The trademark dispute between Hermès and MetaBirkins creator Mason Rothschild is set to establish important elements of the legal framework for brands and creators in the web3 era — if the case isn’t settled first.
In filings in federal court, the luxury house and the artist behind the NFTs depicting colourful, fuzzy iterations of Hermès’ famed Birkin bag are battling over some of the big legal questions surrounding NFTs and other digital assets that have exploded in popularity over the last two years: Can a digital item infringe on a real one? What makes something digital art versus a knockoff? If an NFT is really just a bit of code on a blockchain that points to and authenticates a jpeg of a bag, are the NFT and the jpeg the same entity or are they distinct?
Hermès first sued Rothschild at the start of the year, claiming his MetaBirkins infringed its trademarks and diluted the Birkin name. As the legal filings and first orders from the judge have come in, they’ve more clearly defined what’s at stake, which goes well beyond a simple trademark fight. While these sorts of disputes can be quietly settled long before they’re litigated in open court, the case is so far carrying on. In May, US District Judge Jed Rakoff also denied Rothschild’s motion to dismiss the suit.
The case is already shaping how the industry thinks about NFTs from a legal perspective. In his order, the judge made clear that NFTs, despite being code pointing to an image, can qualify as artistic expression, which means — importantly — they could be protected as free speech by the first amendment to the US constitution, according to Felicia Boyd, US head of IP brands at law firm Norton Rose Fulbright. Commodities such as mass-produced reprints of artwork do not receive that protection.
Last week, Rothschild released a statement on Twitter hailing that outcome. But he is far from being in the clear, and there are a number of thorny issues to be worked out that could shape how the law treats digital assets.
Legal Questions Still to Resolve
“It definitely does signal that activity in the metaverse may very well be regulated similar to activity in the real world, in our physical universe,” said Preetha Chakrabarti, a partner at law firm Crowell & Moring.
Right now, the court has focused on the MetaBirkins as static images. But what if the allegedly infringing object were a digital wearable made for use in an online game or other virtual environment? Chakrabarti likened it to the difference between a painting of a handbag versus a version made from leather and metal and put on the street for sale.
In the MetaBirkins case, the court acknowledged there is a distinction between the MetaBirkins and a digital wearable. It’s still unclear if any eventual decision would address whether the law should treat them differently, but the point is hardly moot when digital creators are making and selling items for use in online spaces from Roblox to The Sandbox, a new blockchain-based world.
As more brands move into the world of digital fashion themselves, they might not want others making products based on their designs and trademarks. Balenciaga, Prada and Thom Browne were announced as the first brands launching virtual clothing in Meta’s Avatar Store. Nike debuted its first virtual sneakers in collaboration with RTFKT, the NFT brand it acquired last year. Others have released items on Roblox, such as Burberry, which introduced a line of virtual handbags.
“Hypothetically, it would be easier for Hermès to go after people creating little Hermès bags to be sold for avatar use,” Boyd said.
The long-running online environment Second Life spawned lawsuits on this point, but they all settled, according to Chakrabarti. It has left these questions still to be answered.
One issue central to Hermès’ complaint is Rothschild’s use of the name “MetaBirkin.” The court will have to decide whether it is artistically relevant and not explicitly misleading in suggesting an association with Hermès.
“In our view the answer is clearly yes — the artworks are illustrations of imaginary fur-covered Birkin bags, and the title MetaBirkins describes what the artworks are about,” Rothschild said in an emailed statement. “The second question is whether I’ve made any explicit claim that Hermès is responsible for the MetaBirkins artwork, and again we look forward to showing that I’ve always identified myself as the creator, not Hermès.”
Whether the court will take the same perspective remains to be seen. In Judge Rakoff’s order tossing out Rothschild’s motion to dismiss, he pointed out that on the MetaBirkins Instagram page users mistakenly believed there was some affiliation, and media outlets such as the New York Post and Elle incorrectly reported on the MetaBirkins as a partnership with Hermès.
Hermès did not reply to a request for comment but has previously told BoF it does not comment on ongoing legal action.
What’s at Stake For Brands and Creators
For brands trying to protect their intellectual property in digital worlds, there’s more at stake than just lost sales of virtual products. They use their design, distribution and marketing to carefully manage how they’re perceived because their images are crucial to how they attract and connect with shoppers. That’s as true online as it is in the physical world, as experts such as Ian Rogers, former chief digital officer of LVMH and current chief experience officer at Ledger, which makes hardware to secure crypto assets, have pointed out.
In his defence, Rothschild has claimed a right to fair use of the iconic Birkin because he says his work transformed it into something distinctly novel. He’s pointed to artist Andy Warhol’s paintings of items like Campbell’s soup cans and argued his work should be similarly protected. But Warhol, or more specifically his foundation, is about to face its own challenge on that front.
The US Supreme Court has agreed to hear a case alleging Warhol violated copyright when he created a series based on a photo of Prince. Lawyers representing the photographer who took that photo say Warhol’s work wasn’t meaningfully transformative and is therefore not protected.
It’s a “big deal” that the highest court in the US agreed to hear a fair-use case, Chakrabarti said, and her clients who deal in NFTs and art will be watching closely as arguments begin in October. The MetaBirkins case, meanwhile, will offer some of its own answers on where the lines are in the legal relationship between brands and creators making NFTs based on their products — assuming Rothschild and Hermès don’t settle first.
“I think all attorneys at least are hopeful that we get more guidance from a court,” Chakrabarti said. “It’s going to have a lot of implications for how aggressive [brands] decide to be in the metaverse in terms of their own expansion but also enforcement measures.”
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