Hermes filed a lawsuit against a US NFT artist and won in the first instance jury trial. This article will analyze Hermes’ litigation strategy and provide recommendations for creators and operators.
Background For details, please refer to the previous article 【Blockchain/NFT/Legal】 Trademark Issues in the Metaverse and NFTs – A Look at the Hermes Birkin Bag Trademark Dispute, which briefly discusses future trademark issues in the metaverse and NFTs based on the Federal District Court’s decision.
In summary, Rothschild is an artist who created a series of artworks depicting 100 different designs of the Hermes Birkin bag, named “METABIRKINS NFT,” and all NFT images are sold on Rothschild’s website: https://metabirkins.com
The Hermes Birkin bag is a well-known luxury handbag that can cost hundreds of thousands of dollars. Hermes owns the US federal trademark registration for the word mark “BIRKIN” (registration number 2991927) and the commercial design for the BIRKIN handbag (registration number 3936105).
Jury verdict result
On February 8th, 2023, the jury found that Mason Rothschild of METABIRKINS NFT was guilty of three charges: trademark infringement, trademark dilution, and domain name squatting, and ordered him to pay $133,000 in damages to Hermès. The ruling from the Southern District of New York is quite unfavorable for Rothschild, and the case may be appealed to the Second Circuit Court of Appeals, where the appellate court may review the legal issues decided by the jury. We will continue to monitor this space.
This judgment was based on the decision of the jury, and there is no detailed reasoning available for reference or analysis. However, two key points can be analyzed from the documents submitted by both parties and other relevant documents.
Trademark litigation strategy Hermès provided the following information during the litigation process:
- Rothschild’s interview in which he mentioned the intention of the METABIRKINS series to replace Birkin
- “for me, there’s nothing more iconic than the Herm[e]s Birkin bag. And I wanted to see as an experiment if I could create that same kind of illusion that it has in real life as a digital commodity.”
- “now you’re able to bring that into the metaverse with these iconic NFTs”; and that “I feel like the difference between the two is like getting a little bit blurred now because we have this new outlet, which is the metaverse, to showcase, showcase them in our virtual worlds, and even just show them online.”
- Hermès conducted a survey on whether consumers were likely to be confused
- Hermès gathered evidence on consumer subjective understanding, the creator’s intent, and the defense, based on the key point of trademark disputes: the attitude of consumers and their understanding of the origin of the product. Trademark law requires the court to determine whether consumers are likely to believe that the allegedly infringing words, symbols, packaging, or product designs are used, endorsed, created, or sponsored by the brand owner.
This paragraph should be particularly noted by business operators and creators. Copyright law does not consider the attitude of consumers and focuses on the purpose and characteristics of the work, the nature of the original work, the substance of the materials used, and any impact on the original work market caused by the use of the work. Therefore, the legal effects and possible liabilities arising from the use of others’ trademarks or copyrights for different products and designs require different considerations in terms of strategy. After the strategic decision is made, any external statements should be consistent with it.
The practical aspects of NFT art
As mentioned in a previous blog post, the judge’s interim ruling stated that special attention should be paid to the functionality and usability of digital art such as NFTs.
“The nature, function, and potential of NFTs in the metaverse may be included in the judgment, as the court stated that if the MetaBirkins NFT handbags can be worn as virtual handbags in the virtual world, then they would be considered goods rather than art.”
Hermès repeatedly mentioned in the litigation documents that Rothschild’s sales content was “digital handbags,” not “digital images.”
Rothschild is making it possible for players to import their collections of NFTs into the game and turn them into usable virtual wearables in other art series called ‘I Like You You’re Weird’.
After the verdict of the regional court jury, it is expected that the case will continue to be appealed, and the subsequent appellate court will engage in a more detailed legal battle on this issue. This will become an important case leading the controversy between NFTs and trademarks of physical goods, and it is worth continuing to pay attention to. Creators and operators should pay special attention when planning and issuing products, as using others’ trademarks or works is not impossible, but there are different considerations in the overall market and legal strategies of the battle. Understanding the risks and the content of the defense and offense will be the key to the smooth launch of the product. If you have any questions, feel free to use the form below to discuss them together!
If you want to know more, please do not hesitate to contact me.