(Hermes Int’l v. Rothschild, 22-cv-384 (JSR), (S.D.N.Y. Jun. 23, 2023))

Introduction

In our increasingly tech-driven world, discussions about intellectual property rights have gained prominence. Notably, the Hermes Int’l v. Rothschild case made significant strides in Trademark issues related to NFTs, a term now widely recognized.

In the recent past, the terms “NFTs” and “Non-fungible tokens” have become popularised, but most people remain unaware as to what the term actually means. The concept of NFTs has allowed pictures of cats, DC comic characters, ferry men, etc. to be sold for more than 90 million USD.

Definitely an interesting concept, NFTs are considered a collector’s item. The word non-fungible means that they are unique and can’t be replaced. For instance, while one bitcoin is equal to another, no two NFTs can be considered equal. Although “NFTs” could refer to anything digital such as drawings, music and celebrity collectibles, NFTs gained broad recognition due to digital art.

This case involves Hermès seeking to protect its Trademark against Rothschild’s MetaBirkin NFTs, highlighting the evolving landscape of NFT-Trademark related disputes.

Facts

Los Angeles artist Mason Rothschild released 100 luxury NFTs known as MetaBirkins, a digital reinterpretation of Hermès classics. These unique pieces featured various faux fur styles, including an elegant Tiffany blue, a rendition of Vincent van Gogh’s The Starry Night, and a custom creation for rapper Young Thug.

Initially priced at around USD 450 each, these NFTs skyrocketed in value, reaching up to USD 46,000 within two weeks, a stark contrast to Hermès Birkin bags starting at USD 9,000. The collection generated approximately USD 800,000 in trades on OpenSea, the largest NFT marketplace, evolving from a tribute to a sought-after digital fashion commodity.

However, it’s important to note that Rothschild and MetaBirkins had no affiliation with the Hermès brand. The website clearly stated this lack of association.

The controversy emerged shortly after the MetaBirkins launch when Hermès issued a cease-and-desist order. Hermès asserted that they had not authorised or consented to the commercialization of their Birkin bag in the metaverse by Mason Rothschild. The Birkin, being their signature handbag, enjoys Trademark protection, preventing others from using its name and distinctive design. Hermès considered these NFTs an infringement on their intellectual property and Trademark rights, labelling them as fake Hermès products in the metaverse.

Rothschild countered by announcing that Hermès’ claims were baseless and expressed his determination to challenge them in court.

Birkins v. MetaBirkins

The Hermès v. Rothschild case hinges on whether NFTs can infringe existing Trademark rights. Specifically, it questioned whether creating an NFT version of a fur-covered MetaBirkin bag infringes Hermès’ Birkin Trademark and the distinctive look of physical Birkin bags.

Rothschild presented several arguments in his favour, emphasising his lack of formal affiliation with Hermès, such as slight modifications to the MetaBirkins’ design, and the belief that they don’t cause confusion with genuine Hermès products. Moreover, he argued for First Amendment protection, claiming the project was primarily artistic.

Regarding Trademark infringement, the jury considered a 7-part balancing test, including similarity, competition, bad faith, and Hermès’ likelihood of selling their own NFTs with the Birkin mark.

On the cybersquatting claim, the jury had to assess the distinctiveness of the Birkin mark at the time of domain registration, the similarity of the domain name to Hermès’ mark, and Rothschild’s intent to profit in bad faith, for commercial gain.

The Final Judgement

Judge Rakoff’s decision denied both parties’ motions for summary judgement, and the Judge’s rationale was filed a week before the jury delivered their verdict. The jury’s verdict, though concise at one and a half pages, found Rothschild liable for

Trademark infringement, Trademark dilution, and cybersquatting. Importantly, the jury determined that the First Amendment did not shield Rothschild from liability.

The crucial aspect of the jury’s verdict is that it concluded Rothschild’s use of the Birkin mark intentionally misled potential consumers into believing a connection with Hermès, going beyond mere confusion. In assessing Trademark infringement, the jury considered the seven factors, with none being determinative. Furthermore, the jury necessarily recognized Hermès’ Birkin mark as famous, a prerequisite for finding Trademark dilution.

Additionally, the jury determined that Rothschild acted with a “bad faith intent to profit from the Birkin mark.”

Implications

The ‘MetaBirkins’ case verdict represents a victory for brand owners and provides clarity on the importance of enforcing intellectual property rights in the digital realm. This outcome reinforces the idea that intellectual property rights should hold sway, whether in the physical or virtual world.

Notably, luxury brands such as Louis Vuitton, Gucci, and Givenchy have ventured into the NFT space. The ‘MetaBirkins’ case underscores that, unlike traditional gallery art, artists and brands may become competitors in the virtual landscape if they operate under similar or conflicting names.

Artists should understand that the issue lies not in creating art but in how it’s branded and presented to consumers, potentially infringing on intellectual property rights.

However, it’s crucial to note that the ‘MetaBirkins’ case was a US federal jury trial and does not establish mandatory legal precedent.

Conclusion

Intellectual property law, encompassing Trademark and Copyright protection, serves as a safeguard for creators and owners of original content. The intersection of these laws with NFTs is an evolving legal landscape, with the Hermès v. Rothschild case marking a significant milestone in clarifying their application in the NFT context.

This case stands as a pivotal moment in shaping the future approach to Trademark issues involving NFTs. It’s worth noting that the jury’s specific findings, such as Hermès having a famous mark and Rothschild’s bad faith actions, may not be universally applicable in all future cases. Nevertheless, this decision has established a vital precedent.

Written By-

Shruti Navayath

5th Year B.A.LL.B.

NMIMS, Kirit P. Mehta School of Law