What is the specificity of this case? The challenged name is “MetaBirkin,” under which Mr Mason Rotschild began selling images of Hermès’ famous Birkin bag as NFT[2] in late 2021.
Named after actress Jane Birkin, the bag is one of the most expensive luxury handbags, with a selling price that starts in the five-figure range and can easily reach six figures. According to Hermès International and Hermès of Paris Inc. (manufacturer of the Birkin bags and owner of the corresponding trademark rights, hereinafter referred to as “Hermès” for short), Birkin bags worth over one billion US dollars have been sold in the USA since 1986, with sales of over 100 million US dollars in the last ten years alone. Accordingly, the promotion of the “MetaBirkins” generated a fulminant attention on the consumer side.
The special feature of the images offered by Mr Rothschild was that the respective images were identical to the silhouette and design of the Birkin bags by Hermès and thus could be identified as such not only on the basis of the designation “MetaBirkin”. The respective bag surfaces, however, were not made of leather, but were visualized in colorful fake fur. With the so-called smart contracts implemented in the NFTs, Mr Rotschild profited not only in the original sale of the NFTs, but also in their resales. He offered the NFTs via a specially created website, available at <metabirkins.com>, even before the NFTs were generated as such. Through his social media accounts on Twitter and Instagram, he promoted his NFTs using the tag “@METABIRKINS”, among others. Up to and including June 2022, 100 “MetaBirkins” were produced and sold for over 1.1 million US dollars. In addition, Mr Rotschild received 7.5% of the resale price for each resale of a MetaBirkin NFT. There was confusion among prospective buyers of the NFTs, as well as in the media, as to where the “MetaBirkin” NFTs originated from and whether there was any kind of partnership with Hermès.
Hermès issued a warning to Mr Rotschild on December 16, 2021. After no cease-and-desist declaration was issued, Hermès filed an action with the US District Court – District of New York on January 14, 2022, for trademark infringement, design infringement and – due to the registered domain <metabirkins.com> – for cybersquatting. It should also be mentioned in this context that Mr Rothschild himself complained that third parties were imitating his “MetaBirkin” creations and were also offering them under the designation as NFT, so in this respect he basically had a correct understanding of the law, albeit somewhat one-sidedly interpreted.
The main question that the court and later also the nine-member jury had to deal with was to what extent the specific type of trademark use in the present case could be justified as free speech, specifically as art. This was thus one of the first decisions in which the interplay between virtual objects and trademark law had to be illuminated and the line had to be drawn as to where artistic freedom ends and trademark infringement by digital creations begins.
In order to approach the core problem of the case, namely to what extent the world-famous Hermès trademark was used by Mr Rothschild as such to mislead the public about the origin of the product through the concrete marketing of the “MetaBirkin” NFTs, or to what extent artistic expression was the primary consideration here, the court consulted the Rodgers v. Grimaldi[3] decision and the test underlying that decision. Within that framework, it first considered (1.) whether the use of the mark in an expressive work was artistically relevant to the work in question, and (2.) whether it was expressly misleading here as to the origin or subject matter of the work. Although the jury found that the “MetaBirkin” NFTs were works of artistic expression from certain aspects, it considered it proven that the specific designation was intended to mislead potential buyers about the origin of the NFTs. Furthermore, the designation “MetaBirkin” was not used in any artistically relevant way, but rather in a commercial context to Hermès’ brand, consequently exploiting its fame and goodwill. Accordingly, the “Free Speech” justification could not save Mr Rotschild from liability. At the end of the day, he had to pay 133,000.00 US dollars to Hermès as damages.
Although the decision is primarily relevant to the U.S., it is certainly of interest to other jurisdictions. It shows one way of approaching the question of whether trademark infringement has occurred through use as and/or in connection with an image distributed as an NFT. This by no means covers all possible forms of infringement. For example, it is still unclear how a court would rule on the use of lesser-known trademarks. Not all trademarks have a comprehensive list of goods and services that also protects digital images of otherwise analogue products. In this respect, an examination of the likelihood of confusion could possibly fail due to the lack of similarity of goods alone. Most recently, however, the EUIPO has stated that it assumes a similarity of goods between goods in the metaverse and the corresponding counterpart in the real world[4]. Even with the help of the supplementary ancillary copyright protection available in Germany under Section 4 (3) of the Law Against Unfair Competition (“UWG”), it would be necessary to examine in detail whether the criteria required there would be met in the case of use of another’s trademark or design as or in the context of an NFT.
There are still no court decisions on this subject in Germany. But in the USA, too, the last word on infringements of intellectual property rights in the metaverse will not yet have been spoken. In the present case, the well-known bags with the distinctive silhouette were offered and advertised under the trademark “MetaBirkin”. However, as far as only the bag (recognizably) would be seen in a larger pictorial work, without being explicitly named or that it would be explicitly advertised, the artistic aspects could well be in the foreground and the origin function of the trademark just not violated; at least according to the reading of the US court.
Another aspect is the enforcement of such claims. In the present case, the alleged infringer was known and, due to its domicile in the USA, also tangible for Hermès. However, there will be other constellations where this will not be the case. Here, other ways will have to be sought, such as the Chinese Hangzhou Internet Court, which, in the case of a copyright infringement by NFTs due to lack of knowledge of the person of the infringer, simply ordered the Internet service provider via secondary liability to take the works in dispute offline, so that the IP address went nowhere in this respect and the infringing items could no longer be commercially exploited.[5]
A further way could be to deliver corresponding lawsuits and also the decision by means of NFT to the specific e-wallet of the infringer who is not known by name, as the New York Supreme Court had already deemed permissible in 2022[6]. Thereby, by means of a so-called “service token”, a hyperlink was placed in the e-wallet held by unknown parties (i.e., sent to a specific blockchain address), through which one could gain access to the lawsuit and all related documents. In this way, the lawsuit was effectively served. At the same time, it was also possible to use this address to locate some of the assets in dispute and restrict their resale. The afore-mentioned method of service has already been imitated by other courts, e.g. the High Court in London, also in 2022.[7]
The decisions cited above sustainably refute the rumor that virtual space or the blockchain would be lawless areas – far from it. All in all, however, many questions remain unanswered. What will please rights holders, however, is the fact that their intellectual property will not become public domain even in the metaverse. For this, one can currently still help oneself with the conventional instruments of ordinary legal protection, albeit within certain limits. It remains to be seen to what extent European legislation will be tightened up accordingly and thus provide rights holders with further options for effectively enforcing intellectual property rights in the virtual world, as courts in the USA and England have already done.
If you intend to present your products in the metaverse or to deal artistically with products of third parties in the metaverse, please contact us in advance.
[1] Case 1: 22-cv-00348-JSR.
[2] Regarding the definition of „Non-Fungible Tokens“ (NFT), see: https://preubohlig.de/newsletter/impact-of-the-nft-boom-on-intellectual-property-rights/?lang=en.
[3] Rogers vs. Grimaldi, 875 F.2d 994 (2d Cir. 1989).
[4] Siehe dazu auch: https://euipo.europa.eu/ohimportal/de/news-newsflash/-/asset_publisher/JLOyNNwVxGDF/content/pt-virtual-goods-non-fungible-tokens-and-the-metaverse.
[5] Case no. (2022) Zhe 0192 MinChu 1008 Hao.
[6] LCX AG vs John Doe Nos 1–25, Order to Show Cause and Temporary Restraining Order (Case no. 154644/2022, Supreme Court of the State of New York, 2 June 2022).
[7] Sarah Martinson, ‘London Court OKs NFT To Serve Anonymous Defendant’ (Law360, 12 July 2022), http://www.law360.com/articles/1510718/london-court-oks-nft-to-serve-anonymous-defendant.
