The non-fungible token (NFT) boom among luxury fashion brands recently made headlines again with a highly publicised trial involving the French fashion brand Hermès and its iconic Birkin handbags in New York. The case involved a prominent figure in the world of NFTs, digital artist Mason Rothschild. 

NFTs are digital assets that are unique, verified, and securely stored on a blockchain (a type of decentralised public digital database). In recent years, NFTs have gained particular popularity among luxury fashion brands, with recent examples being Balmain’s Barbie collection, and Burberry’s partnership with Mythical Games. The trial, which revealed that Hermès had its own plans to release various NFT projects, has wide implications for fashion brands’ future NFT ventures. 

Case Summary

The trial was heard in the US Southern District of New York Court, and revolved around Rothschild’s creation of 100 images of the Hermès handbag, the Birkin, digitally covered in fur, a project Rothschild called the ‘MetaBirkins’. Hermès alleged in its complaint that the ‘meta’ in Rothschild’s term referred to the digital metaverse, which was where Rothschild was selling the NFTs.

Rothschild sold NFTs of the images in the metaverse for a total of more than $1m, according to court records. Hermès took issue with the NFTs, claiming they were unauthorised and infringed on Hermès’ trade mark and intellectual property rights in both the name and appearance of the Birkin bags. Rothschild argued that the NFTs were merely a representation of the bags and that he had the right to sell them as such.

Decision

The court ultimately sided with Hermès, rejecting Rothschild’s argument that the MetaBirkin NFTs fell within ‘protected speech’ (a specific US right), and finding him liable for trade mark infringement, trade mark dilution and unlawful cybersquatting. This decision has far-reaching implications for the luxury fashion world and NFTs, as it sets a precedent for how NFTs can be used in the industry going forward. Jonathan Harris, a lawyer for Rothschild, said the decision marked a “good day for luxury brands” and a “bad day for artists”.

It is worth noting that the trade mark and design specifications on Hermès’ registered trade marks do not cover the metaverse. The EUIPO recently advised that rights holders who intend on using their registered rights in the metaverse should be extending their protection to cover, for example, ‘virtual bags’ in Class 18, or ‘NFT’ in Class 9. However, in this case the court found that this did not matter on the basis that the Birkin handbag design and word mark were considered famous marks. This should provide some comfort to other well-known brands who may have concerns that their trade mark and design registrations may not be wide enough to include the metaverse, as this case suggests that so long as the mark is sufficiently well known, it will be protected in the metaverse.

Comment 

US v UK

Rothschild appeared dissatisfied with the idea of a jury trial. Criticising the decision and the manner in which it was made on his personal Twitter account, he railed in a tweet at the idea that what “nine people off the street” say will now be considered “the undisputed truth”. He has since announced his intention to appeal the decision. Although the outcome of this case has received some criticism, it is likely that the same decision would have been reached under English law, based on Hermès’ intellectual property rights in the UK. Some commentators have questioned whether, in an area such as intellectual property law and taking into account the evolving technology of both the metaverse and NFTs, a jury is best placed to make these types of decisions. It will be interesting to see how UK judges tackle these issues in comparison to the jury trial approach of the US.

Enforcing IP Rights 

The outcome of this trial provides some guidance to NFT creators, artists and sellers: it is essential to ensure that NFTs are authorised and do not infringe on any trade mark or intellectual property rights. It is likely that brands will become more active in pursuing and enforcing any possible infringement of their rights through the use of NFTs in the metaverse, to protect their image and reputation.

Growth & Collaborations 

In spite of the challenges this case poses, the use of NFTs in the luxury fashion industry is expected to continue to grow, probably with a greater emphasis on collaboration and originality. Brands may partner with NFT and metaverse platforms to create NFTs, but with necessary agreements and licences in place. Recent NFT collaborations between Estée Lauder and Decentraland, and L’Oréal’s partnership with Meta on a metaverse start-up accelerator programme, are indicative of this trend. The Hermès decision is expected to support and endorse the high value of digital goods and NFTs and will no doubt be looked at favourably by some Web3 developers and brands entering the metaverse. However, it is clearer than ever that it is essential for NFT creators to be aware of the legal implications of their artwork and to ensure that their NFTs are not infringing on others’ protected rights.