The much-anticipated verdict in the Hermès v Rothschild US trade mark case was handed down on Wednesday, with a federal jury awarding Hermès $133,000 in damages against Mason Rothschild, determining that the “MetaBirkin” NFTs constitute an infringement of intellectual property rights.
The case relates to the creation and sale by Rothschild of non-fungible tokens (NFTs) linked to a collection of one hundred digital images with the same shape and style as the famous Hermès BIRKIN bag, which Rothschild called “MetaBirkins”, and which he promoted through domain names and social media handles containing the term.
Hermès’ Birkin bag is one of the most coveted luxury items in the fashion industry, known for its exclusive wait lists and price tags in the tens of thousands of pounds. Rothschild began sales of the MetaBirkins in late 2021 for around $450 each but their resale value soon became comparable to real-world Birkin handbags and reports state that the collection had made over $1 million in sales by January 2022.
Hermès served a cease and desist demand on Rothschild, claiming that the sale and promotion of the MetaBirkins amounted to trade mark infringement. However, Rothschild argued that the MetaBirkins were an artistic expression, lawful under the USA’s freedom of speech laws and protected by the First Amendment, and vowed not to stop sales.
In January 2022, Hermès proceeded to issue a claim against Rothschild, alleging trade mark infringement, dilution, misappropriation of the BIRKIN trade mark, cybersquatting and injury to business reputation. Hermès argued that the use of the generic prefix “meta” only served to denote fake Hermès products in the metaverse and that there had been genuine consumer confusion in the mistaken belief that Hermès endorsed or was affiliated with the MetaBirkins.
Interestingly, Hermès also argued that it had itself invested in research and considered the creation of its own fashion NFTs, having stated that it was “curious and interested” in the metaverse, indicating that Rothschild’s actions therefore impeded the expansion of its business opportunities. The point highlights that fashion brands do see value and opportunity in capitalising on branded goods in the virtual world and makes this an area of development that we will follow with interest.
In defence of the claim, Rothschild asserted: “These images, and the NFTs that authenticate them, are not handbags; they carry nothing but meaning”. Rothschild likened his artwork to that of Andy Warhol’s use of the Campbell’s soup cans as an artistic expression and sought to rely on the defence provided by established US case law (Rogers v Grimaldi) which outlines the test for dealing with artistic works that collide with intellectual property rights.
The case would have provided a true platform for setting a precedent as to the technicalities of NFTs and how the law, particularly intellectual property laws, should apply to them and the exploitation of associated digital images in the virtual world. However, much of the evidence relied upon throughout the trial focused on traditional trade mark infringement arguments as to “consumer confusion” and “explicit misleading”. The fact that the trial was heard before a jury likely assisted such arguments.
Rothschild was ultimately found to have infringed Hermès’ rights in the BIRKIN mark and was ordered to pay damages of $110,000 for estimated profits he received from the NFT sales and $23,000 for cybersquatting on the MetaBirkins.com domain. While the level of the damages awarded to Hermès is not high in comparison to the value of the MetaBirkins, the significance of the ruling is great. That significance is not lost on Rothschild, who declared the decision “wrong” and vowed to appeal.
Our Intellectual Property team will be following with interest the application of this precedent-setting decision in future cases concerning NFTs and the impact on intellectual property rights, whether in UK jurisdictions or across the pond; particularly in respect of any appeal action that may be brought by Rothschild moving forward.
In the words of Rothschild himself: “this is far from over.”
