- Trademark and the Metaverse: The Hermes Birkin Handbag
Trademark and the Metaverse: The Hermes Birkin Handbag
The Weekly Wright Report recently published an article on blockchain and its application to cryptocurrencies and the metaverse world of virtual reality, including crypto-assets and non-fungible tokens (NFTs). As noted in the previous article, the laws, and regulations applicable to crypto-assets are evolving globally. Of particular importance are the laws and cases dealing with intellectual property. What is protected? This issue was litigated in a recent case before the United States District Court for the Southern District of New York, Hermes International v. Rothchild, USDCSDNY, No. 1:22-cv-00384. NFTs are on blockchain networks. NFTs are frequently used to verify ownership of works of art in digital format. The case addressed trademark law as applied to an NFT.
If you are in the market for a ten-thousand-dollar handbag, look no further than Hermes’. It sells the Birkin leather handbag that identifies the carrier as part of the super wealthy. Doors open; people stare; paparazzi fire cameras like a swarm of lighting bugs. Sales in the US have exceeded one billion dollars – over one hundred million dollars in the last ten years.
Artist/fashion designer Mason Rothchild created an NFT of pictures of the Birkin’s bag as an “artform” in the metaverse – a digital commodity claiming that it was art. It sold for $42,000, marketed as MetaBirkins. Rothchild contended that it was a tribute to Hermes and “a commentary on the fashion’s history of animal cruelty, and its current embrace of fur-free initiatives and alternative textiles.” “(T)he First Amendment gives me every right to create art based on my interpretation of the world around me.” Hermes sent him a cease and desist letter demanding that Rothchild take the NFT off the market. Rothchild refused, and Hermes filed its Complaint alleging common law trademark infringement, false designation of origin, trademark dilution, cybersquatting , and injury to reputation. The issue boiled down to the extent that real world trademark law applies to the virtual world of NFTs, and whether the NFT is an artwork or a consumer product.
Rothchild filed a Motion for Summary Judgment several months prior to the trial date , arguing the First Amendment defense. He claimed that MetaBirkins was creative expression and art, the title MetaBirkins is artistically relevant because it describes the artworks, and Hermes did not identify any misleading statements or evidence supporting Hermes’ claim of a likelihood of confusion. The court denied the Motion because there were factual issues.
Hermes testimony included a statement that it was considering its own NFT although it had not yet created one. Hermes’ experts testified that the public would be confused as to the source of the NFT, that based on statical research and the trading history of the NFT, some of the purchasers had concluded that the NFT was affiliated with Hermes. One expert opined that 18.7% of people viewing MetaBirkins were confused, supporting the argument that there was a substantial likelihood of confusion. Hermes contended that MetaBirkins was Rothchild’s “get rich” scheme, and offered testimony that Rothchild considered MetaBirkins as a “gold mine” and was seeking investors. In other words, his behavior and promotion were not consistent with what one would expect from an artist. Rothchild argued that the NFT was social commentary protected by the first amendment. He equated MetaBirkin’s depiction of the bag to Andy Warhol’s soup can paintings that were not authorized by Campbell.
After hearing testimony of the parties and their experts, the jury found that Rothchild was liable for trademark infringement and dilution and “cybersquatting”; that he was not protected by the First Amendment, and that he must pay Hermes $133,000 in damages.
What is the take away from this jury verdict, assuming it survives an appeal? Be careful how you market and promote NFTs. The market for NTFs is expanding rapidly, and intellectual property disputes will expand with it. The debate will not end with this verdict.
If you have any questions about this post, please contact James Constable at email@example.com or 410-659-1315.