Hermès Wins MetaBirkins Lawsuit; Jurors are not convinced that NFTs are art

Alarmed when an artist created a digital version of its coveted Birkin bag with a reproduction of a mature fetus inside, luxury fashion brand Hermès watched in shock as other iterations appeared online. A Birkin with mammoth barrels attached. One with the Grinch’s shaggy green fur. Others stamped with van Gogh’s “Starry Night” or populated by smiley emojis.

Hermès quickly sued the artist, Mason Rothschild, over the NFT project he called “MetaBirkins”, claiming that the company’s trademark was being diluted and that potential consumers could be tricked into buying the unrelated virtual goods.

The case’s consequences extended far beyond Hermès. In some of the first court cases to scrutinize the nature of digital assets sold on the blockchain, it was up for debate whether NFTs, or non-fungible tokens, are strictly goods or art shielded by the First Amendment.

On Wednesday, a nine-person federal jury in Manhattan found that Rothschild had violated the company’s trademark rights and awarded Hermès $133,000 in total damages. The jurors also found that his NFTs were not protected speech.

Rothschild’s defeat was a major blow to the NFT market, which has often described itself as part of the creative economy. But the jury ruled that the MetaBirkins looked more like goods, which are subject to strict trademark laws that prevent copying, than works of art where appropriation is protected.

In a statement following the verdict, Hermès said it was forced to act to protect consumers and the integrity of the brand. “Hermès is a house of creation, craftsmanship and authenticity that has supported artists and freedom of expression since its founding,” it said.

One of Rothschild’s lawyers, Rhett Millsaps II, called it a “great day for big brands” and a “terrible day for artists and the First Amendment.”

Rothschild criticized the jury, the legal system and a luxury fashion house that he said had the courage to decide who qualified as an artist.

“What happened today was wrong,” he said in a statement. “What happened today will continue to happen if we don’t keep fighting.”

The ruling may provide some guidance for brand owners, said Megan Noh, an art lawyer unconnected to the case, “about the boundary between works of artistic expression and commercial goods.”

Birkin bags, named after actress Jane Birkin, are handcrafted and take specialist artisans a minimum of 18 hours to make. Hermès does not disclose how many of the bags it has made since they were first created in 1984, but some luxury goods researchers have estimated that there are now more than a million Birkins on the market. In 2021, the auction house Sotheby’s sold a Birkin for more than $226,000.

Rothschild had plans to make 1,000 MetaBirkins, which he has described as an “ironic nod” to the renowned brand, but only 100 have been released since the project began in 2021.

Each was priced at $450, and Rothschild also received 7.5 percent of secondary sales. Hermès has claimed in court cases that MetaBirkins reached around $1.1 million in total sales volume. Rothschild has estimated that he made about $125,000 from the NFTs, including the initial sale and royalties.

“What we’re seeing in the Hermès case is how new technologies and historic, ancient brands collide,” said Ari Redbord, head of legal and public affairs at TRM Labs, a blockchain analytics firm.

Over the past decade, the French company’s Birkin collection has steadily generated $100 million in sales each year. In recorded testimony played at the trial, Robert Chavez, president and CEO of Hermès in Paris, said he was not aware of any revenue the company lost because of MetaBirkins.

During opening arguments in the US District Court for the Southern District of New York, Oren Warshavsky, a lawyer representing Hermès, argued that MetaBirkins confused consumers who thought they were associated with the fashion brand.

“The reason for these sales was the Birkin name,” he said.

Rothschild’s legal team questioned whether people wealthy enough to afford Birkins, which cost thousands of dollars and often have years-long waiting lists, would really be misled by his art project.

Millsaps also argued that the NFTs were art protected under the First Amendment as free speech. The lawyer said Birkins were a “cultural symbol of rare wealth and status”, ripe for artists to explore as metaphors for consumerism.

“Art doesn’t exist in a vacuum — it’s often about context,” he said.

Blockchain assets like MetaBirkins were part of the economic boom-and-bust cycle in cryptocurrencies in recent years. At the market’s peak, there was a $40 billion industry around digital collectibles, but fortunes eroded last year when the volume of NFT sales fell by 97 percent.

Yet lawsuits continue to play out across the beleaguered industry, including trademark battles that focus not on the technology itself, but the essence of what users have stored on the blockchain.

Yuga Labs, creator of the NFT franchise Bored Ape Yacht Club, has filed a trademark infringement lawsuit against artist Ryder Ripps, accusing him of copying the images. (Ripps has said the suit attacks his freedom of speech.) The company announced Monday that it had settled a separate case against Thomas Lehman, a developer on Ripps’ NFT project, who admitted to infringing the Yuga Labs trademark.

Noh said the best protection artists have against trademark disputes is the Rogers test, a legal standard established in 1989.

In that case, actress Ginger Rogers had sued film producer Alberto Grimaldi, claiming that the film “Ginger and Fred” infringed her trademark rights because it used her name in connection with its fictionalized portrayal of a pair of disheveled Italian dancers. But a federal appeals court ruled that the use of the name Ginger was an expressive element of the title, artistically relevant to the underlying film, and therefore subject to First Amendment interests that had to be weighed against the risk of misleading consumers.

Rebecca Tushnet, a Harvard Law School professor who helped prepare Rothschild’s defense, said the Rogers test meant “you can’t hold someone liable for infringement unless their work is artistically irrelevant or explicitly misleading.”

During the trial’s opening arguments, Hermès attempted to minimize Rothschild’s credibility and artistic intent by focusing on his business strategy, showing text messages asking social media influencers to “do another shill post” that might increase demand for his NFTs. The company’s lawyer also told the jury that Rothschild had published its cease-and-desist letter on social media, hoping the conflict would drive interest.

Judge Jed S. Rakoff granted Hermès’ motion to exclude a report prepared by art critic Blake Gopnik that favorably compared MetaBirkins to artworks by Andy Warhol and Damien Hirst. (Gopnik contributes to The New York Times.)

The defense painted a more sympathetic picture of Rothschild, 28, who worked in retail for streetwear and luxury brands such as Saint Laurent after dropping out of college. In 2021, he and Ericka del Rosario, now his fiancee, opened a concept store in Los Angeles called Terminal 27. He often hired assistants with the technical skills he lacked to work on projects, including MetaBirkins.

Rothschild was “a conceptual artist,” said Millsaps, his lawyer. “The idea guy, not the guy who does the work.”

The strength of trademark rights will soon be put to the test again when a case between Jack Daniels and VIP Products, which sold squeaky dog ​​toys that resembled the whiskey maker’s bottles, goes before the Supreme Court.

Some fashion industry veterans wondered why Hermès had even bothered to litigate the case. Although Chavez testified that the company had been experimenting with its own NFTs, including a project slated for release this year, it has let other unapproved projects slide, like when the Brooklyn collective MSCHF turned the Birkin bag into a $76,000 “Birkinstocks .”

Ian Rogers, the former digital chief of fashion conglomerate LVMH, who currently works at a crypto company called Ledger, said the company’s preoccupation with Rothschild was puzzling.

“Maybe this hit close to home,” Rogers said. “Luxury people should understand NFTs, because if you’ve been in the business of explaining why someone would spend $18,000 on a bag, then you’re pretty well suited to explain why someone would pay $3,000 for an NFT.”