A Bag Worth Fighting For: The MetaBirkin NFT Trademark Dispute

 ​

Ed. note: Please welcome Nicolette Shamsian to our pages, where she’ll be writing about fashion law.

Created in 1984, the Herm?s Birkin bag is the epitome of luxury and class in the fashion world. This bag is so exclusive that in order to be able to purchase it directly from Herm?s, customers must have a strong relationship – and purchase history – with the brand. The exceptional craftsmanship and timeless design of the Birkin bag together with its limited availability leads to a hefty price tag. Today, the price of a Birkin ranges from $10,000 for a standard leather bag to $250,000 for an exotic bag. Whether or not the bag is offered to them in their desired style, 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 is continuing to grow every year, reporting revenue of $12.41 billion in 2022, up 29% compared to 2021.

It is no surprise that Herm?s will go to any lengths to protect its renowned Birkin trademarks. In Herm?s v. Rothschild, Herm?s filed a complaint against Mason Rothschild in the Southern District of New York, alleging that he was infringing its Birkin trademarks through his sale of NFTs called MetaBirkins. Herm?s’ complaint accused Rothschild of federal and common law trademark infringement, false designation of origin, trademark dilution, cybersquatting, and injury to business reputation and dilution under New York General Business Law.

Rothschild sought dismissal, arguing that his NFTs are shielded from Herm?s’ trademark claims as creative expression protected by the First Amendment. While the court denied Rothschild’s motion to dismiss, it determined that the NFTs should be evaluated under the Rogers v. Grimaldi test for artistic works. Under the 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) whether the trademark is used to “explicitly mislead” the public as to the source or content of the work. The second factor of the Rogers v. Grimaldi test requires that consumer confusion must be clear and unambiguous 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 thus went to trial in the end of January 2023.

It is important to note that the Rogers v. Grimaldi doctrine is itself currently under scrutiny in the Supreme Court case Jack Daniel’s Properties Inc. v. VIP Productions LLC. Jack Daniel’s brought this case for trademark infringement against VIP Productions’ dog chew toys bearing the distinctive look of a Jack Daniel’s whiskey bottle alongside the slogan “Bad Spaniel’s.” The Supreme Court will review the Ninth Circuit’s holding that the dog toys were protected as artistic parody under the Rogers v. Grimaldi test. Brand owners expressed their concern about the Ninth Circuit’s decision for its protection of commercial products.

In arguing that his work is entitled to First Amendment protection under Rogers v. Grimaldi, Rothschild argued that his MetaBirkin NFTs, depicting faux fur-covered 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 maintained that the faux fur on the MetaBirkins “comments on the animal cruelty inherent in Herm?s’ manufacture of its ultra-expensive leather handbags.” In addition, Rothschild called the MetaBirkins an experiment to see if he could create the same kind of illusion that the Birkin bag has in real life.

Herm?s introduced evidence of the Birkin trademark’s strong recognition 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, Herm?s argued that it is reasonable for customers to think that the MetaBirkin NFTs are associated with the Herm?s brand. Herm?s also highlighted Rothschild’s motive to profit 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. Herm?s also introduced evidence of text messages from Rothschild to the developer of the MetaBirkins stating, “We’re sitting on a gold mine.”

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

This dispute did not cease with the end of the trial. Herm?s is currently pushing for a permanent injunction to prevent Rothschild and his affiliates from continuing to promote or sell his MetaBirkin NFTs and to reassign ownership to Herm?s. In his opposition, Rothschild argues that the type of permanent injunctive relief sought by Herm?s is not appropriate in a case involving artistic expression and instead requests that the court simply require a “clear disclaimer.” The opposition states that Herm?s has “produced no evidence of any concrete harm that it has suffered from Mr. Rothschild’s promotion and sales of his MetaBirkins artwork,” and instead Herm?s’ sales have continued to increase. Rothschild also contends that the court should not grant injunctive relief due to Herm?s’ unclean hands stemming from its “pattern of deliberately dishonest conduct throughout trial.”

If Herm?s’ proposed permanent injunction is not granted, it is the view of brand owners that NFT creators may think they can continue to ride on the coattails of brands that have put significant time and money into building recognition just by paying a minimal damages award to the trademark owner. This view would be consistent with 15 U.S.C. ? 1116(a)’s rebuttable presumption of irreparable injury that was codified in 2020 in the Trademark Modernization Act. However, if the permanent injunction is granted, some are concerned that this may place NFTs at risk. Some see NFTs as secure investments, fearing 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 precedent that courts are willing to find trademark infringement between similar digital and physical commodities. While this case raises concerns for NFT artists whose existing work can be the subject of another infringement lawsuit, it is a big win for brands who are trying to connect with their customers in the metaverse. Gucci, for example, has already collaborated with Roblox to create a virtual garden exhibition celebrating Gucci’s 100th birthday, while allowing visitors to purchase Gucci NFTs. Brands are now running to file trademarks specifically meant for the metaverse.

We will continue to see more activity in this case unfold as the parties are still awaiting the court’s ruling on Herm?s’ motion for a 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 earned her B.A., summa cum laude, in Political Science and minor in Entrepreneurship from the University of California, Los Angeles and her Juris Doctor from 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 law aficionado, Nicolette enjoys leading discussions to keep attorneys in the firm up to date on noteworthy fashion law cases.