Jury finds that ‘MetaBirkin’ NFTs infringed Hèrmes’ trademark rights | Skadden, Arps, Slate, Meagher & Flom LLP

Background

At the heart of what is considered the first NFT trademark lawsuit were two competing arguments: Was artist Mason Rothschild’s creation of “MetaBirkin” NFTs — digital images of blurry faux-fur handbags inspired by Hèrmes’ iconic Birkin bag — artistic expression protected by the First Amendment, or were they a violation of the luxury fashion house’s intellectual property rights?

Ultimately, after three days of deliberation, a federal jury found Rothschild liable for trademark infringement, trademark dilution and illegal cybersquatting of the “MetaBirkins.com” domain name and awarded Hèrmes $133,000 in damages. While Rothschild has stated that he plans to appeal, the ruling provided some preliminary guidance for brands looking to protect their intellectual property rights in the digital sphere.

The dispute erupted in late 2021, when Los Angeles-based Rothschild created and released 100 “MetaBirkin” NFTs linked to digital images of handbags he called an “homage” to the French fashion house’s iconic Birkin bag. Rothschild argued that MetaBirkins were an artistic commentary on consumerism within the digital realm, as well as fashion’s fur-free movement. The NFTs, originally released at a starting price of approximately $450 each, have since been resold for many multiples of the original price.

Shortly after MetaBirkins was launched, Hèrmes Rothschild sent a cease and desist letter, notifying both Rothschild and the NFT marketplace, OpenSea, of the alleged infringement of Hèrmes’ intellectual property rights. While OpenSea quickly removed MetaBirkins from its platform, Rothschild refused to stop selling the NFTs, claiming that “art is art” and that MetaBirkins was a “playful abstraction of an existing fashion culture landmark” protected by the First Amendment. He also claimed that selling MetaBirkins as NFTs was akin to selling them as physical art prints.

In January 2022, Hèrmes sued Rothschild, alleging, among other things, trademark infringement, trademark dilution and cybersquatting.¹ In its complaint, Hèrmes argued that “the title ‘artist’ does not confer a license to use an equivalent of the famous BIRKIN trademark in a manner calculated to mislead consumers.” The case proceeded to trial in December 2022 after the court rejected the parties’ cross-motion for summary judgment.

Summary Judgment Statement

On February 2, 2023, midway through the trial, Judge Rakoff issued a formal statement explaining his earlier refusal to grant the parties’ cross motions for summary judgment. A key question for the court was which of the other circuit’s tests for trademark infringement would apply – Rogers v. Grimaldi test, which applies to artistic works that make use of a trademark and give substantial First Amendment respect to the artist, or Gruner + Jahr test, which generally applies to trademark infringement cases where artistic work is not involved. Rothschild maintained that Rogers should apply, while Hèrmes argued for Gruner + Jahr. In his February opinion, Judge Rakoff reaffirmed his earlier decision that Rogers test applied to the case, and that there remained genuine questions of material fact requiring a jury’s consideration.

Under the two-tip Rogers test, an otherwise artistic work is not entitled to First Amendment protection if the plaintiff can show that either (1) the use of the trademark in an expressive work is not “artistically relevant” to the underlying work or (2) the trademark is used to “explicitly mislead ” the public with respect to the source of the content of the underlying work. Judge Rakoff noted that the “artistic relevance” prong is generally easy to satisfy and is met unless the use of the mark has “no artistic relevance to the underlying work whatsoever” and was “chosen only to exploit the publicity value of the plaintiff’s mark or brand.”

The court concluded that there was a genuine factual dispute as to whether the centering of Rothschild’s work around the Birkin bag stemmed from genuine artistic expression or was an illegal intent to cash in on a valuable brand name that Hèrmes worked to cultivate. Hèrmes claimed that Rothschild created the project based on the famous handbag to illegally reap a profit, and provided evidence that Rothschild referred to the NFTs in text messages as “a gold mine”; However, Judge Rakoff made it clear that economic motives do not prevent the application of Rogers test.

Furthermore, Judge Rakoff noted that even where the use of a trademark has some artistic relevance to an underlying work, the First Amendment does not protect it if it “explicitly misleads” the public as to the source or content of the work. To that end, the judge instructed the jury that they must assume that the MetaBirkins are “in at least some respects works of artistic expression” and that Hèrmes must establish by a preponderance of the evidence that Rotshchild’s use of the Hèrmes marks was “intentional.” designed to mislead potential consumers’ into believing that Hèrmes was connected to the project.

At trial, Hèrmes introduced evidence of actual consumer confusion, including reports from several publications that falsely linked the MetaBirkins project to the brand. An independent study commissioned by the company also found that 18.7% of potential consumers were confused about whether MetaBirkins was affiliated with Hèrmes. The brand also claimed that it had been put at a competitive disadvantage as it had prepared to enter the NFT market.

Rothschild, meanwhile, denied these allegations, claiming that after receiving the cease and desist letter, he added a prominent disclaimer to the MetaBirkins website that said the project was not affiliated, associated, authorized, endorsed by, or in any way officially connected. with Hermes.” Rothschild also stated that his publicist quickly asked the publications to issue corrections to the erroneous articles.

How trademark law may apply to NFTs

Although this dispute has been closely watched for its potential to set a precedent for the application of trademark law to NFTs, the fact that MetaBirkins was linked to NFTs was not dispositive. Hèrmes argued that the Rothschilds’ use of the “BIRKIN” mark referred to and promoted the symbols themselves, which had value separate and apart from any associated images that might be protected artistic works. However, Judge Rakoff found undisputed evidence in the record that consumers understood they were purchasing exclusive ownership of the digital image associated with the NFT and did not view the token purchase as separate from the digital image purchase. He also reasoned that, because NFTs are simply code pointing to where a digital image is located, such an associated digital image does not automatically become a commodity without First Amendment protection.

The court’s reasoning should not be understood to mean that all digital images linked to an NFT are per se protected by the First Amendment. In a footnote in a May 2022 order denying Rothschild’s motion to dismiss, the court noted that Rothschild appeared to concede that Rogers First Amendment protection might not apply if the NFTs were affixed to a digital image of a virtually portable Birkin bag; in such a case, the use of the MetaBirkins mark will refer to a commercial product without speech. Although the court did not consider the case further in light of the motion to dismiss, the motion may inform future cases where brand owners seek to enforce trademark rights against virtual products that have confusingly similar marks.

Conclusion

The MetaBirkins case is undoubtedly the first of many that will test the limits of trademark protection in the context of digital assets. We anticipate many more cases presenting unique trademark issues, especially with the increasing number of artists using trademarks in connection with making artistic statements. Trademark owners should note that future cases at the intersection of intellectual property rights and NFTs, as with many areas of trademark law, will require an analysis of the specific facts at issue.

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1 Hermes Int’l v. Rothschild22-CV-384 (JSR) (SDNY May 18, 2022).