Luxury goods titan Hermès has won a major victory in its ground-breaking lawsuit involving trademark infringement through non-fungible tokens (“NFTs”). A federal jury in Manhattan recently found that an artist’s NFT collection of “MetaBirkins” infringed and diluted the famous Hermès Birkin bag and associated trademarks, and the artist’s use of the MetaBirkins.com domain name constituted cybersquatting. The case is a first-of-its-kind investigation into trademark infringement in emerging digital markets like the metaverse, closely watched by consumer goods sellers and retail insiders as more and more companies connect with their customers using Web3 technologies. The thing is Hermès International et al. v. RothschildCase No. 1:22-cv-00384 (Southern District of New York).
The Hermès Birkin bag adorns the arms of countless celebrities, featured in numerous films, TV series and songs, and is an instantly recognizable legend in the world of luxury goods. And with such enormous status, imitation is not always the sincerest form of flattery.
Hermès sued Los Angeles-based artist Sonny Estival (a/k/a Mason Rothschild) in January 2022 for Rothschild’s creation, advertising and sale of an NFT collection of “MetaBirkin” handbags on his website www.metabirkins.com and through various “MetaBirkin” social media accounts. The digital handbags are fuzzy and furry imitations, as shown below, of real Birkin handbags (famously made from high-quality, and often exotic, leather):
Hermès argued that Rothschild’s work hurt the fashion house’s ability to market its iconic handbags — which often sell for tens of thousands, if not hundreds of thousands of dollars — in emerging online digital markets.
Rothschild defended his actions under the First Amendment, arguing that his “MetaBirkin” NFTs were constitutionally protected art, commenting “the cruelty inherent in Hermes’ production of its ultra-expensive leather handbags,” and therefore shielded from liability. Rothschild argued that his “MetaBirkin” NFTs are no different than Andy Warhol’s famous Campbell’s Soup Can paintings, in that transformative art like his can imitate well-known trademarks and products without liability for infringement.
A federal jury in New York City disagreed, finding Rothschild liable for trademark infringement, trademark dilution and illegal cybersquatting for the Metabirkin.com domain name. Rothchild has been ordered to pay Hermès $110,000 in profits and resale commissions, as well as $23,000 in cybersquatting damages.
Next step
This case has been closely followed by many as it represents one of the first and most prominent lawsuits involving trademark infringement claims involving real goods breached in the nascent world of digital assets and blockchain technology. The ruling bodes well for brand owners looking to expand their goods into the metaverse, mint and market NFTs or digital twins alongside their physical goods, or otherwise connect with consumers using Web3 technology. The ruling sets the precedent that brand owners have the right to control how their real goods are exploited as virtual goods, especially as more and more consumer-facing companies simultaneously seek to offer goods in these new online spaces alongside NFT artists and disruptors. That said, an appeal of this decision is likely, and it will be important to track how the Second Court of Appeals evaluates this jury verdict.
