Fashion in the Metaverse: A Win for Hermès Against Metabirkin NFTs
By Brigitte Chan and Prudence Etkin
A growing number of high-profile brand owners are taking enforcement action against “metaverse” infringers and on February 8, 2023, a New York Federal court rendered a highly anticipated decision in Hermes International v. Rothschild, S.D.N.Y., No. 1:22-cv-00384- the first case to consider non-fungible tokens (“NFTs”) and trademark infringement in the virtual word. The French luxury brand Hermès International and Hermès of Paris, Inc. (“Hermès”) was awarded $133,000 USD in damages, $110,000 for trademark infringement and dilution, and $23,000 for cybersquatting. See Part I of our Metaverse Series for an in-depth discussion of trademark and copyright protection of virtual goods and services.
In January 2022, Hermès International and Hermès of Paris, Inc. (“Hermès”) the French luxury brand brought an action for trademark infringement and trademark dilution against Mason Rothschild, a California-based digital artist that created and sold the “MetaBirkin”, a collection of 100 NFT’s depicting faux-fur iterations of the iconic Birkin bag. Physical Birkin bags can easily retail for six figures. The “MetaBirkin” NFTs were sold on digital marketplaces for between USD$13,000 – $65,000. In its claim, Hermès asserted that Rothchild’s “MetaBirkins” constitute trademark infringement, unfair competition, and dilution with respect to unauthorized use of Hermès federally registered trademarks, including the “globally recognized” BIRKIN word mark and trade dress.
Rothchild argued that the MetaBirkin NFTs were works of artistic expressions—similar to Andy Warhol’s depiction of Campbell’s soup can—and therefore protected by the First Amendment. Rothchild applied the Rogers test (established in Rogers v Grimaldi, 875 F.2d 994 (2d Cir. 1989)) wherein use of a trademark does not constitute infringement if it is an artistic expression and does not explicitly mislead consumers. He further claimed that the digital works were protected under the doctrine of fair use.
Hermès argued that the Rogers did not apply as Rothschild’s use of “MetaBirkin” explicitly misled consumers to assume the NFT’s were associated with Hermès and undermined consumer identification of Hermès as the unique source of goods sold under the BIRKIN mark. Additionally, Hermès maintained that the Rothchild’s use of MetaBirkin in connection with the NFT’s was commercial in nature, had been used in association with a commercial product line, highlighting Rothchild’s use of “MetaBirkin” on his website and social media platforms.
The case is seen as a potentially significant early precedent for the NFT world, which is built around decentralized, permissionless platforms that let anyone sell digital items. An NFT is a blockchain token that can serve as a deed of ownership for various items, including digital goods like artwork and collectibles plus physical products as well. In May 2022, the court denied Rothchild’s motion to dismiss the lawsuit despite finding that Rogers applied, in part, stating that “using NFTs to authenticate an image and allow for tradeable subsequent resale and transfer 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”.[1] Judge Rakoff ultimately, found that Hermès’ amended complaint contained sufficient factual allegations to support the claim that Rothschild’s use of the BIRKIN trademark was not artistically relevant was explicitly misleading (the two prongs of the Rogers test).
On February 7, 2023 the court instructed the jury on the application of Rogers and First Amendment protections stating that “the parties disagree about the degree to which the MetaBirkins NFTs are works of artistic expression,” but it is “undisputed … that the MetaBirkins NFTs, including the associated images, are in at least some respects works of artistic expression”.[2]
This is a particularly notable case, as it is the first the decision to examine the scope and application of trademark protection of digital assets (specifically, NFTs and blockchain technologies) in a virtual environment. This decision in favour of Hermès suggests a willingness to bolster brand owners’ right to control the use and enforce infringement of their trademarks in the metaverse. Further, this case suggests that while selling digital art could constitute “artistic expression” entitled to First Amendment protection under Rogers, real world, established trademark principles of confusion, goodwill and dilution will be applied to virtual disputes. Other ongoing NFT trademark disputes to watch include Nike v. StockX, and Yuga Labs v. Ryder Ripps. As intellectual property disputes continue to shape the application of current intellectual property tenets to blockchain based, digital assets more and more brands are filing Web3, metaverse focused trademark applications, including Hermès.
