Hermès defeats MetaBirkins in first NFT trademark trial (1)
Luxury brand
The nine-person jury returned a verdict on Wednesday, awarding Hermès $133,000 in total damages. They also found that Rothschild’s NFTs are not protected speech under the First Amendment.
The court case was the first ever to examine how NFTs – digital assets that have exploded in popularity over the past two years – should be viewed through the lens of intellectual property law.
Rothschild’s loss could have a chilling effect on NFT artists who want to use trademarks in their projects, according to Alfred Steiner, an intellectual property lawyer and artist.
“The commentary in Mason’s work was probably harder to discern because it was subtle,” he said. “It may have been lost on a group of jurors or the general public.”
Emily Poler, a New York attorney who specializes in technology and intellectual property, noted that the case is fact-specific and that “there is still room for artwork to be protected by the First Amendment.”
Legal experts have been following the case closely, which could affect pending and future NFT cases that test the often blurred line between art and consumer products. The ruling comes as a number of fashion brands, from Balenciaga to Nike Inc., announce plans to expand into NFTs and the metaverse.
The 100 MetaBirkin NFTs are linked to digital images showing Hermès’ iconic luxury Birkin bag, but covered in colorful, cartoonish fur instead of leather. Rothschild created and sold the NFTs in late 2021 following an extensive marketing campaign through social media and websites.
The jury determined that the NFTs are more akin to consumer products subject to strict trademark laws that protect brands from copycats and those seeking to exploit their goodwill.
“What happened today was wrong,” Rothschild said in a statement. “What happened today will continue to happen if we do not continue to fight. This is far from over.”
Hermès did not immediately return requests for comment.
“Artistic Experiment”
Throughout the case, Rothschild argued that his NFTs are works of art protected by the First Amendment, no different from Andy Warhol’s famous screen prints of Campbell’s soup cans. His lawyers characterized the NFT project as an “artistic experiment” that explored how society places value on status symbols.
Physical Birkin bags range in price from $12,000 to close to $200,000. Rothschild first sold the NFTs for about $450 each, but their resale value rose to tens of thousands of dollars.
A blockchain expert testified at trial that Rothschild created about 55.2 Ethereum tokens, worth about $87,700 today.
“It is perfectly legal for artists to make money off their art,” Rothschild’s attorney Rhett Millsaps said during opening arguments. “Trademark rights are limited by the First Amendment.”
Rothschild’s appeal to artistic freedom could have been hampered by a last-minute setback. On the first day of the trial, US District Judge
Gopnik, who wrote the 2020 biography “Warhol,” might have been able to establish a connection between MetaBirkin and Warhol’s art. In pretrial testimony, Gopnik claimed that MetaBirkins were in the style of “Business Art,” a concept developed by Warhol.
In his statement, Rothschild criticized the “multi-billion dollar luxury fashion house” for claiming to care about artists but then claiming to “have the right to choose what art IS and who IS an artist.”
The parties also clashed at trial over the reliability of a survey conducted by one of Hermès’ expert witnesses, which found a net confusion rate of 18.7% among potential NFT buyers. Rothschild’s expert witness said the survey misclassified respondents as confused when they were not, bringing the net confusion rate to 9.3%.
Speech, trademark balance
Hermès filed the lawsuit last January after observing that some media had wrongly identified MetaBirkins as a project endorsed by Hermès.
Although Hermès does not yet sell NFTs, it has developed plans to do so, and MetaBirkins hurt its ability to break into that space, the company claimed. “If we want to bring our bag into this virtual world, there will always be a reference to MetaBirkins,” Hermès general counsel Nicolas Martin told the jury during testimony.
Hermès lawyers pointed to dozens of pages of text messages that they said show Rothschild wants to “create the same exclusivity and demand for the famous handbag.” He used the words “pump” and “shill” and sought financial backers whom he called “whales”.
“We are sitting on a gold mine,” Rothschild said in a text.
Rothschild’s lawyers, made up of a group of intellectual property researchers at the firm Lex Lumina PLLC, pointed to the decade-old “Roger’s” legal test. First defined in the 1989 case Rogers v. Grimaldithe standard allows artists to use a trademark without permission as long as it meets a minimal level of artistic relevance and does not explicitly mislead consumers.
Hermès “doesn’t come close to clearing the high bar for the First Amendment,” Millsaps said during closing arguments.
Rothschild moved to dismiss the case based on the Rogers test. Rakoff ruled last March that while he believes the test is valid, he needed more evidence to evaluate the test. But after both sides gathered survey data and expert testimony, Rakoff again denied the parties had won before the trial in late 2022.
During closing arguments, Rothschild’s lawyer Jonathan Harris of Harris St. Laurent & Wechsler LLP said Hermès wrongly went after a small, independent artist with humble beginnings.
“He made himself an artist,” Harris said of Rothschild. – He never got anything.
The case is Hermes International SA v. Rothschild, SDNY, No. 1:22-cv-00384, judgment 2/8/23.
