Counterfeiting or Creative Freedom? What the MetaBirkins Ruling Means for Digital Creators

Key takeaway

In one of the first trademark-related cases involving the metaverse, a jury in the U.S. District Court for the Southern District of New York ruled that an artist who used a trademark in connection with NFTs without the rights holders' consent was guilty of trademark infringement.


Hermès brought legal action against an artist for creating and commercializing NFTs that replicated the Birkin bag without authorization, leading to one of the first court decisions on trademark use in virtual environments. The case highlights the tension between artistic freedom of expression and trademark rights. In this instance, the jury ruled in favor of Hermès, holding the artist liable for trademark infringement and cybersquatting.


1. Background of the Dispute

In 2021, the American artist Mason Rothschild (real name Sonny Estival) founded the studio Gasoline, which specializes in creating “solutions” for Web3. (1) He launched a first project called Baby Birkin, a digital animated image depicting a Hermès Birkin bag with a fetus inside, associated with a non-fungible token (NFT). The image sold for $23,500.

This was followed by a second project titled MetaBirkins, which replicated the Hermès Birkin bag model using faux fur in various colors. This digital image, released in 100 copies, allegedly generated over $1.1 million in revenue for its creator, according to Hermès. At the same time, Mason Rothschild registered the domain name metabirkins.com to promote the MetaBirkins collection online, which was auctioned on NFT marketplaces.

However, the artist did not seek authorization from Hermès to use the iconic bag model or the associated Birkin trademark.

In January 2022, Hermès filed a lawsuit against the artist in New York, alleging infringement of the Birkin bag design and trademark, dilution of the Birkin brand, and cybersquatting. Hermès sought an injunction to halt the project, recover the domain name metabirkins.com, and obtain damages.


2. Creative Freedom vs. Trademark Infringement

According to Mason Rothschild, Hermès' claims are unfounded. In his defense, he invoked the First Amendment of the U.S. Constitution, which guarantees freedom of expression, arguing that the disputed NFTs were works of art meant to raise awareness about animal cruelty. Rothschild drew a comparison to Andy Warhol’s famous Campbell’s Soup Cans paintings.

He further relied on the Rogers v. Grimaldi precedent, a 1989 U.S. court decision which established that the use of a trademark in an expressive work does not constitute infringement, provided that: (i) the use is artistically relevant, and (ii) it does not explicitly mislead consumers. (2)

Rothschild argued that the MetaBirkins NFTs qualified as artistic expression, just like Warhol’s paintings, and that consumers were not misled about the origin of the works.

Hermès, however, argued that the Rogers v. Grimaldi test did not apply to this case. First, the use of the name “MetaBirkins” to identify the NFTs was not the result of artistic expression. The MetaBirkins NFTs were digital assets released in 100 copies, more akin to a product line than unique works of art. Both the trademark and domain name were used not in an artistic context, but rather to promote a commercial venture. Second, the use of the Birkin name and bag design could mislead the public as to the origin of the NFTs.

It is worth noting that Hermès sued Mason Rothschild only in connection with the MetaBirkins project, which involved 100 copies, and not in relation to the Baby Birkin NFT, which was produced as a single unit.

As a result, the MetaBirkins NFTs could not benefit from the more favorable legal standards applied to artistic works, and instead fell under the rules governing trademark use (Lanham Act). Under this law, reproducing a trademark without the rights holder’s authorization constitutes trademark infringement.


3. The Ruling

On February 8, 2023, the jury in this case sided with Hermès’ arguments and found Mason Rothschild liable for $110,000 in trademark infringement and $23,000 for cybersquatting. (3)

Mason Rothschild announced that he was considering appealing the decision.


4. The Aftermath of the Hermès v. Mason Rothschild Case

In this case, it is important to note that Hermès and Birkin are well-known trademarks, which grants them an exception to the principle of specialty that governs trademark protection under French law.

Under the principle of specialty, a trademark is only protected in the territory and for the specific goods and/or services for which it has been registered. As a result, two identical or similar trademarks can coexist as long as they are registered in different classes covering unrelated goods or services.

In this case, the Birkin trademark was not originally registered in classes that would allow it to be protected against digital counterfeiting. However, due to its notoriety, the mark benefited from an exception to the specialty principle, allowing Hermès to extend its protection beyond the formal scope of registration. Notably, Hermès filed the Birkin trademark in Classes 9, 35, and 41 with the United States Patent and Trademark Office (USPTO) in August 2022.

The issue of trademark infringement by NFTs remains open for non-well-known trademarks that are not registered for digital goods or services. As a precaution, it is advisable to extend trademark registrations to cover classes that ensure protection in the virtual environment, particularly class 9 under the current Nice Classification.

This precautionary principle should also be applied to domain names. Again, for goods and services that may be used in the metaverse, it is recommended to register domain names including Web3-related terms (such as blockchain, NFT, meta, etc.) in order to prevent cybersquatting.


     Although this decision was rendered by a U.S. court, it is significant on several levels. For the first time, a trademark associated with a physical product may have its protection extended to its digital representation.

Subject to developments on appeal and potential case law evolution in France, this ruling serves as a valuable reminder to creators and users aiming to commercialize virtual branded products in the metaverse that trademark law applies within these virtual worlds as well.

Finally, NFTs and metaverses are not bound by any specific geographical territory. Currently governed by platform Terms of Use and smart contracts, it will become necessary to regulate these agreements under a unified legal framework for digital assets and virtual environments. Despite differences across legal systems, such harmonization is essential to ensure a stable social and economic ecosystem, enabling these innovative technologies to evolve in a legally secure manner.

(1) Web3, considered the successor to Web 2.0, is defined as a decentralized web built on blockchain technology.


(2) Ginger Rogers v. Alberto Grimaldi, 875 F.2d 994 (2d Cir. 1989)


(3) Hermès International et al. v. Rothschild, Case No. 1:22-CV-00384 (S.D.N.Y), February 14, 2023

Bénédicte DELEPORTE
Avocat

Deleporte Wentz Avocat
www.dwavocat.com

February 2023