On February 8, 2023, a federal jury awarded Hermès International and Hermès of Paris, Inc. (“Hermès”) $133,000 in its trademark lawsuit against designer Mason Rothschild. Hermès sued Rothschild for selling non-fungible tokens (NFTs) of METABIRKINS in the metaverse, thereby infringing and diluting Hermès’ BIRKIN mark that is used for luxury handbags.

A New Frontier: The Metaverse and NFTs

NFTs are exchanged in the metaverse. The metaverse is a virtual place teeming with many of the same activities that occur in the physical world – spending time with friends, playing games, shopping and going to sporting events or concerts.

This case is the first to provide some guidance in the U.S. as consumers navigate the metaverse and NFT market, while proprietors scramble to protect their valuable trademarks.

What makes the Hermès case significant is that the infringing goods are virtual, not physical, replicas of Hermès’ BIRKIN^® bags. Rothschild created the MetaBirkin bags as NFTs, which are digital assets that are rare, unique collectibles and can be extremely valuable. To put the value of owning an NFT into perspective, think of the value of owning the physical original of the Mona Lisa or perhaps The Beatles’ masters.

Hermès Bags a Win

A federal jury sitting in U.S. District Judge Jed S. Rakoff’s court in the Southern District of New York found Rothschild liable for trademark infringement, dilution, and cybersquatting (due to his registration of the domain name MetaBirkins.com).

Hermès filed its lawsuit against Rothschild in January 2022. Hermès alleged that Rothschild intentionally sought to seek his fortune by swapping out Hermès “real life” rights for “virtual rights.” Rothschild admitted that he chose to sell his NFTs as METABIRKINS because a BIRKIN handbag is extraordinarily valuable in the physical world. Additionally, he used the BIRKIN mark not only to identify his NFTs but also for his social media accounts and his Discord channel, and he registered the MetaBirkins.com domain name.

Rothschild first sold a single NFT, known as the “Baby Birkin NFT”, that consisted of an animation of Hermès’ BIRKIN handbag with a fetus shown on top of a transparent version of the bag. The Baby Birkin NFT was sold for $23,500 and later resold for $47,000. Due to the success of the Baby Birkin NFT, Rothschild then created a line of 100 digital collectibles created on the Ethereum blockchain and featuring BIRKIN handbags covered in fur and listed for sale under the METABIRKINS mark. Rothschild was rewarded handsomely for selling the METABIRKIN NFTs. By January 6, 2022, the METABIRKINS NFTs surpassed $1.1 million in sales.

Rothschild argued he was an artist and, therefore, he was entitled to a First Amendment “fair use” defense. According to Rothschild, like Andy Warhol’s work of art, Campbell Soup Cans, selling his METABIRKINS NFTs was not his attempt to pass off his artwork as being associated with BIRKIN handbags; he was simply selling the “expression” of a Birkin.¹

However, in the trial, Hermès presented evidence of news reports that falsely stated that METBIRKINS was connected to or approved by Hermès which bolstered its claims that the NFT artwork was causing confusion, a key element in establishing trademark infringement.

The Hermès jury disagreed with Rothschild and, in handing Hermès a victory, gives both metaverse designers and brand owners some indication of how to avoid liability and how to prevail against infringers, respectively. However, brand owners should keep in mind that trademark decisions are fact specific, and some of the facts in the Hermès case may have swayed the jury in finding for Hermès.

Minding the Metaverse for Brand Protection

As demonstrated by this case, brand owners like Hermès that are not interested in participating in the metaverse can nonetheless be drawn into it, and forced to expend resources to protect their brands in that virtual venue.

Policing brands in the metaverse presents a significant challenge. While the metaverse is still developing, sales that rely on the goodwill of a brand can accrue to someone other than the brand owner. Brand owners interested in offering their goods and services virtually in the metaverse should consider taking proactive measures to protect their marks, such as filing trademark applications. Even brand owners without immediate plans to enter the metaverse should diligently police their brands in that space and issue takedown notices to platforms where their protected brands are being infringed.

¹ Andrew Rossow, Esq., The Hermès Lawsuit May Dictate the Future of NFTs, NFT NOW, Jan. 30, 2023, https://nftnow.com/guides/how-the-hermes-lawsuit-could-determine-the-future-of-trademark-rights-in-nfts/