Hermes wins MetaBirkins lawsuit, jurors not convinced NFTs are art

NEW YORK – Perturbed when an artist made a digital version of its coveted Birkin handbag with a reproduction of a mature foetus inside it, luxury fashion brand Hermes watched in shock as other iterations popped up online.

A Birkin with mammoth tusks affixed to it. One sporting the Grinch’s shaggy green fur. Others stamped with Dutch artist Vincent van Gogh’s Starry Night or populated by smiley emoji.

Hermes swiftly sued the artist, Mason Rothschild, over the non-fungible token (NFT) project he called MetaBirkins, arguing that the company’s trademark was being diluted and that potential consumers might be fooled into buying the unaffiliated virtual goods.

The case’s ramifications extended far beyond Hermes. In some of the first litigation to scrutinise the nature of digital assets sold on the blockchain, up for debate was whether NFTs are strictly commodities or art shielded by the First Amendment.

On Wednesday, a nine-person federal jury in Manhattan determined that Rothschild, 28, had infringed on the company’s trademark rights and

awarded Hermes US$133,000 (S$176,280) in total damages.

The jurors also found that his NFTs were not protected speech.

Rothschild’s defeat was a major blow for the NFT market, which has often described itself as part of the creator economy.

But the jury determined that MetaBirkins were more similar to commodities, which are subject to strict trademark laws that prevent copycats, than to artworks where appropriation is protected.

In a statement after the verdict, Hermes said it was compelled to act to protect consumers and the integrity of its brand.

“Hermes is a house of creation, craftsmanship and authenticity which has supported artists and freedom of expression since its founding,” it added.

One of Rothschild’s lawyers, Mr Rhett Millsaps, called it a “great day for big brands” and a “terrible day for artists and the First Amendment”.

Rothschild criticised the jury, the justice system and a luxury fashion house that he said was emboldened to determine who qualified as an artist.

“What happened today was wrong,” he said in a statement. “What happened today will continue to happen if we don’t continue to fight.”

The verdict could provide some guidance for brand owners, said Ms Megan Noh, an art lawyer unaffiliated with the case, “about the line between works of artistic expression and commercial goods”.

The Birkin bag, named after actress Jane Birkin, is made by hand and takes specialised artisans a minimum of 18 hours to make.

Hermes does not disclose how many of the bags it has made since the Birkin was created in 1984, but some researchers of luxury goods have estimated that there are now more than one million Birkins in the market.

In 2021, auction house Sotheby’s sold a Birkin for more than US$226,000.

Rothschild had plans to create 1,000 MetaBirkins, which he has described as an “ironic nod” to the renowned brand, but only 100 have been released since the project began in 2021.

Each was priced at US$450, and Rothschild also received 7.5 per cent of secondary sales. Hermes has claimed in court filings that MetaBirkins reached about US$1.1 million in total sales volume. Rothschild has estimated that he made about US$125,000 from the NFTs, including the initial sales and royalties.

“What we see in the Hermes case is how emerging technologies and historic, age-old brands collide,” said Mr Ari Redbord, head of legal and government affairs at TRM Labs, a blockchain analytics firm.

Over the past decade, the French company’s Birkin collection has steadily generated US$100 million in sales each year.

In recorded testimony played during the trial, Mr Robert Chavez, president and chief executive of Hermes of Paris, said he was not aware of any revenue that the company lost because of MetaBirkins.

During opening arguments in the United States District Court for the Southern District of New York, Mr Oren Warshavsky, a lawyer representing Hermes, argued that MetaBirkins confused consumers who thought they were connected to the fashion brand.

“The reason for these sales was the Birkin name,” he said.

Rothschild’s legal team questioned whether people wealthy enough to afford Birkins, which cost thousands of dollars and often have years-long waitlists, would be genuinely misled by his art project.

Mr Millsaps also argued that the NFTs were art that was protected under the First Amendment as free speech. He said Birkins were a “cultural symbol of rarefied wealth and status”, ripe for artists to explore as metaphors of consumerism.

“Art doesn’t exist in a vacuum – it’s often about context,” he said.

Blockchain assets like MetaBirkins were part of the financial boom-and-bust cycle in cryptocurrencies over the past few years. At the market’s height, there was a US$40 billion industry around digital collectibles, but fortunes eroded in 2022 as the volume of NFT sales fell by 97 per cent.

Yet, lawsuits are still playing out across the beleaguered industry, including trademark fights focused not on the technology itself, but the essence of what users have stored on the blockchain.

Ms Noh said the best protection artists have against trademark disputes is the Rogers test, a legal standard established in 1989.

In that case, actress Ginger Rogers had sued movie producer Alberto Grimaldi, arguing that the film Ginger And Fred (1986) violated her trademark rights because it had used her name in connection with its fictionalised depiction of a pair of washed-up Italian dancers.

But a federal appeals court determined that the use of the name Ginger was an expressive element of the title, artistically relevant to the underlying film and therefore subject to First Amendment interests that needed to be weighed against the risk of misleading consumers.

Harvard Law School professor Rebecca Tushnet, who helped prepare Rothschild’s defence, said the Rogers test meant “you can’t hold someone liable for infringement unless their work is artistically irrelevant or explicitly misleading”.

During the trial’s opening arguments, Hermes attempted to minimise Rothschild’s credibility and artistic intent by focusing on his business strategy, displaying text messages in which he asked social media influencers to “do one more shill post” that might raise demand for his NFTs.

The company’s lawyer also told the jury that Rothschild had publicised its cease-and-desist letter on social media, hoping that conflict might drive interest.

Judge Jed Rakoff granted Hermes’ motion to exclude a report prepared by art critic Blake Gopnik that favourably compared the MetaBirkins to artwork by Andy Warhol and Damien Hirst. (Gopnik contributes to The New York Times.)

The defence painted a more sympathetic picture of Rothschild, who worked in retail for streetwear brands and luxury brands like Saint Laurent after dropping out of college.

In 2021, he and Ms Ericka del Rosario, now his fiancee, opened a concept store in Los Angeles called Terminal 27. He often hired assistants with the technical skills he lacked to work on projects, including MetaBirkins.

Rothschild was “a conceptual artist”, said Mr Millsaps. “The idea guy, not the guy who executes the job.”

The strength of trademark rights will soon be tested again when a case between Jack Daniels and VIP Products, which sold squeaky dog toys resembling the whiskeymaker’s bottles, goes in front of the Supreme Court. NYTIMES