Handbags in the Metaverse
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Background
In December 2021, Rothschild created (or 'minted') a collection of 100 non-fungible tokens (NFTs) inspired by the Birkin handbag brand, which he titled 'the MetaBirkins'. NFTs are an increasingly popular means of owning digital assets (for a detailed explanation of what NFTs are, how they represent assets and how ownership of NFTs can be transferred, please see our earlier article: NFTs: a legal perspective - ownership).
The Birkin handbags that inspired the MetaBirkins are produced and sold by Hermès, which owns both the BIRKIN trade mark and trade dress rights in the Birkin handbag design worldwide. Rothschild began selling MetaBirkins on the OpenSea NFT trading platform for up to $46,000 per MetaBirkin token from 3 December 2021. OpenSea subsequently removed the NFTs following a complaint of IP infringement from Hermès. However, Rothschild continues to sell his bag collection via NFT exchange platform LooksRare. Hermès filed a trade mark infringement complaint against Rothschild in the United States District Court in the Southern District of New York on 14 January 2022 and an amended complaint on 2 March 2022.
Hermès' argumentIn short, Hermès alleged that Rothschild appropriated the Birkin brand in order to 'get rich quick' by creating, marketing, selling and facilitating the exchange of the MetaBirkins. Hermès claimed that Rothschild had infringed its rights in the BIRKIN trade mark by simply adding the 'generic prefix "Meta" to the famous trademark BIRKIN' and that the artist's 'confusing and dilutive use' of Hermès' trade mark had brought the artist 'great financial success'.
Rothschild's response
On 9 February 2022, Rothschild filed a Motion to Dismiss Hermès' complaint, contending principally that the MetaBirkins were artistic works protected by his First Amendment rights to freedom of expression. In US law, expressive works can infringe trade mark rights if they have no 'artistic relevance' or they 'explicitly mislead as to the source or the content of the work' (see US case Rogers v Grimaldi 875 F.2d 994 (2d Cir. 1989)). Rothschild argued that the NFTs were artistically relevant as a 'comment on the fashion industry's animal cruelty' and likened his use of Hermès' trade mark and design rights to Andy Warhol's depiction of iconic brands such as Campbell's Soup and Coca-Cola. He further argued that the MetaBirkins did not explicitly mislead as to their origin.
Comment
The decision in this case will be informative for other brands, fashion-related or otherwise, as to their IP enforcement rights in the Metaverse. If the court finds in Hermès' favour, this will send a clear message to artists incorporating IP rights protected in the real world into their digital artwork. In contrast, a decision in favour of Rothschild will raise serious questions as to whether existing rights and registrations in the real world are sufficient to protect brands in the digital asset world.
Such cases appear to be on the up and look set to stay. For example, Nike's complaint against StockX LLC, (an online marketplace offering Nike-branded NFTs) is another ongoing dispute with the enforceability of IP rights in the Metaverse at issue. It will be interesting to see how this area develops in light of these cases.
In the meantime, brands might want to consider adjusting their trade mark portfolios by registering their marks to cover software under the 'Nice Classification' system, for increased IP protection in the Metaverse.
With thanks to trainee, Richard Gorman, co-author of this publication.