Hermès is a luxury fashion brand famously known for its iconic Birkin handbag. Since 1986, Hermès has sold over $1 billion worth of these handbags in the United States, including over $100 million worth in the past 10 years. Even the entry-level Birkin bags sell for tens of thousands of dollars. Exotic Birkins such as the Himalaya Birkin and the special edition Faubourg Birkins fetch well over a $100,000, and as such, Birkin bags have been considered the epitome of luxury handbags. Currently, the most popular size of the Hermès Birkin is its smallest—a 25 cm Birkin lovingly nicknamed “the baby Birkin.”
In May 2021, Defendant Mason Rothschild (whose real name is Sonny Estival) created a non-fungible token (NFT) depicting an image of a fetus gestating in a transparent Birkin bag and called it “Baby Birkin.” The Baby Birkin NFT sold for $23,500 and recently resold for $47,000. Backed by the success of the Baby Birkin NFT, Rothschild later created a collection of digital images entitled “MetaBirkin,” which he sold on his website and on exchange sites such as openseas.com.
Hermès sued Rothschild alleging 1) trademark infringement of “BIRKIN” and its design and iconography of the handbag, 2) appropriation of the Birkin mark that diluted and damaged the brand, 3) cybersquatting via metabirkin.com, and 4) unfair competition in the NFT space.
To determine whether Rothschild infringed, misappropriated and cybersquatted turns on the outcome of the Rogers test outlined in the seminal case Rogers v. Grimaldi, 875 F.2d 994 (2d. Cir. 1989). The Rogers test is applied when the art could constitute a form of artistic expression in determining whether the artistic expression is protected under the First Amendment. Determining the outcome of the second prong of “explicitly mislead[ing]” the public can be determined by applying the eight Polaroid factors in Polaroid Corp v. Polaroid Elecs. Corp., 287 F.2d 492 (2d Cir. 1961), including (1) the strength of Hermès’ mark; (2) the similarity between Hermès’ “BIRKIN” mark and the “MetaBirkin” mark; (3) whether the public exhibited actual confusion about Hermes’ affiliation with Rothschild’s MetaBirkin collection; (4) the likelihood that Hermès will “bridge the gap” by moving into the NFT space; (5) the competitive proximity of the products in the marketplace; (6) whether Rothschild exhibited bad faith in using the Hermès’ mark; (7) the respective quality of the MetaBirkin and Birkin marks; and (8) the sophistication of relevant consumers. If Rothschild’s MetaBirkin NFTs are determined 1) “artistically relevant” and the trademarked BIRKIN was not used to 2) “explicitly mislead” the public, then Rothschild’s MetaBirkin project will be protected under the First Amendment via the Rogers test.
Hermès argues that Rothschild’s MetaBirkin NFTs were not artistically relevant and explicitly misleads the public. Hermès provided text messages from Rothschild claiming himself as a “marketing king” and discussed future projects that included watch NFTs called “MetaPateks” after Patek Philippe watches. Hermès also provides evidence that several major publications, including Elle UK and the New York Post, mistakenly reported an affiliation between Hermès and the MetaBirkin project, which Hermès used as evidence of actual public mistake of affiliation. Hermès also commissioned a study that found 18.7% net confusion rate among potential consumers of NFT whether Hermès was affiliated or associated with the MetaBirkin project. And Hermès argues that its ability to enter the NFT market was significantly hindered by Rothschild’s NFTs. In June 2021, Hermès claims, even before the launch of the “Baby Birkin” NFT, Hermès had plans to launch its own NFTs.
Rothschild insists that these NFTs constitute art and are protected by his First Amendment rights to artistic freedom. The original intent behind the NFT project was to see whether people would “actually ascribe value to the ephemeral MetaBirkins” in the same way people attach value to the physical Birkin bags. He also argues that he’s a “conceptual artist” akin to Andy Warhol, the artist behind the Campbell’s Soup Cans paintings. Rothschild maintains that the MetaBirkin NFTs are argued to be an artistic expression—a two-dimensional image with cartoonish fur that only exists in the digital space. Rothschild argues that owners of the Hermès Birkin bags were never confused that MetaBirkin were not actual Hermès products.
After three days of deliberation, the jury held Rothschild liable for trademark infringement, trademark dilution and unlawfully cybersquatting. Rothschild is to pay up $110,000 for profits and commissions for the sale of the infringing MetaBirkin NFTs and an additional $23,000 for cybersquatting. This outcome provides useful guidance for trademark owners and artists alike in what will likely be the first of many cases seeking to determine the bounds of trademark protection in the context of newer digital assets.
Ripps, Slapps and Apes: Yuga Labs v. Ripps, et. al. Moves Forward
The U.S. Copyright Office and USPTO Announce a Joint Study on NFT-Related IP Issues
Soulbound Tokens: Moving Away from the Hyper-Financialization of Digital Assets