By Merlene Engelbrecht, Senior Associate at Spoor & Fisher

Birkin Background

In the first verdict of its kind, a New York federal jury on 8 February 2023 found that non-fungible token (NFT) artist Mason Rothschild’s MetaBirkins NFTs infringed the rights of Hèrmes International S.A. and Hermès of Paris, Inc. (collectively, “Hermès”) to its BIRKIN trade mark and awarded the French luxury goods company $133 000 in damages. Additionally, Rothschild (whose real name is Sonny Estival) was found liable on the grounds of trade mark dilution and cybersquatting concerning his MetaBirkins NFTs and, said the jury, the First Amendment protections of the U.S. Constitution that apply to expressive and not-explicitly-misleading works, did not protect him from liability. Rothschild created and sold 100 MetaBirkins NFTs using blockchain technology.

In a follow-up ruling on 23 June 2023, the court granted Hermès the interdictory relief it sought against Rothschild one month after the verdict, solidifying the permanent halt to his infringing activities.

What is the metaverse, and what are NFTs?

The metaverse is a three-dimensional virtual and augmented space where people can engage with computer-generated environments and interact with each other. It enables communication and transactions within this digital realm, often facilitated by cryptocurrencies. Non-fungible tokens (NFTs) are distinct digital tokens that utilise blockchain technology to establish ownership and validate authenticity. They represent a novel form of digital asset and can signify ownership of both digital and physical assets. When you acquire an NFT, you gain ownership of the unerasable record of ownership and access to the associated underlying asset, such as the MetaBirkins NFTs.

Examples of Mason Rothschild's MetaBirkins

What are MetaBirkins NFTs?

MetaBirkins NFTs are digital artworks depicting bags that mirror the design of the highly sought-after Birkin bag - a handmade luxury tote bag released in 1984 by Hermès. Named after the famous English actress and singer Jane Birkin, this bag has become synonymous with opulence and prestige. Its exorbitant price tag renders it a symbol of wealth, elevating it beyond the average person’s reach. According to Sothebys.com, the Hermès Diamond Himalaya Birkin, adorned with genuine diamonds, holds the title of the most expensive handbag ever sold at auction, commanding a staggering price of over $440,000—surpassing its already lofty retail price of $300,000.

Rothschild first listed his MetaBirkins on OpenSea, an NFT marketplace, in November 2021. Following the release of the MetaBirkins collection at Art Basel in Miami in December 2021, Forbes Magazine reported that Rothschild created “100 versions of the famed Hermès Birkin Bag as Non-Fungible Tokens or NFTs… in an attempt to raise awareness to accelerate fashion’s “fur-free” initiatives and embrace ethical alternatives”.

Unlike the genuine Hermès Birkin bags crafted from natural leather, the MetaBirkins NFTs are digital pictures of caricatured Birkin bags adorned with faux fur, each with its own colour, theme and graphic execution. The MetaBirkins NFTs garnered significant attention, with individual sales reaching tens of thousands of dollars. By January 2022, the collective sales revenuesfrom  the project had soared to $1 million.

What’s in the Bag: A brief outline of the case since Jan 2022

Hermès was not impressed with Rothschild’s use of the MetaBirkins NFTs trade mark and, on 16 December 2021, sent a cease and desist letter to Rothschild, alleging trade mark infringement of its registered BIRKIN trade mark and demanding that the MetaBirkins NFTs be removed from the market. In response, Rothschild took to his official Instagram and X (formerly Twitter)  accounts both under the handle @MetaBirkens, to address open letters to Hermès and OpenSea (the NFT marketplace that initially facilitated the sale and subsequent removal of the MetaBirkins artworks):

An open letter to Hermès, OpenSea and Community. pic.twitter.com/pkctZbUzRG

— MetaBirkins (@MetaBirkins) December 22, 2021

[ Metabirkins’ tweet: An open letter to Hermès, OpenSea and Community https://x.com/MetaBirkins/status/1473743852863299584 ]

To Hermès:

“…MetaBirkins is a playful abstraction of an existing fashion-culture landmark. I re-interpreted the form, materiality and name of a known cultural touchpoint…When it comes to art, selling my MetaBirkins as NFTs is akin to selling them as physical art prints. It should not be my job to educate you on advancements in the world and the culture of art. Art is art.”

To OpenSea:

“I am disappointed to see that MetaBirkins has been removed from your platform before any legal action was taken, and without due process…The growth of your business relies on the support of the art community. You should stand by the artists that support you.”

After its cease and desist letter had fallen on deaf ears, Hermès filed a complaint against Rothschild on 14 January 2022, seeking monetary damages and interdictory relief to prevent further use of its BIRKIN trade mark. The complaint included a laundry list of accusations:

• Trade mark infringement,
• False designation of origin,
• Trade mark dilution,
• Cybersquatting (which claim stemmed from Rothschild’s use of the metabirkins.com domain name) and;
• Injury to business reputation and dilution under New York General Business Law.

Hermès contended that Rothschild’s unlawful use of its BIRKIN bag trade dress and imagery was an aggravating factor, but the primary issue was his unauthorised use of the BIRKIN trade mark in connection with NFTs. Hermès claimed that Rothschild’s use of the BIRKIN trade mark to refer to and promote the NFTs, which Hermès argued had value independent of any associated images, was the primary concern. Rothschild disagreed and claimed that MetaBirkins is the name of an art project and a series of artworks,  not a trade mark. His counsel argued that his use of MetaBirkins was protected by free speech under the First Amendment, as the artworks and NFTs underlying them are art and commentary of Hermès’ BIRKIN handbag, thus not constituting trade mark infringement, dilution or cybersquatting. Rothschild even likened his work to Andy Warhol’s famous silkscreen prints of Campbell’s soup cans.

Jury’s verdict

Rothschild’s lawyers pointed to what is colloquially known as the “Rogers” test, which was defined in the 1989 U.S. case of Rogers v. Grimaldi, 875 F.3d 994 (2d Cir. 1989). In terms of this test, artists can use others’ trade marks in their work without permission as long as it meets a minimal level of artistic relevance and doesn’t explicitly mislead consumers. The jury was instructed that if Hermès proved Rothschild intentionally misled consumers into believing that there was an association between the parties or if the use of the trade mark in the artistic work was not “artistically relevant”, the First Amendment protection would not apply.

In essence, the jury had to weigh up consumer confusion on the one hand with the right to artistic expression on the other, and ultimately, they found the likelihood of confusion to be decisive. Hermès presented evidence, including evidence of actual confusion, leading the jury to conclude that using the MetaBirkins name was likely to confuse consumers about an association with Hermès. Consequently, in a unanimous verdict, the jury determined that First Amendment protection did not shield Rothschild from liability and found him liable for trade mark infringement, dilution and cybersquatting.

Permanent interdict

On 3 March 2023, one month after the jury’s verdict, Hèrmes filed a motion for a permanent interdict in response to Rothschild’s continued promotion and sale of the MetaBirkins NFTs. Hermès requested the court to order Rothschild to, among other things, discontinue his use of the BIRKIN mark and avoid misleading the public about any association with Hermès; transfer the domain name metabirkins.com and related social media accounts to Hermès; transfer any MetaBirkins NFTs in his possession, including associated smart contracts, to a cryptocurrency wallet designated by Hermès and to notify Hermès of any income received from the MetaBirkins NFTs and transfer that income to Hermès.

In his scathing opinion and order dated 23 June 2023, U.S. District Court Judge Rakoff penned that the jury “expressly found” that Rothschild was “simply a swindler” and “purposely sought (with some success) to confuse consumers into believing that his [MetaBirkins NFTs] and associated website metabirkins.com were affiliated with Hèrmes’ iconic BIRKIN trade marks”. The judge further opined that Rothschild’s “entire scheme here was to defraud consumers into believing, by his use of variations on Hermès’ trade marks, that Hermès was endorsing his lucrative MetaBirkins NFTs”and “nothing in the First Amendment insulates him from liability from such a scheme”.

The judge accordingly granted Hermès the relief it sought, except for requiring Rothschild to transfer any MetaBirkins NFTs, including associated smart contracts, to Hermès.

Conclusion

This case is considered to be the first to address alleged trade mark infringement and dilution in the virtual world, highlighting the growing ability of brand owners to control the use of their trade marks in the metaverse. The outcome is significant, as it suggests that existing “real world” trade mark rights may be enforced in the virtual world and can underpin successful infringement and dilution claims. The jury viewed the MetaBirkins NFTs as digital versions or extensions of Hermès’ consumer products, thus warranting protection under trade mark law.

Side note - Rothschild allowed displaying MetaBirkins NFTs in an exhibit at museum

Earlier this year, on 26 January 2024, Rothschild filed a motion seeking clarification on whether the Order of Permanent Interdict would prevent him from having the MetaBirkins NFTs displayed on a computer screen at an exhibition at the Spiritmuseum in Stockholm. After considering submissions from both Rothschild and Hermès, Judge Rakoff ruled on 29 April 2024 that Rothschild was permitted to “display his trademark-infringing NFTs”, provided that the following text be displayed at the exhibit to prevent any further confusion:

“A jury in New York unanimously found that Mr. Rothschild had intentionally designed his NFTs to confuse the public into believing they were in some way sponsored by Hermès, when in fact they were not.”

To date, Hermès has not filed any objections to this order.