The jury in the US District Court for the Southern District of New York has concluded that an artist’s NFT versions of Hermès’ Birkin bags has infringed the legendary fashion house’s trade marks.
We have previously covered the development of this case here and here. By way of brief background however, artist Mason Rothschild created non-fungible tokens (NFTs) which depicted Birkin bags covered in colourful fur. For many, Hermès’ Birkin bags are the holy grail of handbags. They are one of the world’s most expensive, well-made and exclusive luxury fashion accessories. Rothschild's work started with the creation of a digital image (later sold as an NFT) he entitled “Baby Birkin,” which depicted a 40-week-old fetus gestating inside a transparent Birkin handbag, claiming it was an artistic representation that played on the words baby and Birkin, which was “the most sought-after Birkin size.” However, the project soon expanded into a collection of 100 “MetaBirkins” NFTs with (allegedly) total sales in excess of 1.1 million. Rothschild was promptly sent a cease & desist letter by Hermès back in August 2021.
In light of Rothschild’s refusal to cease his activities, Hermès issued proceedings alleging trade mark infringement, dilution and cybersquatting (the practice of registering a domain name in bad faith). Hermès maintained that Rothschild was seeking to “get rich quick” by ripping off the BIRKIN trade mark to market his own line of products and that Rothschild’s decision to feature the Birkin bag in his works was not a genuine “artistic expression” but rather an attempt to cash in on its 180 year old brand. According to Hermès, consumers were likely to consider Rothschild’s MetaBirkins genuine Hermès products.
Amongst others, Hermès produced evidence which showed that when the MetaBirkins project expressly clarified it was not associated with the luxury brand, the sale price decreased. The survey evidence also showed that 18.7 % of the NFT audience were confused as to the origin of the MetaBirkins, and 3.6% of luxury handbag customers were confused.
In response, Rothschild adopted the “David and Goliath” narrative of a humble artist against a major business, which we have seen pay off in recent cases such as Thom Browne and Adidas. However, given the commercial success of his NFT project, this narrative did not convince the jury who found that Rothschild was liable on all 3 counts: trade mark infringement, dilution and cybersquatting. Moreover, the jury was not persuaded that Rothschild’s works were protected by First Amendment (i.e. freedom of speech) under the Rogers v Grimaldi test which allows the use of trade marks in artistic works where a trade mark is used to further “plausibly expressive purposes” provided however that such use does not intentionally mislead consumers about the origin of a product or suggest it is endorsed or affiliated with the trade mark owner.
In his instructions to the jury, judge Jed Rakoff stated that it was undisputed that the MetaBirkins qualified as artistic expressions “at least in some respects”. Therefore, it appears the jury was called to decide on the second limb of the Rogers v Grimaldi test, i.e. whether Rothschild intentionally mislead consumers into believing that Hermès was associated with the MetaBirkins. The jury’s answer was, yes.
Among the evidence presented to the jury, statements by Rothchild that “he wanted to make “big money” by “capital[izing] on the hype”, that he was “in the rare position to bully a multi-billion dollar corp[oration]” and that “he doesn’t think people realize how much you can get away with in art by saying ‘in the style of’” may have played a significant role.
The jury awarded Hermès a total of $133,000 in damages for trademark infringement, dilution and cybersquatting. While the damages awarded appear relatively modest in light of Rothschild’s claims of sales in excess of 1.1 million, the decision is nevertheless a pioneering victory which shows that the NFT market cannot escape the legal regulatory landscape, and artists trying to argue a first amendment defence will not necessarily be exempt from liability if they infringe intellectual property rights.
While obtaining trade mark protection for digital goods is still highly recommended for all brand owners who are in the process of prototyping or considering launching their own NFT projects, this landmark decision indicates that existing registered trade marks covering physical goods may prevent unauthorised use in the virtual world, especially where the brand has a strong reputation.
Rothschild has indicated that he intends to appeal the jury’s decision, so this will not be the end of the MetaBirkin saga just yet.
Hermes in its lawsuit called Rothschild a "digital speculator" and the NFTs a "get rich quick" scheme.