Of Trademarks and Birkins: The Saga of NFT Jurisprudence

Against a black canvas of faint stars sits a digital recreation of an Hermès Birkin bag with a translucent, celestial skin revealing a fetus floating around in a swirl of smoke and clouds. Mason Rothschild and Eric Ramirez’s Baby Birkin was sold through an auction on Basic.Space on May 20th, 2021 for $23,500 — almost 2.5 times more than a real Baby Birkin, which retailed for $9,500 at the time. Jesse Lee, the founder of Basic.Space, told Vogue Business the creators wanted to capture “the cultural zeitgeist, including the popularity of the song by rapper Gunna entitled ‘Baby Birkin.’” The NFT was resold six months later for $47,000.

This was Rothschild’s first dance with the Birkin name, and it wouldn’t be his last.

Not Your Mother’s Trademark

At Art BASEL 2021, Rothschild revealed his MetaBirkins - 100 NFT versions of the Birkin handbag inspired by “the acceleration of fashion’s ‘fur free’ initiatives and embrace of alternative textiles.” The faux fur texture of the bags also took inspiration from artists like Bob Ross, Van Gogh, Rothko, and Kusama. The allowlist-based mint took place on December 2, 2021 with the MetaBirkin reveal on December 3rd. Within 48 hours, the collection traded just under 150 ETH ($600,000 at the time) and a floor price of 5.9 ETH ($23,600 at the time).

However, as hype around the collection built up, it was evident from the beginning that the general public was still very confused about the NFTs’ affiliation with Hermès.

By December 22, 2021, Rothschild had received a cease & desist letter from Hermès, alleging copyright and trademark infringement. OpenSea delisted the collection from their marketplace, leaving LooksRare as the only remaining marketplace at the time that would allow the listing and selling of the NFTs. Rothschild maintained his position that the MetaBirkins were a form of derivative and additive art, and thus completely legal under the first amendment of the United States Constitution. At the same time, the MetaBirkins website was updated with a new disclaimer at the end to indicate that the collection was not officially connected with Hermès in any way.

On January 14, 2022, Hermès International filed a complaint in a New York federal court, alleging that Rothschild infringed upon the Birkin trademark and violated their intellectual property.

This sets the stage for perhaps the most influential case yet to define the jurisprudence of NFT art.

Only Baby Birkin

Before diving into the main Hermès v Rothschild case, it’s important to examine why this lawsuit only came after the launch of the MetaBirkins collection and not when Rothschild originally released the Baby Birkin NFT. In their initial complaint, Hermès notes that the Baby Birkin was a “one-off” incident and so, implicitly, not worth the hassle of a legal affair. However, I do think it’s deeper than that.

The Baby Birkin NFT artwork was “art” in the way of understanding it to be a unique creation meant to offer commentary or perspective on an already existing piece of culture. The fetus modeled inside the bag is a play on words for the name — the Baby Birkin — and it could be argued that the artwork itself is the commercial appeal of the art, rather than the name, thereby it can more readily be considered as derivative art.

This, however, was not the case with the MetaBirkins. Hermès argued in its original complaint that the success of the MetaBirkins could be attributed to the fact that they heavily rely on the “Birkin” aspect of their existence. The Birkin trademark is used extremely often for this collection, from its name to its tagline (”Not Your Mother’s Birkin”) to the domain and social media presence — not to mention the appearance of the bags themselves, which are modeled after Birkins. Hermès argued that by hinging a large aspect of the commercial success of the collection on their Birkin adjacency, Rothschild was in violation of fair use and thus infringing upon their trademark.

(Free and) Fair Use

In traditional media, the fair use exception considers four key factors in determining whether a piece of media falls under fair use protection or not. The first is the purpose of the media at hand — usually, non-profit and educational purposes lend themselves to fair use consideration. Media students creating a sample trailer using bits and pieces of different movies for a midterm project would not open themselves up to copyright violations as their final product is meant for educational purposes. This also applies to whether a work is “transformative” enough for these purposes — has there been more added to the work or has enough been changed in order to consider it transformative enough?

The second factor is the nature of the copyrighted work. In essence, if one creates a form of media based upon a factual piece of work, like a news report, then they are more likely to be permitted to create that derivative work. However, if the original work is creative, like a novel or short story, then it is given more protection and is thus harder to grant a derivative work a fair use exception. This factor is usually balanced with the other three factors to determine a final verdict.

The third factor is how much of the original work has been used in the new piece of media. Depending on the context of usage, cutting a 10 second clip from an Oscar-winning movie in a documentary about award shows could easily fall under fair use protection — however, increasing the duration of the clip, or using the 10 most critical moments of the film could weigh against fair use protection.

Finally, the fourth factor is what effect the new piece of media will have on the market. Does the new work impact the market in such a way that it harms the original work? Or is it different enough to not affect their sector of the market whatsoever? If one were to release a song that sampled, without permission, aspects from another so much so that it took away streams from the original song, it could potentially be considered a fair use violation.

One of the reasons this case was monumental in determining NFT jurisprudence was because it sought to answer a question everyone was asking since NFTs began gathering steam: do they have the power to disrupt existing media and art markets?

As Hermès considered the MetaBirkins to be a fair use violation, it can be argued that while the MetaBirkins relied on the Birkins’ commerical success, they could also potentially be cutting into the market for Birkins.

Minimal Artistic Relevance, Maximum Cultural Impact

When Golden Age Hollywood star Ginger Roberts sued Alberto Grimaldi and MGM for the film Ginger and Fred in 1988, she probably never thought she’d be made into a legal test for free speech and first amendment protection (or losing the case).

In Roberts’ case, she alleged that the film Ginger and Fred was profiting off of implying that she was affiliated with the film thereby violating her common law rights of publicity and privacy, in addition to a violation of the Lanham Act — the primary federal trademark statute of law in the United States. During the trial, she argued that 43% of individuals exposed to the title of the film associated it with her. The defendants argued that the film was a work of artistic expression, and the title was merely a symbol of hope and the characters bore no resemblance to her. Ultimately, however, she lost the case as the district court concluded that the film was a work of artistic expression and not a commercial product.

The Second Circuit dove even deeper, and established the Rogers Test - a two-pronged test that asks two primary questions:

  1. Does the piece of work in question use a trademark in an artistically relevant manner?

  2. Is the use of trademark in the artistic work explicitly misleading?

If the answer to the first question is yes and to the second is no, then the piece of work passes the test and is protected under the First Amendment. According to this case, Ginger and Fred used the Roberts trademark in an artistically relevant manner, and was not explicitly misleading to general audiences about being directly affiliated with the trademark.

Mason Rothschild used the Rogers Test in his defense of the MetaBirkins. He claimed the collection did, in fact, use the Hermès Birkin trademark in an artistically relevant manner, and the use of the trademark was not explicitly misleading to imply that the collection was affiliated with Hermès. This was at the heart of his first motion to dismiss, filed in March 2022.

In April 2022, Hermès filed an opposition to this motion, effectively wanting the court to pass a judgement on the case to cement a legal precedence for Metaverse art. The court refused to grant Rothschild’s motion in May 2022 as they believed Hermès’ complaint had factual basis for disagreeing with Rothschild’s argument, but did agree that the Rogers Test was an appropriate framework for the case. With this, and a few more back-and-forth motions, the jury trial date was set for January 30, 2023.

A Tale of Two Testimonies

Opening statements began in the U.S District Court for the Southern District of New York with Hermès counsel rationalizing their case on the basis of not wanting people to think that Hermès was involved in the MetaBirkins project. Rothschild’s counsel rebutted by reiterating their previous argument: the MetaBirkins used the Birkin trademark in an artistically relevant manner and did not explicitly mislead consumers into thinking they were affiliated with Hermès.

Here’s where the scales become unbalanced (more than they perhaps already were): Judge Jed S. Rakoff agreed with Hermès in precluding Rothschild expert witness, Dr. Blake Gopnik, from testifying. Hermès argued that Gopnik was not actually an expert for the jurisdiction of this lawsuit — his opinion does not rely on methodology or data, rather just his own understanding and perspective of legal cases.

So, who is Dr. Blake Gopnik? Gopnik was The Washington Post’s chief art critic for a decade, prior to which he was an arts editor and critic in Canada. He holds B.A in medieval studies, specializing in Vulgate and medieval Latin, from McGill University, and a Doctorate from the University of Oxford on realism in Rennaissance painting and the philosophy of representation. Most notably, he authored a most comprehensive biography of the famous Andy Warhol, publishing by HarperCollins.

Warhol comes up in the philosophy of this suit a lot — primarily because of his famous Campbell’s Soup Cans, currently on display at the Museum of Modern Art in New York City, which pioneered the era of pop art. On January 17, 2022, the MetaBirkins Twitter account tweeted a letter written to Warhol from the Product Marketing Manager at Campbell Soup Company, expressing his admiration for Warhol’s art and informing him of the cans of soup they were sending his way (PR packages before they became cool, huh?).

The statement here is simple: Campbell Soup hadn’t gotten all up on arms because of Warhol’s art. They didn’t claim it as a trademark violation, and instead commended it and sent Warhol some free soup. Perhaps sending Rothschild free Birkins might have been above the call of duty, but his point is that Hermès should have celebrated the art instead of trying to censor it.

Gopnik believed that the MetaBirkins case was similar to that of Warhol’s Campbell Soups, and thus was to be considered as “business art” — the First Amendment extends protection to the “business” of promoting a digital image in addition to the image itself, thereby protecting the MetaBirkins’ entire run.

However, there’s a small flaw in his argument here — one that brings Rothschild’s case down but potentially bolsters the case for NFTs as art.

Warhol’s paintings could never directly compete with Campbell soup, for the simple reason that a painting can never be soup. People could buy dozens of canvases, but that would never threaten Campbell’s business. This comparison doesn’t work for the MetaBirkins, perhaps precisely because the MetaBirkins can compete with real Birkins. Maybe they don’t compete right now — after all, I think most people today would rather have a real Birkin bag than a MetaBirkin — however we don’t know if that is to be the case in a few years.

Additionally, from an evidentiary perspective, Hermès indicated in their argument that they intended to enter the NFT and Metaverse world following other luxury brands who had already begun their campaigns — Hermès Americas CEO Robert Chavez testified to this and was backed up by Hermès Group General Counsel Nicolas Martin. Therefore, the MetaBirkins would be in direct competition with Hermès, who holds the trademark for the Birkins.

Hermès’ expert witness, data scientist Kevin Mentzer, tried explaining NFTs to the jury (not particularly successfully) and attempted to compare the MetaBirkins to “trading cards” rather than “artwork.” Can a data scientist be considered as much an expert over NFT art as an art critic cannot be considered an expert over artistic relevance?

Don’t Text and Implicate

One of the more damning exhibits in this case were Rothschild’s texts, where he told a developer they were “sitting on a gold mine.” He also goes as far as to call the MetaBirkins “pictures of those 3D images in 2D.” While the latter simply demonstrates self-awareness for his art, the former betrays a commercial, rather than an artistic, interest in the sale of these NFTs. The day after these texts were presented in evidence, Hermès brought forth multiple testimonies that aimed to establish the MetaBirkins’ success to be solely hinged on their adjacency to the Hermès Birkin. Soon after, closing statements ensued.

The jury took some time to come to a unanimous decision. Notably, there were two public indications of the jury’s thought process. The first was when they questioned when Hermès applied for a digital trademark, implying that they saw a difference between the physical and digital trademarks and their potential applicability. While Hermès’ trademark was not submitted in evidence, they had filed a “trio of web3-focused trademark applications” in August 2022 — after the complaint was filed.

In their application, Hermès included Class 42 which refers to the “authentication, issuance and validation of digital certificates; user authentication services using technology for e-commerce transactions; [and] providing user authentication services using blockchain-based software technology for cryptocurrency transactions.” There is an attempt here to tokenize the Hermès products — specifically the Birkin and the Kelly — linked to the physical ownership of those products.

The second indication from the jury during deliberation was when they asked Judge Rakoff what they should do if they agreed on three counts but not the fourth. The three counts they had achieved consensus upon were related to trademark infringement, dilution, and false designation of origin. The fourth they couldn’t agree on was the First Amendment. This potentially signals that there were members of the jury who initially believed that Rothschild was, in fact, protected by the First Amendment.

Despite this glimmer of hope, however, the jury delivered their verdict on the morning of February 8, 2023, having found Rothschild liable on three counts: trademark infringement and dilution, cybersquatting, and not protected by the First Amendment. They awarded Hermès roughly $133,000 in damages — a drop in the bucket for the luxury brand.

Meta-Intellectual Property

While Rothschild still intends to fight back against the verdict, there’s no denying the impact this case in its present form has on the implications for metaverse intellectual property and NFT art jurisprudence. I confess that I believed Hermès would win this case from the start — to me, the trademark violation was evident. An argument could be made that had Rothschild selected a different brand to model the collection after, like the Lady Dior or the Chanel classic flap, perhaps the collection wouldn’t have made as much of an impact. At the same time, it was perhaps the correct decision to go with the Birkins, for another collection may not have made the point that Rothschild intended to make.

Ultimately, there is still no marked difference between “real world” IP and metaverse IP — the two worlds are not distinct enough yet to merit different legal functions. What the case did establish, however, at least for me, is that NFTs still hold enough power to be disruptive to traditional industries of fashion and art. It does make the world a little tougher for NFT artists, but also grants them a certain level of legal recognition. Fair use jurisprudence in art still has a long way to go in establishing the rules of engagement for NFTs — the Yuga Labs case is yet to go to jury trial and it is one where the roles are a bit reversed.

Maghan McDowell makes the point in Vogue Business that this verdict is still “an endorsement of the value of digital goods and NFTs […] the digital representations of luxury goods have meaningful value even if they don’t perform the original function of, say, carrying one’s belongings or clothing one’s physical body.” I agree. While at face-value this seems like the maintenance of status quo in trademark law for NFTs, the legal recognition of their value is a big win for the space as a whole. NFTs are not just “trading cards”, but indicative of a larger and deeper movement in art and fashion, and will not go away so easily.

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