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Intellectual Property

Talking Tech

Birkin Battles – Hermes and Mason Rothschild square off over "Metabirkin" NFTs

Intellectual Property Consumer Fashion 3 March 2023

Hermès is a luxury French design house renowned for its exquisite creations of high-end handbags, accessories, and jewellery. Among its notable designs are the highly coveted BIRKIN and KELLY handbags, which have been immortalised in various forms of media and entertainment.

In the case Hermes International SA v. Rothschild in February 2023, Hermès emerged victorious in a legal battle against digital artist Mason Rothschild, who had started advertising and selling digital art in the form of non-fungible tokens (NFTs) under the name of "METABIRKINS". In this regard, Hermès demonstrated to a New York jury that Rothschild was legally responsible for (a) infringing the BIRKIN trademark, (b) diluting the BIRKIN trademark, and (c) cybersquatting, following the registration of a domain name that bore a "confusingly similar" resemblance to the BIRKIN trademark.

This landmark case is one of the world's first to address intellectual property violations by digital creators of NFTs with artistic expression as a defense. It marks a victory for luxury brands that strive to safeguard their brand identity against third-party exploitation through the unauthorized creation of NFTs or other emerging technologies. The ruling may give some comfort to such brands by demonstrating that their intellectual property rights can be protected in the digital realm. However, the case also serves as a warning to digital creators that attempt to capitalise on established brand names to boost their online presence.

Background

Hermès is a French luxury design house that was established in 1897. The brand is well known for the BIRKIN handbag, a design that was first created in 1984 and first sold in the U.S. in 1986. Hermès have stated that each BIRKIN bag is handcrafted from leather in France in a process requiring more than 17 hours of artisanal labour. In its submissions, Hermès stated that the demand for the bags is such that Hermès cannot satisfy all requests from consumers. The price of a BIRKIN handbag can range from thousands of dollars to over one hundred thousand dollars – in 2022, Sotheby’s sold a "Diamond Himalaya" Birkin bag for $440,000. Hermès is the owner of the BIRKIN mark and the HERMES mark, as well as a three-dimensional design mark for the BIRKIN handbag's distinctive design.

On 2 December 2021, digital artist Mason Rothschild began to advertise NFTs bearing the "METABIRKINS" brand at Art Basel Miami (for more information on the key Intellectual Property issues surrounding NFTs, please see our Talking Tech article: "NFTs – An Introduction and Some Key Intellectual Property Considerations"). Rothschild then went on to produce a collection of one hundred NFTs depicting digital Hermès BIRKIN bags covered in designs never seen in any Hermès BIRKIN bag – namely faux fur, polka dots, and artwork such as the Mona Lisa and Van Gogh’s Starry Night. Hermès said that Rothschild sold more than $1 million worth of METABIRKIN NFTs.

Hermès argued that, because of their widespread and constant use of the BIRKIN trademark and related trademarks registered by Hermès, the bags have come to be known as "source identifiers" for Hermès and for "renowned high-quality luxury goods".

After sending a cease-and-desist letter to Rothschild in December 2021, Hermès filed a complaint against Mason Rothschild in the Southern District of New York in January 2022. During the trial in February 2023, the jury was asked to consider claims of (1) infringement of the Hermès BIRKIN trademark; (2) trademark dilution; and (3) cybersquatting.  

Infringement of the Hermès BIRKIN trademark

Hermès claimed that the METABIRKINS NFT project violated the Hermès BIRKIN trademark, as the use of the BIRKIN name and/or the handbag's unique visual appearance may have caused confusion among potential customers, leading them to believe that the METABIRKINS NFTs were produced, sold, or otherwise affiliated with Hermès and its BIRKIN brand.

The jury was instructed to consider several factors in determining whether Rothschild was liable for trademark infringement, including:

  • the strength of the Hermès BIRKIN trademark
  • the similarities between the Hermès BIRKIN trademark and the name and visual appearance of the METABIRKINS NFT
  • whether the products offered by Hermès and those released by Mason Rothschild were similar in name and visual appearance and whether such similarity was likely to cause consumer confusion
  • evidence of actual consumer confusion
  • the level of care and attention an average consumer might exercise when encountering the two products
  • whether Rothschild acted in bad faith, i.e., if he intentionally disregarded the possibility of customer confusion
  • whether Hermès had concrete plans to develop and release its own NFTs using the BIRKIN trademark.

A claim of trademark dilution

To evaluate the trademark dilution claim, the jury was instructed to consider several key factors, including:

  • Rothschild's intent to create an association with the BIRKIN trademark
  • any actual customer association of the METABIRKIN NFTs with the BIRKIN mark
  • the level of recognition of the BIRKIN mark amongst the jury.

During trial, Hermès noted that the Hermès Birkin bag and the BIRKIN mark had received "unsolicited publicity" and praise from consumers and in media, citing references to Hermès Birkin bags in television and film, magazines, and financial journals that discussed the benefits of a Birkin bag as a financial investment.

A claim of "cybersquatting"

Hermès accused Rothschild of engaging in "cybersquatting", which involves registering a domain name that is identical or confusingly similar to another trademark, by using the domain name "metabirkins.com" in connection with the METABIRKINS. To prove this allegation, Hermès needed to establish several elements, including:

  • the distinctiveness of the BIRKIN trademark at the time of the registration of the "metabirkins.com" domain name,
  • the identical or confusing similarity between "metabirkins.com" and the Hermès Birkin trademark, and
  • the existence of a bad faith intent on the part of Mason Rothschild to profit from the Birkin trademark, such as intending to divert customers from the Hermès online location to a site that could harm the goodwill represented by the Birkin mark.

First Amendment considerations

The jury was also instructed by the court that, if Rothschild was found to be liable for one or more of the claims brought against him by Hermès, they must also consider whether his liability was barred by the legally protected right to artistic expression under federal law. This right, which is safeguarded by the First Amendment to the U.S. Constitution and affirmed by U.S. courts as a form of fair use, would allow Rothschild to create METABIRKINS NFTs if he was engaged in "artistic expression" during the production of the works. Because the court acknowledged that the METABIRKINS were artistic expressions in at least some respects, it instructed the jury to determine whether Rothchild's use of the BIRKIN marks was intentionally designed to mislead consumers into believing Hermès was associated with the project, which waives any First Amendment protections afforded to Rothschild in this case.

Conclusion

After three days of deliberation, the jury found in favor of Hermès and concluded that the use of the METABIRKIN trademark in this way violated Hermès rights in the Birkin trademark. The jury further concluded that the First Amendment did not bar Rothchild's liability. As a result, Rothschild was ordered to pay $110,000 in profit and resale commissions he received from selling the infringing NFTs and pay $23,000 in damages for cybersquatting. As of the date of this article, Rothschild has not appealed the jury's decision, but there is an indication of a plan to do so according to his publicist.

What this means for you

According to the Financial Times, NFTs became a $40 billion market in 2021. In response to this trend, several luxury brands, including Chanel, Dolce & Gabbana, and Burberry, have proactively invested in virtual worlds by registering digital trademarks. Dolce and Gabbana were the first fashion brand to release an NFT collection, followed by Burberry's release of an NFT collection with Mythical Games. The inaugural Metaverse Fashion Week launched in March 2022, which cemented the growing importance of this digital market for the fashion industry (for more information please read "Virtual Fashion Week – the key IP implications").

Several luxury brands have taken a proactive stance when asserting their presence in the digital world. To avoid the risk of third parties registering similar trademarks in the digital space, luxury brands should consider taking pre-emptive action to secure their rights and avoid costly litigation.

The Hermès decision represents a significant milestone in guiding luxury brand owners on how to navigate the ambiguous boundary between the physical and virtual realms. Mason Rothschild noted that he created the METABIRKIN NFTs as an "experiment to see if he could create the same kind of illusion that the BIRKIN handbag has in real life, as a digital commodity". Although digital artists and brands may be tempted to recreate famous designs, the decision has highlighted the importance of applying intellectual property rights in the digital world just as they are in the physical world. Further, the ruling suggests that similar tests, such as the assessment of likelihood of confusion and reputation and balancing of First Amendment considerations, will also apply to activities in the virtual world.

This combination of factors described above, including text messages from Rothschild relied on as evidence by Hermès, in which he stated, "People don’t realise how much you can get away with by saying ‘in the style of", and referring to his project as a "goldmine", demonstrates that it was the value Hermès and the BIRKIN brand name which drove interest and revenue generated by sale of the METABIRKINs NFTs.

We note that the verdict decided by a jury in the New York court has not yet established a firm legal precedent for other courts to follow, especially as we wait for a potential appeal to the Second Circuit. Furthermore, it is uncertain how comparable cases will be decided in the UK or other jurisdictions, as the outcome of this case might have differed if a judge had decided the case. Nevertheless, it is expected that this ruling will act as a deterrent to third parties who deliberately replicate well-known trademarks for financial gain.

For further analysis on pressing legal issues in the fashion industry today, read our previous insights:

 

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