‘Valueless’ NFTs no good as collateral, judge tells Metabirkins maker
Judge rejects motion using Metabirkins smart contract and NFT artwork to stay damages owed to Hermès | Court highlights irony of attempt and deems them “valueless items”.
A US district judge has denied an attempt by Mason Rothschild to use his Metabirkins NFTs as collateral to stay damages owed to Hermès.
The artist, who in February 2023 lost a trademark infringement case against the luxury brand, proposed to place his Metabirkins smart contract and Metabirkins NFT artwork in escrow as collateral against the $133,000 damages bill.
Judge Jed Rakoff ruled on December 29, 2023, that Rothschild failed to present "an acceptable alternative means of securing the judgment" necessary to pass his motion.
The US District Court for the Southern District of New York, unswayed by Rothschild's proposition, asserted that “valueless items” can’t serve as an acceptable alternative for securing a $133,000 judgment.
Additionally, the order highlighted the “irony” that these Metabirkins products were “central to Rothschild's trademark infringement and dilution of Hermès's brand.”
Notably, Rothschild admitted being unaware of the monetary value of the smart contract and acknowledged the virtually non-existent NFT art market.
The court’s denial
The rejection centred on Rothschild's reliance on a Federal Rule of Civil Procedure provision that the court viewed as inapplicable to his specific request.
The rule Rothschild referred to concerned modifications of injunctions while an appeal is ongoing, but Rothschild wanted to stop the collection of damages that had been awarded.
The court pointed out that Rothschild may have misunderstood and suggested that even if he meant to use the rule to obtain a stay by providing a bond or security after judgment, it would still be rejected.
The court explained that the rule aims to guarantee the winning party gets full compensation if the decision is upheld, while also protecting the other party from paying if the decision is reversed.
Case background
In February 2023, the Southern New York district court delivered a verdict against Rothschild, holding him accountable for trademark infringement, trademark dilution, and cybersquatting.
The plaintiff, renowned luxury brand Hermès, emerged victorious as the jury awarded them $133,000 in damages.
In March, 2023, Hermès demanded an injunction against Rothschild, seeking to force the artist to turn over to Hermès all materials related to the Metabirkins NFT artworks, including the Metabirkins smart contract as well as the website domain and social media handles associated with his project.
This was followed by Rothschild filing a strongly-worded counter motion in the same month, asking the court to deny Hermès’ request in its entirety because of “the dishonest conduct of Hermès’ representative and expert witnesses at trial”.
Hermès’ permanent injunction was granted in June 2023.
However, In July, Rothschild asked the US Court of Appeals for the Second Circuit to review the decision.
Rothschild attracted support, including from the art collective MHCSF and The Authors Guild, who collectively submitted an amicus brief endorsing Rothschild’s argument that his creations should be constitutionally protected, in November 2023.
On December 12, 2023, Rothschild filed a letter motion seeking a stay of the money judgment and requesting a waiver of the bond requirement while the appeal is pending.
In response, Hermès swiftly filed a letter brief opposing the motion on December 15, 2023.
Rothschild filed his reply on December 20, 2023, which resulted in the court's rejection of his motion.
The representatives for Hermes were Gerald Ferguson, Deborah Wilcox and Oren Warshavsky from BakerHostetler.
The lawyers representing Rothschild were Rhett Millsaps, Christopher Sprigman, Mark McKenna and Rebecca Tushnet from Lex Lumina, and Jonathan Harris and Adam Oppenheim from Harris St. Laurent & Wechsler.
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