Hermès Case Tests IP Rights with Virtual Birkin Bags

The Birkin handbag, made by French luxury brand Hermès, is a symbol of wealth and exclusivity. For decades, it has been sold through exclusive shops and mysterious wait-lists at prices that reach tens of thousands of dollars or more.

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In 2021, an entrepreneur and artist set out to offer another way to own a Birkin, with a digital nonfungible token. Mason Rothschild created a series of 100 digital images he called MetaBirkins, depicting fur-covered purses in the same shape and style as the Hermès RMS 0.06%. A luxury product that is sold as a digital token on a virtual marketplace can sometimes sell for prices similar to the real thing. In the case of handbags, this can be a significant amount of money.

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On Monday, Mr. Rothschild's MetaBirkins will go on trial in New York, in a case that tests the boundaries of trademark law and freedom of expression. Hermès is seeking to stop Mr. Rothschild from using its brand, and is asking for the destruction of the NFTs, as well as Mr. Rothschild's profits and other financial damages. Mr. Rothschild, however, argues that his MetaBirkins are protected by the First Amendment as artwork.

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Neither Hermès nor its lawyers responded to requests for comment. Mr. Rothschild also declined to comment on the matter. This trial is seen as an important early test of how a company can protect its rights against virtual assets that it didn't authorize. This case will set a precedent for how similar cases will be handled in the future.

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As virtual reality expands, companies are worried that their brands will be used and abused in the unregulated metaverse. Thomas Brooke, an intellectual property lawyer with Holland & Knight LLP, said this is a top concern for businesses. This case will help us understand how to deal with NFTs better, according to Mr. Brooke. With any new technology, courts often have to figure out how to apply existing law.

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NFTs have become increasingly popular in recent years as investors have flocked to marketplaces where tokens are sold. However, lawsuits have also followed, with retail brands and other companies claiming trademark and copyright infringement.

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Nike Inc. is suing online marketplace StockX over virtual sneakers depicting the brand’s well-known swoosh that it sold as NFTs in combination with the resale of Nike sneakers. StockX denied the claims, saying that the introduction of the tokens expedites the process of authenticating and processing the physical items it sells.
Other cases have been resolved without going to trial, including a copyright disagreement between Hollywood director Quentin Tarantino and Miramax LLC regarding the director's plan to auction off exclusive scenes from the 1994 film "Pulp Fiction" as NFTs. In another case, Jay-Z's label, Roc-A-Fella Records, prevented the label's co-founder from selling the rapper's debut album as an NFT.

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In the Birkin matter, Mr. Rothschild received a percentage of each NFT sale. He said his project was designed to explore the issue of conspicuous consumption. The images, he said, aren’t replica Birkins, but rather art that depicts an imaginary bag. Mr. Rothschild said that his project is not about selling replica Birkins, but rather about exploring the issue of conspicuous consumption through art.

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"My MetaBirkins project was an experiment to explore where the value in the Birkin handbag actually lies - in the handcrafted physical object, or in the image it projects?" Mr. Rothschild said in a legal declaration. He compares his work to Andy Warhol's famous prints depicting Campbell Soup's iconic cans. The soup maker, after initial skepticism, didn't take legal action against the pop artist and later embraced his work.

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The lawyers for Mr. Rothschild are basing their argument heavily on a 1989 court case in which an appeals court rejected claims by actress Ginger Rogers. Rogers had claimed that the Italian director Frederico Fellini's movie "Ginger and Fred" misled the public into thinking she was connected to the film. The ruling endorsed protections for artistic expression, so long as it doesn't create consumer confusion.

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The precedent set by the Rogers case is currently being revisited in a case pending at the Supreme Court. The makers of Jack Daniel's are asserting trademark claims against a company that made a dog toy that is a replica of the brand's whiskey bottle.

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In January 2022, Hermès filed a lawsuit against Mr. Rothschild, accusing him of being a "digital speculator who is seeking to get rich quick." The company argues that his MetaBirkins diluted its brand and confused consumers, while allowing him to profit unlawfully off the goodwill of its sought-after luxury product.
The company said in court documents that he is seeking to make his fortune by swapping out Hermès' 'real life' rights for 'virtual rights.'

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Hermès has said that it hasn't yet minted or sold any NFTs, but Mr. Rothschild's actions have preempted its ability to offer products and services in virtual marketplaces.
U.S. District Judge Jed Rakoff in Manhattan has rejected requests from both sides to rule in their favor ahead of the jury trial, which begins with jury selection Monday.
New York University law professor Amy Adler said the central issues in the case are in many ways the latest chapter in the age-old debate about the applicability of trademarks in the world of art. Still, she said, it's unclear whether this case will have a lasting impact on intellectual property law.