Infringement is still infringement, even in the metaverse: New York jury finds “MetaBirkin” infringing, not protected artistic expression

White & Case Tech Newsflash

A nine-person jury in the Southern District of New York has found that "MetaBirkin" NFTs violate Hermès International SA's rights in its "Birkin" trademarks.¹ This is the first trial to consider the intersection of NFTs and trademark law, with big implications for where to draw the line between artistic expression and trademark infringement for blockchain-enabled digital assets.

“MetaBirkin” NFTs

In late 2021, Mason Rothschild created and sold 100 "MetaBirkin" NFTs, which depict iconic Hermès "Birkin" handbags covered in colorful digital "fur" instead of leather. Rothschild, who claimed to be making artistic commentary on animal cruelty in real-world luxury fashion, priced each NFT at $450 and received a royalty on downstream sales. Hermès successfully took down what it considered to be infringing digital products from the OpenSea NFT marketplace. But, as often happens in online enforcement, Rothschild moved to a different NFT marketplace and continued to market his NFT collection through Discord – the new social media darling of the Web3/NFT generation. He also sent a bold response to Hermès's demands, arguing his works constituted artistic expression, fully shielded by the First Amendment.

Hermès sued Rothschild, asserting trademark infringement, dilution, cybersquatting, and unfair competition. Hermès "Birkin" bags, named after actress Jane Birkin, and handcrafted by artisans, are highly coveted luxury goods, selling for tens and even hundreds of thousands of dollars.

A central issue in the case was whether "MetaBirkin" NFTs are forms of artistic expression protected by the First Amendment or commercial uses that are likely to cause consumer confusion and thus infringing.

The jury found for Hermès on all counts. It found that even though the "MetaBirkin" NFTs were "at least in some respect works of artistic expression,"² Rothschild intended to confuse potential consumers and, therefore, the First Amendment did not shield him from liability. The jury awarded Hermès $133,000 in damages.

Two critical rulings by Judge Rakoff

Two rulings by Judge Rakoff may have impacted the jury's decision.

First, in his order denying the cross motions for summary judgment, Judge Rakoff held that the decades-old Rogers v. Grimaldi test for artistic works applies, as opposed to the Gruner + Jahr likelihood-of-confusion test for trademark infringement. Judge Rakoff noted that the "touchstone of the inquiry, then, is whether the trademark was used to mislead the public about the origin of the product or the parties that endorse or are affiliated with it," as compared to furthering plausibly expressive purposes.³ Rogers v. Grimaldi test entails a two-part inquiry: (1) whether the use of the trademark in an expressive work is artistically relevant to the underlying work; and (2) if it is, whether it is explicitly misleading of the source or content of the work. While Judge Rakoff specified in his ruling that Rogers v. Grimaldi applied for the purposes of those motions he decided, it is clear from the jury instruction on the First Amendment that the use of the Rogers v. Grimaldi test for artistic works carried over to trial.⁴

Second, Judge Rakoff excluded the testimony of one of Rothschild's key experts, art critic Blake Gopnik. Gopnik would have testified that "MetaBirkin" NFTs are akin to Andy Warhol's depictions of Campbell's Soup Cans – putting them in a larger artistic context. Importantly, the jury did not hear testimony comparing "MetaBirkins" to these iconic works of pop art.

What's next

This eagerly awaited verdict sheds light on how the courts will treat NFTs that incorporate others' intellectual property in the name of artistic expression. Some have decried the verdict as setting up a precedent that favors big brands over small artists, but the future applications of this case are far from conclusive. The question of trademark infringement has long been, and will continue to be, highly fact-specific, centered on questions like the strength of the asserted marks, the intention behind the uses, and consumer impressions as measured in methodologically sound surveys. This case is not the final word on the matter, and at least the following questions linger:

• Would the result have been the same if the BIRKIN marks and trade dress were used not as stand-alone NFTs but as part of a larger metaverse world, akin to the depiction of buildings, objects, and third-party trademarks in a movie or a video game?
• Here, the identity of the defendant was no secret, and Hermès could take advantage of the court system to stop infringing sales. Ability to enforce, however, will be far less clear when dealing with situations where the identity of a defendant behind an NFT drop is unknown or where the uses involve truly decentralized platforms – making it challenging to shut down infringing uses.

_{1 Hermès Int'l v. Rothschild, No. 1:22-cv-00384-JSR (S.D.N.Y Jan. 14, 2022).
2 Instructions of Law to the Jury, Hermès Int'l v. Rothschild, No. 1:22-cv-00384-JSR, ECF No. 143, at 21.
3 Hermès Int'l v. Rothschild, No. 1:22-cv-00384-JSR, Slip. Op. at 11-12 (S.D.N.Y Feb. 2, 2023).
4 Instructions of Law to the Jury, at 21-22.}

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