The Hermès Lawsuit May Dictate the Future of NFTs

Mason Rothschild was sued by Hermes International, a French fashion house, for trademark infringement after the release of MetaBirkins. This is a collection 100 NFT Birkin bags that are covered in faux fur and come in a variety of colors.

The Birkin bags of Actual Hermes are highly sought-after and expensive, making them a popular choice for society’s elite. You must establish a rapport with a sales representative and build a history of purchasing. This is why the luxury brand that values exclusivity and does all it can to keep out imitations, even NFT ones.

The trial is scheduled to start in the Southern District New York on January 30, 2023. It will include new legal issues that require the intersection of constitutional law, intellectual property law, technology, as well as fashion.

Balancing “artistic expression” with real-world art

Hermes claims that Rothschild’s MetaBirkins NFTs violate the luxury brand’s Birkin trademark, which dates back from 1984. Hermes believes Rothschild’s NFTs collection, due to its Birkin brand’s strength, is likely to cause confusion and mistake in consumers’ minds. This is according to the Lanham Act. This federal statute covers trademarks, service marks and unfair competition.

Hermes further asserts that Rothschild did not have permission to use the Birkin mark, but also profited visibly from the unauthorised use of the trademark via the sale and resale NFTs.

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At the heart of Rothschild’s argument is the idea that he should be allowed to “create art based on [his] interpretations of the world around [him].” Rothschild has asserted a “fair use” defense under the First Amendment, explicitly referencing Andy Warhol’s

Campbell Soup Cans

He can use this series to justify why he should continue marketing and promoting the MetaBirkins NFT collection.

Although Warhol’s artwork looked identical to Campbell soup’s, subtle variations in the lettering and symbols made Warhol’s expressions stand out.
Rothschild argues that what he’s done with MetaBirkins is no different than Warhol’s 32-work campaign — he is merely selling the “expression” of the Birkin rather than trying to pass the artwork off as affiliated with the real thing.

Andy Warhol Campbell’s Soup, 1968

Speaking to Rothschild’s arguments, Hermès says that Rothschild is simply “seeking to make his fortune by swapping out Hermès’ ‘real life’ protections for “virtual rights,” choosing to capitalize on an already successful brand in order to generate profits for himself.

Learn about the landmark Rogers test (1989).

This case, and all others, is crucial to understand. The Second Circuit’s 1989 case Rogers. set out the criteria for when an artistic work is claimed to infringe a Lanham Act-protected rights. The Rogerstest protects any First Amendment rights and is still the standard for trademark infringement.

Rogers states thatthe use a trademark in artistic works is only possible if the mark is:

  1. Does not have any artistic relevance to the underlying work.

  1. Inexplicably misleads about the source or content

Referring to the second element, “explicitly misleading”, the Ninth Circuit ruled that the use of a trademark alone can mislead consumers as to a product’s origin if the mark is used by consumers.

This was further explained by Gordon, Inc., in which the jury found the defendant had “simply used Gordon’s mark with minimal artistic expression and used it in exactly the same manner that Gordon was using.”

Rothschilds motion to dismiss the case has been denied

U.S. District Judge Jed Rakoff denied a March Rothschild Motion to Dismiss, which allowed Hermes’ lawsuit to proceed.

Rothschild’s arguments in the 33-page Motion are not limited to First Amendment rights. Another crucial element is the Rogersartistic expression element. Rothschild explains that MetaBirkins NFTs provide commentary on “the animal cruelty inherent in Hermes’ manufacture of its ultra-expensive handbags.” He says that his NFT collection is protected by the First Amendment, and would fail the Rogerstest.

Rothschild states that as an artist, Rothschild is free to choose the topic they address and to depict objects that exist in the real world as they are seen. This is a reflection of his comments on animal cruelty and the movement for leather alternatives.

Rothschild cites two examples in the Motion. The first is the Second Circuit’s analysis of “Ginger and Fred”. This explains why Andy Warhol’s Campbell’s Soup Cans and his NFT collection are synonymous. MetaBirkins, on the other hand, are “not commercializable” assets.

Rothschild then argued that Rothschild’s use was “not explicitly misleading,” as required by Rogers. The defendant claims that the Birkin mark alone cannot prove explicit misleadingness, which would, according the brown court render Rogers null.

Some might interpret the MetaBirkins’ name as implying that Hermes “endorsed the work” or “had a role in its production,” but the Lanham Act does not apply when there is an “explicit misleadingness.”

Rothschild’s third argument centers around NFTs being used as authentication. This does not negate First Amendment protections. Rothschild argues that NFTs are a “new technological method” to authenticate his arm. This does not affect his First Amendment rights. Rothschild states that NFTs “merely point to a digital asset” but that they are not more.

He cites several cases in which courts in the Second Circuit applied Rogers, but only when the defendant was “selling work” rather than creative expression. It is now clear that speech that isn’t “purely commercial” or does more than just propose a commercial transaction is protected by the First Amendment.

Setting the scene for how IP law will be applied to NFTs

Other cases, including Nike/StockX, Miramax/Quentin Tarantino and Miramax/Quentin Tarantino are still in active litigation. However, Hermes’ lawsuit against Rothschild is certain to set the scene for how intellectual property will be applied to digital assets and NFTs. As luxury brands expand into the metaverse, and start their NFT projects, the courts will have to decide what it means to bring originality and balance artistic expression and the right of creation.

Although Hermes doesn’t currently operate in the metaverse, the brand is interested. However, it will be interesting for the brand to see how this case affects its view of how the world is changing and evolving around it.

You can find more information about Hermes’ lawsuit at Hermes International. Rothschild, U.S. District Court for Southern District of New York. 1:22-cv-00384

Andrew Rossow, an attorney and journalist, focuses on intellectual property and fintech law.

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