Background

The ‘ball’ in this case started ‘rolling’ when Rothschild presented his MetaBirkins collection at Art Basel Miami in December 2021 and began selling it through NFT platforms like OpenSea. The collection consisted of 100 NFTs with digital images of Hermès Birkin bags in various designs. The starting price for one copy was 0.1 ETH (about $450 at the time). The artist was said to have soon sold more than $1 million worth of digital handbags.

After a formal notice from Hermès, OpenSea removed the MetaBirkin collection from its platform. Rothschild, however, refused to stop selling his virtual handbags. He invoked his artistic freedom of expression based on the First Amendment of the U.S. Constitution.

Unimpressed with this argument, Hermès decided to file suit in the U.S. District Court for the Southern District of New York. Finding in favour of the French fashion house, the jury decided that Rothschild was guilty of trademark infringement (among other things). The artist was also convicted of cybersquatting by unlawfully registering the MetaBirkins.com domain name to promote the NFTs.

The case and ruling have been followed with great interest by IP professionals worldwide, as it is one of the first tests of whether existing IP law, and in particular trademark law, is sufficiently resilient to deal with the emergence of new Web 3.0 applications such as NFTs.

Of course, there is still a long way to go and the (case) law will continue to evolve. However, cautiously one or two conclusions can be drawn from this case.

Trademark law holds up in Web 3.0

The law often runs behind the times. Rarely is legislation prepared for technological (r)evolutions. Instead, legislation has to be adapted a posteriori to the new reality.

In the field of intellectual property, this is very noticeable in copyright law. Just about every major adaptation of copyright law has been caused by a technological (r)evolution that brings with it new exploitation opportunities. Ongoing innovations in the digital world continue to put pressure on the legislative framework. The recent NFT hype (which is not as new as one might think, as the first NFT dates from 2014) is just one of them.

Compared to copyright law, trademark law overall seems a bit more digital-proof. Still, the sudden ‘explosion’ of the NFT phenomenon has raised questions. One key question is whether and to what extent trademark rights can be enforced against NFTs, which use a trademark, and other applications from the new Internet (e.g. the metaverse)? That question was also at issue in the MetaBirkins case.

The New York jury’s answer is positive. So, trademark holders, and certainly holders of well-known brands such as Hermès, which enjoy broader protection than less known brands, can breathe a sigh of relief: their rights are also valuable in the new digital world and can be enforced.

This will, obviously, be easier today for trademarks registered (among others) for NFTs. This is possible since the 1 January 2023 update of the Nice classification (the list of goods and services for which trademarks can be registered). Class 9 now explicitly refers to NFTs ("downloadable digital files authenticated by non-fungible tokens [NFTs]").

Despite the attention that has gone to the MetaBirkins case, it is not the first time that a court has ruled that an NFT amounts to a trademark infringement. While this is the first U.S. case, the first known case is from Europe. In July 2022, a court in Rome ruled that the "minting" and commercialization of NFTs with the "Juventus" trademark infringed the trademark rights of the football team of the same name.[1]

An NFT can be "art" but...

When NFTs relate to artistic creations, artistic freedom of expression quickly comes into play in their creation and sale. The question, then, is whether and to what extent artistic freedom may take precedence over trademark law.

Rothschild invoked the U.S. Constitution’s First Amendment ("freedom of speech"). He defended his MetaBirkins by arguing that the First Amendment gave him the right to create art based on his interpretation of the world around him. According to him, the MetaBirkins are "a playful abstraction of an existing fashion-culture landmark" reinterpreted by him, and also an indictment of the use of fur.[2]

Hermès disputed the application of artistic freedom, claiming that Rothschild had no real artistic intent (more rather a commercial purpose) in promoting and selling the NFTs.

At a preliminary stage the court swept this aside, stating: "a court may not strip an artistic work of First Amendment protection merely because the artist seeks to market and sell his creative output."

This turned out to be a Pyrrhic victory, as the jury ultimately decided that Rothschild could not hide behind artistic freedom. So, the trademark proprietor eventually prevailed.

Yet the final word has not been said, as Rothschild has announced an appeal.

The future will tell whether Hermès will win the war... or whether its victory was only virtual.