shutterstock_1704639262_camera_rules
19 January 2023FeaturesTrademarksSarah Speight

NFTs on trial: MetaBirkins puts digital art to the test

The case that everybody with an interest in fashion, art, digital goods, NFTs, intellectual property—or all of the above—will be watching, finally moves to trial at the end of this month.

Yes, you guessed it: the feud between a major French fashion house and a digital artist in the US—Hermès International v Rothschild, more colloquially known as the MetaBirkins case.

In 1984, luxury fashion brand Hermès created what has become known as the ‘holy grail of handbags’, the Birkin, so-named after actress Jane Birkin who apparently told the brand’s founder that she couldn’t find a bag to suit her needs as a young mother.

Fast-forward to 2021, and LA-based artist Mason Rothschild created a series of blurry images of fur-covered handbags which resemble the shape of the Birkin. He named them ‘MetaBirkins’ and minted 100 individual non-fungible tokens (NFTs) of the images.

As of January 6, 2022, the total volume of sales for the NFTs surpassed $1.1 million, with a floor price of $15,200, with the highest sale at $45,100, according to Hermès in its lawsuit filed against Rothschild on January 14, 2022.

The fashion house alleged trademark infringement and consumer confusion on the part of Rothschild’s MetaBirkins.

Rothschild fired back with a statement on Twitter (which has since been removed), asserting that the First Amendment of the US Constitution gives him the right to make and sell art that depicts the Birkin bags, “just as it gave Andy Warhol the right to make and sell art depicting Campbell soup cans”.

$100k bag to digital image

According to Hermès, the ‘MetaBirkins’ dent its own ability to sell products and services in virtual marketplaces that are uniquely associated with the brand and meet its quality standards.

Hermès claims that manufacturing a single Birkin handbag takes more than 17 hours, while the bag’s price tag ranges from thousands of dollars to more than $100,000.

Now, the case will put those First Amendment rights—as well as the Rogers test, determined in Rogers v Grimaldi  (1989), in which a court “must determine whether the use of the trademark has any artistic relevance whatsoever”—to the test.

Indeed, Rothschild cited Rogers in his motion to dismiss Hermès’s original complaint, filed on February 9, 2022, and claimed his rights under the First Amendment “to respond in the marketplace of ideas to the inescapable corporate brand messages”.

A bit of to-ing and fro-ing and a fair amount of press coverage ensued, until now, after US District Judge Jed Rakoff denied both parties’ motion of summary judgment on whether Rothschild’s use of the Birkin bag image in his art caused consumer confusion and infringe on Hermès’ trademarks.

In a one-page order, released in late December, Rakoff announced that the jury trial will begin in the US District Court for the Southern District of New York on January 30.

A pivotal moment

The high-profile trial is anticipated to be pivotal in clarifying whether physical trademarks are enforceable in a virtual context. It’s an issue that has been the focus of several cases involving brands recently, including Juventus FC and Nike.

Robert Freund, an advertising ecommerce attorney and founder of Robert Freund Law, told WIPR that the MetaBirkins case will “significantly impact” the future of brands’ IP in the metaverse and Web3.

“That's really it in a nutshell,” says Freund. “If Hermès wins, then not that much will change. If Rothschild wins, it certainly opens up the door for more NFT projects, and similar Web3 projects, to use brand IP in a way that brands probably did not anticipate would be available to those third parties.”

Depending on the result, brands will need to reassess the ways in which they police and protect their IP in “what might become more of a novel environment than it currently is”.

Mauricio Uribe, partner at Knobbe Martens in Seattle, Washington, adds that there are constraints over what any one case can achieve.

“Litigation cases are limited to real-world facts in terms of registered intellectual property rights, the accused product/services and the actions of the parties,” he tells WIPR.

“If Hermès wins on its legal arguments, this case could be interpreted as validation (by at least one court) that the existing legal doctrines are sufficient to address the [Rothschild’s] NFTs without need for changes. This could be considered a victory for trademark owners.

“If Mr Rothschild wins, this case could be interpreted as moving the needle in the incorporation of digital images in an NFT context.

“Regardless of the outcome, because the NFTs produced by Mr Rothschild were not available in a virtual reality context, the question of the applicability of the Rogers test or the need for a revision to the analysis will remain open.”

Providing clarity

Could it become a gamechanger for providing clarity surrounding trademark law and digital goods?

“Certainly,” says Freund. “At least within the Second Circuit, I would expect that—regardless of the result—one of the parties will probably appeal it to the Second Circuit Court of Appeals.

“If Rothschild prevails, it will embolden other NFP projects. It might send a message to the marketplace that trademarks are either more of a ‘Wild West’ situation, or they're just up for grabs, as long as you are using them in a metaverse-related project.”

Real world, virtual world

Joseph Barber, a partner at Howard & Howard Attorneys in Michigan, US, suggests that it may be difficult for Hermès to prove the likelihood of consumer confusion on Rothschild’s part.

“Whether Hermès can demonstrate that consumers will confuse Hermès and its handbags with digital images of altered handbags using MetaBirkin is an open question—and it will be interesting to see how the court resolves the issue,” he wrote on  WIPR.

The question at the heart of this case is: should real-world trademarks be enforceable in a virtual context like this?

“At least so far in this case, we've seen that Judge Rakoff has entertained the idea that they might be [enforceable], at least in this specific context,” points out Freund.

“And the fact that he has denied both parties summary judgement motions shows that [he] believes that there are disputed issues as material factors that really need a trial to get sorted out. So we will see.”

Rothschild claimed in his first motion that each of the 100 works in the ‘MetaBirkins’ series is a “unique, fanciful interpretation of a Birkin bag” that “carry nothing but meaning”.

MetaBirkins, he asserts, is artistic expression, to which he is entitled under the First Amendment.

“This aspect of Rothschild’s ‘MetaBirkins’ art comments on the animal cruelty inherent in Hermès’ manufacture of its ultra-expensive leather handbags,” said the memorandum in support of the motion, a reference to the revelation by an animal rights organisation that crocodiles bred for their leather supplied to Hermès-owned tanneries were mistreated.

Putting Rogers to the test

Judge Rakoff denied Rothschild’s motion on May 5, but the question remains: to what extent does or should the First Amendment negate trademark rights in cases such as these?

In answer, Freund references the Rogers test as a framework.

“There are two prongs to [the Rogers test],” he explains. “[1] The unauthorised use of a mark is not actionable in the context of an expressive work, if the use of the mark is artistically relevant to the expression; [and 2] if it's explicitly misleading as to the source of the material.

“In my opinion, I think that Hermès has the better argument here. I think that they've made a substantial showing, or a good argument that…Rothschild was using the Birkin mark in a way that was not artistically relevant.”

He goes on to say that those who were purchasing some of the NFTs “initially didn't even know what the art was—they just saw the mark and decided to make a purchase”.

“So that puts Rothschild in a difficult position of trying to argue that the use of the mark, at least at that point, was related to his expressive work.”

Explicitly misleading

Freund believes the stronger argument that Hermès has is related to the second prong of Rogers.

“Hermès has put forth evidence supporting their claim that the use was explicitly misleading: several media outlets incorrectly reported that Hermès was linked to this project,” he points out.

“And Rothschild also made the mistake of making statements that strengthen Hermès's position and undercut his. He said things like, ‘the difference between the real life bag and the digital bag is getting blurred, because we have this outlet, the metaverse, to showcase our products’.

“‘Products’ sounds less like art, and more like a product or a commodity,” observes Freund.

He adds that, in an interview with Yahoo Finance, [Rothschild] says, ‘We can put together this kind of digital commodity that everybody loves’.

“He's calling it a commodity,” he says, adding that such statements put Rothschild in a “spot of arguing that his use of the mark was not explicitly misleading as to the source of the NFTs”. “Hermès has done a good job of showing that customers or purchasers were actually confused about Hermès's involvement or lack thereof in the project.”

In the hands of the court

In the past year, Rothschild has continued to fight his corner, and no doubt achieved a decent amount of fame (or notoriety, depending on your view).

The domain name on which the NFTs were previously for sale, MetaBirkin.com, no longer belongs to Rothschild, but is for sale at $2,695.

Whatever the outcome of MetaBirkins, there’s no doubt that many eyes will be watching for what will be a test bed for the future of brands’ IP, NFTs, and the extent to which trademark law should extend to digital assets.

This article has been updated since publication to incorporate comments from Mauricio Uribe.

Did you enjoy reading this story?  Sign up to our free daily newsletters and get stories sent like this straight to your inbox.

Today’s top stories

Getty targets AI firm in copyright dispute

US jury orders AT&T and Nokia to pay $166m damages

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Adrian Tapping at atapping@newtonmedia.co.uk


More on this story

Trademarks
14 February 2023   The trademark decision will shock a market built on selling digital artworks, finds Sarah Speight. Crowell & Moring | Withers & Rogers | Dickinson Wright | Knobbe Martens | Greenberg Glusker.
Trademarks
15 February 2023   Legal challenges prove that the virtual world is just as complicated as the real one, explain Erwin Sotiri and Ruben Mendes of Bonn Schmitt.
Trademarks
8 February 2023   Jury rules self-proclaimed artist’s creations not protected by free speech | Victory for IP owners applies real-world trademark law to the virtual environment | Reaction to follow.