Hermès’ Challenge of ‘MetaBirkin’ NFTs Foretells Future Trademark Litigation Trends

“The court held…that the MetaBirkin NFTs qualified as artistic works [and] said that because NFTs are simply code pointing to where a digital image is located and authenticating the image…the use of NFTs does not in itself make the image a ‘commodity’ without First Amendment protection.”

https://depositphotos.com/241808438/stock-photo-hermes-birkin-handbags-pictured-luxury.htmlThere are not many trademark cases that are of equal interest to high fashion, the art world and cutting-edge tech. The ongoing “MetaBirkin” lawsuit is unusual, however, in that it involves a designer brand and two of the latest, trending topics – non-fungible tokens (NFTs) and the metaverse.

In a case that has bagged global attention, luxury design house Hermès is suing artist Mason Rothschild in New York for trademark infringement and dilution, misappropriation of its BIRKIN trademark, cybersquatting, false designation of origin and description, and injury to business reputation.

What Did Rothschild Do?

It all began in November 2021, when Mason Rothschild created and sold 100 NFTs, code used to demonstrate a piece of artwork’s authenticity. These linked to images of a Hermès BIRKIN bag covered in a variety of faux fur and patterns, polka dots, and artworks such as the Mona Lisa and Van Gogh’s “Starry Night”.

Rothschild also registered and used the domain name ‘www.metabirkin.com’ and social media handles such as ‘@metabirkins’ to promote the sale of the MetaBirkin NFTs. By early January 2022, Rothschild had sold MetaBirkin NFTs to the value of over $1 million.

metabirkins

Copies of Rothschild’s “MetaBirkin” Fuzzy Handbags

What are the Legal Arguments?

In January 2022, designer brand Hermès sued Rothschild for alleged trademark infringement in the U.S. District Court for the Southern District of New York. Hermès claimed that Rothschild is “a digital speculator” and that the title ‘MetaBirkin’ infringes its famous BIRKIN trademark. It also said that some people mistakenly believed Hermès was affiliated with the MetaBirkin NFTs and so there was confusion.

Rothschild fought back against the claims, arguing that the First Amendment of the U.S. Constitution – freedom of speech – gives him “the right to make and sell art that depicts Birkin bags, just as it gave Andy Warhol the right to make and sell art depicting Campbell’s soup cans.”

He said that the “MetaBirkin” NFTs were “inspired by the acceleration of fashion’s “fur free” initiatives and embrace of alternative textiles,” and that he included a disclaimer on the website, saying: “We are not affiliated, associated, authorized, endorsed by, or in any way officially connected with the HERMÈS [sic], or any of its subsidiaries or its affiliates.”

Hermès’ retorted that the disclaimer in fact had the effect of increasing, rather than decreasing, the likelihood of confusion, as it “excessively” used the Hermès brand and “unnecessarily” linked Hermès to Rothschild’s website.

Seeking Dismissal of the Case

In a bid to bring the lawsuit to a speedy close and avoid a positive finding of trademark infringement and other claims brought by Hermès, Rothschild and his lawyers sought dismissal of the case on a number of different grounds. They argued that Hermès had failed to make a proper claim under U.S. law because the MetaBirkin works are protected artistic expressions under a test laid down in the 1989 case, Rogers v. Grimaldi. Under this legal test, people are protected from claims if they are making both an artistic expression – rather than simply selling a commodity – and do not explicitly mislead consumers. In this scenario, the First Amendment right to free speech essentially outweighs trademark rights.

Rothschild also said that he had the right to call his images of Birkin bags “MetaBirkin”, as the name both refers to the context in which he makes the art available – the online, virtual environment widely known as the “Metaverse” – and his artwork’s “meta” commentary on the Birkin bag and the fashion industry more generally.

Hermès of course opposed the request for dismissal, arguing that Rothschild’s use of the name “MetaBirkin” in connection with the sale of the NFTs was not “artistic expression” and that it was used to indicate origin, identify a product line and promote an enterprise, all of which it said is “the essence of trademark use.”

What Did the Court Decide and What Does it Mean for the Industry?

Rothschild’s motion to dismiss Hermès’ lawsuit was denied by the court on May 5, 2022.

It followed up with a reasoned decision issued on May 18, 2022. The court considered Hermès’ arguments and held that the MetaBirkin NFTs qualified as artistic works. It said that because NFTs are simply code pointing to where a digital image is located and authenticating the image – allowing for traceable, subsequent resale and transfer – the use of NFTs does not in itself make the image a “commodity” without First Amendment protection.

Interestingly, it also noted that not all artistic images associated with an NFT might receive the same protection under the First Amendment. For example, trademark rights could be enforced if the MetaBirkin bags were sold as virtual goods to be worn by avatars in the metaverse, making them more like commodities as opposed to artistic works. This could have major implications for the growing industry of meta commodities, where gamers and other virtual enthusiasts are spending increasing amounts of money on kitting out their online avatars. More on this below.

But it did not all go Rothschild’s way. The court said Hermès had presented enough evidence to claim, plausibly, that Rothschild’s use of the name “MetaBirkin” was not artistically relevant to the works and that it was explicitly misleading as to source, sponsorship or affiliation.

The case is therefore ongoing and certainly one to watch, both for brand owners and for those creating NFTs. It raises interesting questions about trademark law in the digital age given emerging technologies and the rapid evolution of the metaverse.

NFTs Are All the Rage

There are many other instances of NFTs and, increasingly, of litigation concerning NFTs and intellectual property – typically trademark – rights. NFTs are, to say the least, a growing phenomenon.

Quentin Tarantino, for example, is being sued by Miramax for auctioning NFTs comprising previously unseen excerpts from the original handwritten screenplay of the 1994 film, Pulp Fiction. Miramax claims breach of contract, copyright and trademark infringement and unfair competition, stating that it owns the rights in the film and the original screenplay.

The website Hitpiece recently ran into trouble for trying to sell NFTs of music owned by a number of artists without their permission, giving rise to potential copyright infringement claims.

In the so-called “Sneaker Wars”, Nike is suing online resale sneaker retailer StockX for trademark infringement, claiming that StockX’s Vault NFT Collection uses Nike’s trademark without consent, freerides on Nike’s goodwill and misleads consumers. Each item in StockX’s Vault is tied to a physical item that it sells; StockX say that each of its NFTs “ensures that items traded on StockX conform to the product descriptions and condition standards advertised by StockX, and that the products offered for sale are what they claim to be, and are not counterfeit, defective, or used.” Clearly, Nike disagrees.

NFTs in the metaverse are also becoming big business. For example, Selfridges announced recently that it will sell NFTs and digital fashion in its Oxford Street, London store, with prices thought to range from £2,000 to over £100,000.

Burberry, meanwhile, has announced a partnership to create an NFT collection inside Mythical Games’ flagship product, Blankos Block Party. This is an open-world multi-player game that features digital vinyl toys known as Blankos that live on a blockchain. Burberry has a limited-edition Blanko character, Sharky B, an NFT that can be bought, upgraded and sold within the game’s marketplace. Burberry will also launch its own in-game NFT accessories, such as a jetpack, armbands and pool shoes, which players can apply to any Blanko they own.

More recently, Meta announced that it is launching a digital designer clothing store called the ‘Meta Avatars Store’ on Facebook, Instagram and Messenger and will allow users to buy digital clothes for their avatars. Initially, the store will offer digital outfits from Balenciaga, Prada and Thom Browne in the United States, Canada, Thailand and Mexico.

It seems that the possibilities for NFTs are endless but litigation, particularly around intellectual property rights – especially trademarks and copyright – is likely to define those possibilities. Watch this space!

Image Source: Deposit Photos
Author: ChinaImages
Image ID: 241808438 

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