A Bag Worth Fighting For: The MetaBirkin NFT Trademark Dispute

Biglaw, fashion

(Photo by Edward Berthelot/Getty Images)

Oath. Note: Welcome Nicolette Shamsian to our pages, where she will write about fashion law.

The Hermès Birkin bag was created in 1984 and is the epitome of luxury and class in the fashion world. This bag is so exclusive that in order to purchase it directly from Hermès, customers must have a strong relationship – and purchase history – with the brand. The exceptional craftsmanship and timeless design of the Birkin bag along with its limited availability lead to a high price tag. Today, the price of a Birkin ranges from $10,000 for a standard leather bag to $250,000 for an exotic bag. Regardless of whether the bag is offered in their desired style or not, a customer who is offered a Birkin rarely turns it down. The Birkin is seen as an investment piece that can sell for two to five times its retail value in the resale market. The brand continues to grow every year, reporting revenue of $12.41 billion in 2022, up 29% compared to 2021.

It’s no surprise that Hermès will go to great lengths to protect its famous Birkin trademarks. IN Hermès v. Rothschild, Hermès filed a complaint against Mason Rothschild in the Southern District of New York, alleging that he infringed the Birkin trademarks through his sale of NFTs called MetaBirkins. Hermès’ complaint accused Rothschild of federal and common law trademark infringement, false designation of origin, trademark dilution, cybersquatting and reputational harm and dilution under New York General Business Law.

Rothschild sought dismissal, arguing that his NFTs are shielded from Hermès’ trademark claims as creative expression protected by the First Amendment. While the court denied Rothschild’s motion to dismiss, it ruled that the NFTs should be evaluated below Rogers v. Grimaldi test for artistic works. Under Rogers v. Grimaldi test, an otherwise artistic work is not entitled to First Amendment protection if the plaintiff can show that either: (1) the use of its trademark in an expressive work was not “artistically relevant” to the underlying work, or (2) if the trademark is used to “explicitly mislead” the public as to the source or content of the work. The second factor to Rogers v. Grimaldi The test requires that consumer confusion be clear and unambiguous in order to overcome the strong First Amendment interests at stake. The court found that there is a genuine issue of material fact as to both factors, and the case was therefore heard at the end of January 2023.

It is important to note that Rogers v. Grimaldi the doctrine is even currently under scrutiny in the Supreme Court case Jack Daniel’s Properties Inc. v. VIP Productions LLC. Jack Daniel’s filed this trademark infringement suit against VIP Productions’ dog toys that feature the distinctive appearance of a Jack Daniel’s whiskey bottle along with the slogan “Bad Spaniel’s.” The Supreme Court will review the Ninth Circuit’s claim that the dog toys were protected as artistic parody under Rogers v. Grimaldi test. Brand owners expressed their concern about the Ninth Circuit’s decision on commercial product protection.

By claiming that his work is entitled to First Amendment protection under the Rogers v. Grimaldi, Rothschild claimed that his MetaBirkin NFTs, which feature faux fur Birkin bags, are works of art created based on his interpretations of the world around him, even comparing the MetaBirkin NFTs to Andy Warhol’s Campbell’s Soup Cans. More specifically, Rothschild claimed that the faux fur on the MetaBirkins “comments on the animal abuse inherent in Hermès’ production of its ultra-expensive leather bags.” In addition, Rothschild called MetaBirkins an experiment to see if he could create the same kind of illusion that the Birkin bag has in real life.

Hermès introduced evidence of the strong recognition of the Birkin trademark and informed the jury that it has applied for a digital trademark for the Birkin. Since luxury brands are starting to enter the digital space, Hermès argued that it is reasonable for customers to believe that the MetaBirkin NFTs are associated with the Hermès brand. Hermès also highlighted Rothschild’s motive for profiting from his so-called “social experiment”. Rothschild sold his first MetaBirkin for $23,500, which later resold for $47,000. In total, Rothschild produced over 100 MetaBirkin NFTs, which sold for over $1.1 million. Hermès also introduced evidence of text messages from Rothschild to the developer of MetaBirkins saying: “We are sitting on a gold mine.”

On February 8, 2023, the jury returned a verdict in favor of Hermès, finding that Rothschild infringed the Birkin trademarks even under the stricter Rogers v. Grimaldi standard. Rothschild was ordered to pay Hermès $133,000 in damages.

This dispute did not cease with the end of the trial. Hermès is currently pushing for a permanent injunction to prevent Rothschild and his affiliates from continuing to market or sell their MetaBirkin NFTs and to transfer ownership to Hermès. In its opposition, Rothschild argues that the type of permanent injunction sought by Hermès is not appropriate in a case involving artistic expression, asking instead that the court only require a “clear disclaimer.” The opposition states that Hermès has not “produced any evidence of any concrete damage that it has suffered from Mr. Rothschild’s promotion and sale of his MetaBirkins works of art”, and instead Sales to Hermès have continued to increase. Rothschild also argues that the court should not grant an injunction because of Hermès’ dirty hands stemming from its “pattern of deliberate dishonest conduct during the trial.”

If Hermès’ proposed permanent injunction is not granted, it is the brand owners’ view that NFT creators may believe they can continue to ride on brands that have spent significant time and money building recognition simply by paying minimal compensation to the trademark owner. This view would be consistent with 15 USC § 1116(a)’s rebuttable presumption of irreparable harm which was codified in 2020 in the Trademark Modernization Act. But if the permanent injunction is granted, some are concerned it could put NFTs at risk. Some view NFTs as safe investments, and fear that if they can be destroyed by an injunction, buyers and sellers will be at financial risk and may be less likely to engage with NFTs.

As one of the first cases to discuss intellectual property rights within the metaverse, this case sets the precedent that courts are willing to find trademark infringement between similar digital and physical goods. While this case raises concerns for NFT artists whose existing work could be the subject of another infringement lawsuit, it’s a big win for brands trying to connect with their customers in the metaverse. Gucci, for example, has already partnered with Roblox to create a virtual garden exhibit celebrating Gucci’s 100th birthday, while allowing visitors to purchase Gucci NFTs. Brands are now running to register trademarks specifically intended for the metaverse.

We will continue to see more activity in this case unfold as the parties continue to await the court’s decision on Hermès’ motion for permanent injunction and Rothschild’s renewed motion for judgment as a matter of law or a new trial.

Nicolette Shamsian joined Above the Law as a fashion law columnist in 2023. Nicolette received her BA, summa cum laude, in Political Science with a minor in Entrepreneurship from the University of California, Los Angeles and her Juris Doctor from the UCLA School of Law. Nicolette is currently an associate in the Litigation group at Irell & Manella. Nicolette’s work at Irell focuses on intellectual property litigation. As Irell’s resident fashion lawyer, Nicolette enjoys leading discussions to keep attorneys at the firm updated on notable fashion law cases.