Scroll Top

NFTs and Trademark Infringement: Hermès v. Rothschild – The MetaBirkins Debate

Introduction to Trademark and Trademark Infringement

A trademark is a symbol that can be used to separate the products or services of one company from those of other companies. Its capabilities to identify the products or services of one firm from those of other enterprises are directly related to its functions. The first function of trademarks is to act as a source identifier. By allowing consumers to easily distinguish a product’s origin from other items without being confused, trademarks assure consumers that a product is indeed from that origin, as was determined in Hoffman-La Roche v. Centrafarm. Companies, in general, vehemently protect their trademark, for it has immense value in terms of investment and advertising as well. Simply put, trademark infringement is the unpermitted use of a trademark. This could be in relation to products or services and could cause misunderstandings, deception, or confusion regarding the true source of a good or service.

Non-fungible Tokens (“NFTs”)

NFTs are individually numbered digital records of data that are stored on a blockchain. NFTs are linked to a larger digital file that is too big for a blockchain to contain. When trading or selling digital assets, it is suggested that the digital record can be utilised to demonstrate that the NFT owner is the true owner of the original digital file. Leveraging NFTs has, in part, given digital artists the ability to claim ownership of an original version of their work through the NFT, which can be monetised. Notably, it is uncertain how far and how broadly existing intellectual property rights (“IPR”) will extend due to the technological and decentralised nature of NFTs. The ongoing Hermès v. Rothschild is the first of its kind, dealing with NFTs and how IPR principles will be applied in such cases.

Hermès v. Rothschild

Hermès International (“Hermès”) filed a lawsuit against Mason Rothschild on January 14, 2022, alleging trademark infringement and dilution, misappropriation of its BIRKIN trademark, cybersquatting, false designation of origin and description, and harm to business reputation following the release of MetaBirkins, a collection of 100 NFT Birkin bags coated in faux fur in a variety of colours and patterns. The issue arose when Rothschild created and sold 100 NFTs in November 2021 that was linked to an image of a digital Hermès BIRKIN bag decorated with faux fur, prints, polka dots, and artwork. This lawsuit, filed in the Southern District of New York (“SDNY”), raises new concerns that compel the convergence of constitutional law, intellectual property law, technology, and the law of fashion.

Hermès claimed that Rothschild’s use of the brand MetaBirkin to advertise and the metabirkin.com website constituted trademark infringement and dilution. Hermès asserted that Rothschild’s NFT collection is “likely to induce consumer confusion and error in the minds of the public” due to the enormous power of its Birkin mark. Rothschild lacked the authorisation to use its Birkin brand and clearly benefited from it through the sale and resale of NFTs. Therefore, Hermès contended that MetaBirkins misrepresent that Hermès has authorised, endorsed, or approved the products supplied by Rothschild while in reality, they do not.

First, according to Rothschild, his MetaBirkins are not in the first place commercial assets (as Hermès views them), but rather Rothschild’s speech, art, and expression, all of which are First Amendment-protected. Rothschild based his argument on the precedent outlined in the case of Rogers v. Grimaldi,  (“Rogers”), which allows the use of trademarks in creative works so long as they are not artistically significant or create a misleading designation of origin. Furthermore, trademarks only cover goods and services that are logically connected to the goods and services that are expressly included in the registrations. While MetaBirkins are digital graphics, Hermès’ trademarks are for leather items. Second, Rothschild argued that his marketing and promotion of MetaBirkins falls within the ‘fair use’ defence, citing Andy Warhol’s series of Campbell Soup Cans. Third, Rothschild highlights the fact that First Amendment protections are valid when NFTs are used for authentication.

SDNY issued a reasoned decision on May 18, 2022. On one hand, it was found that MetaBirkins met the criteria for artistic works; the use of NFTs did not transform a photograph into a ‘commodity’, which is immune from First Amendment protection. However, SDNY found that Hermès adequately supported its argument that Rothschild’s use of ‘MetaBirkin’ was expressly deceptive as to source, sponsorship, or association and that it was not aesthetically relevant to the works.

Firstly, under Rogers,  the use of a trademark in an artistic work is actionable only if the mark: (1)has no ‘artistic relevance’ to the underlying work; or (2)explicitly misleads as to the source or content of the work. If consumers typically identify a product’s source by its mark, then the employment of a mark alone may deliberately mislead consumers regarding the source, which brings us to the second element of ‘explicitly misleading’. Owing to the reputation that has been built around the trademark Birkin, it is not surprising that consumers will assume that something named ‘Metabirkin’ is associated with Hermès, thereby being explicitly misleading. Second, despite being appropriated, Warhol’s famous Campbell’s Soup Cans are considered to be non-infringing because the general public is unlikely to believe that the painting is sponsored by the soup company. However, consumers are likely to see MetaBirkins in association with Hermès themselves. Thus, while the argument of MetaBirkins as an artistic expression is valid, the use of the name ‘Birkin’ should not be permitted. Thirdly, there is a possibility that consumers will confuse two trademarks when their visual representations are so similar to one other and the products or services they are used to identify are so closely related. While no one would confuse a digital MetaBirkinswith a leather handbag, consumers may invest in MetaBirkinsbased on the assumption that they are purchasing something that is associated with Hermès’ Birkin bag. This is a situation where there is a likelihood of association, as was reiterated in Sabel v. Puma. Although the goods in question are not similar, the use of a similar mark means that consumers are confused about where the goods are originating, thereby defeating the function of trademarks serving as source identifiers. Fourthly, as was held in Interflora v. Marks & Spencer, trademark dilution refers to the notion that the proper function of trademark law should be to safeguard the proprietor’s assets, labour and the goodwill of the mark. With the growing popularity of NFTs, people may think of the Birkin bag and MetaBirkins as being associated with Hermès. This is likely to result in trademark dilution on account of blurring and free-riding.

Conclusion

The MetaBirkins case has received a lot of attention since Hermès first filed the suit, owing to its status as one of the first legal actions to concentrate on the intersection of trademarks and NFTs and its attention to crucial issues, such as the extent to which “real” world trademark rights extend to the virtual world. Most of the existing problems with association and free-riding on the brand name would not exist today if Rothschild had not chosen the brand name ‘Birkin’. This is why it is likely that Hermès will win this lawsuit. However, only time can tell how SDNY will rule. On December 30, 2022, the SDNY court indicated in a succinct order that a trial will start on January 30, 2023, and that an opinion outlining the decision on the summary judgement will be released by January 20, 2023.

Author(s) Name: Sandhya Narayanan (Jindal Global Law School)