Making Sense of the Hermès v. Rothschild MetaBirkins Verdict

We asked experts for an explainer even the Web3-illiterate will understand.

On Wednesday, a Manhattan federal jury ruled in favor of Hermès in its lawsuit against artist Mason Rothschild over his collection of NFT versions of Birkin bags — “MetaBirkins,” as they were officially dubbed. The jurors found that these digital artworks violated the iconic French luxury brand’s trademark rights and were likely to confuse consumers, awarding Hermès $133,000 in damages.

One of the first lawsuits of its kind, concerning a burgeoning industry that many (myself included) don’t fully understand, it’s getting a lot of chatter online, with some wondering if the verdict spells the end of NFTs-as-art.

Confused yet? So was I, so I consulted a couple of experts who know a lot about the issues at hand — intellectual property law, trademarks, fashion and NFTs — and asked them to explain it all to me like I’m five. Below, a hopefully easy-to-understand breakdown of the verdict and what it really means for the future of digital art and fashion IP.

What did Mason Rothschild do?

In May of 2021, Rothschild, a digital artist (and co-founder of Los Angeles concept shop Terminal 27), released his first Hermès-inspired digital artwork: The Baby Birkin featured a fetus gestating in a transparent Birkin bag and sold for $23,500 as an NFT, a “non-fungible token” that represents authentic ownership of a digital asset on a blockchain (meaning no physical version of this item exists). There was more to come, Rothschild promised.

“That controversial piece depicted a fetus as a Birkin bag, creating buzz for the larger collection of 100, and its high sale price drove speculation on the value of the MetaBirkin collection,” explains Rembrandt Flores, founder of 8Commas, a web3 amplification consultancy.

In December of that year, he followed up that buzzy debut with a new collection of 100 “MetaBirkins.” These colorful, fuzzy digital renderings of Hermès Birkin bags were revealed via platforms like Twitter and Discord and put up for sale as NFTs. Per Business of Fashion, they were priced at 0.1 ETH (ETH being the cryptocurrency for the Ethereum blockchain) equivalent at the time to about $450. After the initial sales, the owners of these tokens were free to trade them like stocks, with their value fluctuating based on demand and rarity — one went for as much as $46,000.

Why was it concerning?

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Experts were quick to question whether such NFTs could stand up against intellectual property law and Hermès’ was quick to publicly condemn the project (even before taking legal action), telling the Financial Times shortly after the launch, “These NFTs infringe upon the intellectual property and trademark rights of Hermès and are an example of fake Hermès products in the metaverse.”

“If Rothschild had stopped with ‘Baby Birkin,’ Hermès might not have sued,” explains Professor Susan Scafidi, founder and director of the Fashion Law Institute at Fordham Law School. “Artists often use famous logos in pop-art-style paintings and other traditional artistic media, and the brand owners rarely object to one-off, expressive creations. Rothschild, however, didn’t stop.”

Rothschild, who rendered the MetaBirkins in “faux fur” (again, these pictures were never real in the first place), told BoF they were, “my artistic take on an icon, my remix.”

“I think that Mason believed that he had two rules protecting him, one being the First Amendment, ‘Free Speech,’ and the second being an exception to copyright and trademark law called ‘Fair Use,’ says Flores.

“Many artistic works that incorporate others’ trademarks can claim free speech protection — as long as consumers aren’t misled into thinking those works are affiliated with the brand,” explains Scafidi.

Why did Hermes sue — and win?

The Hermès Birkin is one of very few fashion items that are recognizable enough to be legally trademarked — both the word “Birkin” and the bag’s shape are protected. When Rothschild sold his 100 MetaBirkins, indicating plans to launch hundreds more, Hermès was not going to look the other way. 

“At that point, Hermès objected, since Rothchild’s actions looked less like free speech and more like the kind of commercial free-riding that could damage the image of Hermès,” says Scafidi. “The attention to the Metabirkins could also prevent Hermès from developing its own digital art and NFT strategy, something that had already proved very lucrative for other fashion houses. Dolce & Gabbana, for example, in 2021 created a collection of 9 NFTs that sold along with physical items for almost $6m.” Gucci, Givenchy and Burberry have also released NFTs.

“It’s not every day that fashion can make millions on a whole new product category, and the lawsuit by Hermès was intended to make sure that if anyone was going to profit from NFTs associated with its products, it would be the company itself,” Scafidi continues.

Hermès is a powerful, well-protected company, but there was still no guarantee it would prevail, especially once the case went to trial.

“Hermès took a risk in bringing this case before a jury, which could have decided instead that the MetaBirkins were artistic expression and that consumers were not confused as to their association with the brand,” says Scafidi. “Instead, the company argued that Rothschild was engaged in ordinary trademark infringement under the pretext of making art, and the jury apparently agreed — in their eyes, Rothschild was no starving artist, just a tech-savvy opportunist, even if his target was a luxury brand. In other words, Hermès got a New York jury that knew its bags from its BS.”

“The biggest reason why Hermes prevailed gets to the heart of why these laws are in place,” offers Flores. “Brand builders spend decades refining their products, courting customers, and building a logo that can be trusted for quality and unique value. They protect these brands by filing for trademarks so that they can rely on the court system to back them up whenever someone is selling using their name. Since Mason used Hermès’ iconic product, their name, and sold his collection for money to buyers, his defenses weren’t enough to persuade the court that he wasn’t trading on their brand with his artwork.”

Why is this all a big deal?

“Every new medium or form of retail has its signature trademark lawsuit, and the Metabirkin case is that lawsuit for art and NFTs,” says Scafidi. “Every fashion lawyer in the world has been watching this case, and today was a red-letter day in the brand protection world.”

It’s one of the first lawsuits of its kind, and thus, its verdict sets a precedent. Some onlookers, particularly those in opposition to the ruling, worry about the fact that a jury decided Rothschild’s NFTs didn’t qualify for protection under free speech, determining that such digital artworks should be seen as commodities rather than art. Per the New York Times, one of Rothschild’s lawyers, called it a “great day for big brands” and a “terrible day for artists and the First Amendment.”

What does this mean for the future of NFTs and digital art?

“The future of fashion NFTs depends on the art market and whether consumers would rather spend money on images of handbags or the real thing, but this victory for one intellectual property owner clears the way for brands to challenge at least uncreative commercial use of their trademarks in the digital realm,” says Scafidi, who believes that “true artistic or expressive uses” of a brand’s intellectual property could still escape similar lawsuits.

“This going to set precedent for all NFTs in the future, but with this could mean more litigation protecting art/IP ahead,” says Flores. “It opens the door for other lawsuits such as Nike v. StockX and brings the conversation back to the NFT community about what IP means, even if these collections are 100% digital”

There’s also the question of what, if any, responsibility NFT marketplaces (where NFTs like the MetaBirkins are sold online) have.

“NFT marketplaces rarely monitor projects and have taken a hands-off approach generally,” notes Flores. “We may see greater pressure on NFT marketplaces to comply with takedown requests of trademarked and copyrighted projects.”

What should brands and artists take away from it?

“Any brand that has artistic aspirations but has not yet registered its trademarks in the class relevant to NFTs should do so immediately,” advises Scafidi.

Meanwhile, “artists should proceed with caution when incorporating others’ trademarks into their work, asking themselves what statement they’re making and whether the trademark is relevant to that artistic expression. It’s also important for artists who use others’ trademarks to make an effort to ensure that consumers won’t think their work is affiliated with the brand, a common assumption in the age of frequent fashion/art collabs.”

Flores advocates for more education and communication between both parties — i.e., fashion brands working with digital artists in an official capacity to explore the NFT world.

“This is a call to legacy brands to understand what is happening with this next generation. They are comfortable with collecting exclusive things digitally and want to see their favorite products and brand names wherever they go,” he says. “Brands should encourage community collaborations and have a way to help plan for and reward user-generated content and artistic works that help shine light on their products. Many brands pay huge sums to films, musicians, and sports organizations for product placement. Getting a top brand into web3 and metaverse should be approached in a similar way. I would love to see more brands such as Tommy Hilfiger, Dior and Fenty Beauty lean in to web3, but work with a team that understands the space so they can enter the right way.”

What happens next?

As for the battle between Hermès and Rothschild, specifically, the latter can still appeal the decision. “What happened today was wrong. What happened today will continue to happen if we don’t continue to fight,” Rothschild wrote on Twitter Wednesday. “This is far from over.”

However, Scafidi argues that, “since the judge’s earlier rulings on which kind of trademark infringement standard to apply generally favored Rothchild, he would have a difficult time arguing that the jury verdict should be overturned.”

It’s also likely we’ll continue to see similar litigation pop up. Currently, all eyes are on Nike’s lawsuit against StockX: The resale platform known for selling sneakers like commodities launched a collection of NFT versions of Nike sneakers in early 2022 without the brand’s approval or involvement; Nike argues that StockX “almost exclusively used Nike’s marks to launch its Vault NFTs because it knew that doing so would garner attention, drive sales and confuse consumers into believing that Nike collaborated with StockX on the Vault NFTs,” per the filing.

“Trademarks are perhaps the most valuable assets of a fashion house — designers come and go, boutiques open and close — but, with apologies to De Beers, a trademark is forever,” says Scafidi. “At the same time, trademarks can become powerful symbols, compelling to both artists and con artists, from counterfeiters to techies minting NFTs. As long as brands have to defend their trademarks against others who want to exploit them, we will see similar cases arise.”

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Source: Fashionista.com