild argues that the NFTs are “renderings of imaginary Birkin bags … that ‘flags the absurdist, parodic intent of [the] project.’”
In its motion for summary judgment, Hermès argues that the test set forth in Rogers is inapplicable to Rothschild’s NFTs because he “had no discernible artistic intent or expression” in selling the MetaBirkin NFTs, but sought to capitalize on the goodwill associated with Hermès’s Birkin mark instead.
“Rothschild saw a financial opportunity when major fashion brands entered the metaverse and sold branded digital products for significant prices,” Hermès argued. “Rather than creating something original, Rothschild wanted to make money by replicating those fashion brands and created ‘the same kind of illusion that [the Birkin handbag] has in real life as a digital commodity.’”
Hermès added: “Rothschild’s goal in creating the MetaBirkins NFTs was to ‘double as an investment for holders like the real-world ‘holy grail’ handbag.’”
Based on the arguments raised by both sides, the case may likely come down to whether the NFTs are considered art or simply a digital commodity. Even if the court does find that the NFTs qualify as an artistic expression, Hermès could still prevail if the court concludes that Rothschild’s use of the MetaBirkins mark was explicitly misleading to consumers.
The court’s decision in Hermes International et al. v. Mason Rothschild will hopefully help clarify the extent to which brand owners will be able to enforce their trademark rights with respect to NFTs and virtual goods in the metaverse. However, given that this area of intellectual property law is currently plagued by uncertainty, it is key for fashion companies to consider how to properly revise their IP strategies to reflect the growing importance of the digital world.
Howard D. Bader is a NYC attorney who serves as general counsel for clients in a wide range of industries on an international scale. With over three decades’ worth of legal experience, he has represented clients in numerous legal matters, including commercial litigation, intellectual property, bankruptcy, creditor’s rights and mergers and acquisitions, as well as numerous corporate transactions and business law matters.
Howard D. Bader