MetaBirkin Verdict First in NFT-Brand Landscape

In one of the most-watched cases of 2023 (and 2022), on Wednesday a federal jury in New York returned a verdict in favor of luxury brand Hermès International SA in the “MetaBirkin” nonfungible token (“NFT”) case. Hermès had sued digital artist Mason Rothschild for trademark infringement of the “Birkin” trademark after Rothschild had created digital images depicting different variations of Hermès’ Birkin luxury bag and then selling 100 of these NFTs in 2021. Hermès argued that this was a “get rich quick” scheme by a “digital speculator”, and Rothschild was misappropriating the goodwill in Hermès’ famous intellectual property to create and sell his own line of products. The verdict returned by the jury awarded $133,000 in damages to Hermès – consisting of $110,000 of estimated profits from the sale of the NFTs and $23,000 for cybersquatting for registering the domain

The case was so highly anticipated because it was the first major case involving the interaction of real-world trademarks with the “metaverse”. To what extent could digital artists incorporate real-world brands into their commercial artwork? What degree of difference was there between real-world branded commodities and their digital counterparts? Could existing brands expand into the digital world and sell digital clothing and accessories? What impact would this case have on other pending disputes involving real-world brands and digital items? Could this case have an impact on trademark prosecution where digital goods might be considered to be related to real-world goods? All of these questions were at play in the Hermès case.

Rothschild, whose real name is Sonny Estival, argued that his activities were protected by the First Amendment, and that he had the right to use the term “MetaBirkins” to describe what his art depicted. “The fact that I sell the art using NFTs doesn’t change the fact that it’s art,” Rothschild said at the outset of the case. “It’s quite clear from reading Hermès’ complaint that they don’t understand what an NFT is, or what NFTs do.”

The jury disagreed with Rothschild’s position, and as is common with new decisions it is unclear exactly the impact the case will have on future litigation. Lawyers and court-watchers will pounce on this decision and we should expect to see articles and social media posts galore. At the very least, digital artists should pause to reflect on why they need to use a third-party’s brand and to what extent. As technology advances and intellectual property expands into new arenas, courts have a preference for applying existing legal tests to these new situations. Expect that courts will do the same here and apply traditional notions of trademark fair use until we see otherwise. We should similarly expect to see more blockchain damages experts equating cryptocurrencies (like the Ethereum used to purchase these NFTs) to real-world damage dollars. This verdict will almost certainly embolden brand owners to more vigorously police their brands in the metaverse, and digital creators will need to either make sure they are comfortable proceeding in the face of a cease and desist letter or fold up shop. We should see a number of similar or related cases come down in the near future, and before long artists and brand-owners alike should have more clarity about what is and isn’t permitted.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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