Unprecedented

What Hermès’ victory in the MetaBirkin suit means for the future of IP law in the metaverse.

One of Rothschild’s MetaBirkins. Credit: @metabirkins (Instagram)

Last week, in a landmark ruling, the Southern District of New York sided with Hermès in its highly publicized lawsuit against artist Mason Rothschild, the mastermind behind the now-infamous “MetaBirkins.” The first of its kind, this case not only shot down artistic expression in favor of brand recognition; it also set a precedent in the previously-lawless landscape of trademarked fashion in the metaverse. So, what does this decision mean for the future of fashion, trademarks, and the burgeoning market for high fashion in the metaverse?

First, let’s dive into the case itself. Here are some of the highlights from the original filing for Hermès Int’l. v. Rothschild:

1. Hermès owns TM (trademark) rights for both the Hermès and Birkin marks, as well as trade dress rights in the Birkin handbag design.

2. In or around May 2021, Rothschild create a digital image entitled “Baby Birkin,” which depicted a 40-week-old fetus gestating inside of a transparent Birkin Bag rendering.

3. Rothschild sold the NFT linked to the “Baby Birkin” digital image for $23,500 (the price of a physical Birkin Bag). It was later resold for a whopping $47,000.

4. In December 2021, Rothschild created a collection of digital images entitled “MetaBirkins,” selling them as NFTs. Rothschild described them as “a tribute to Hermès’ most famous handbag.”

5. In an interview soon thereafter, Rothschild said, “for me, there’s nothing more iconic than the Hermès Birkin bag. And I wanted to see as an experiment if I could create that same kind of illusion that it has in real life as a digital commodity,”

6. Consumers posting on the MetaBirkins Instagram page expressed actual confusion, believing that there was an Hermès affiliation with Rothschild’s MetaBirkins.

7. Hermès files suit in December 2021.

In the case filing, Hermès argues that its TM rights under the Langham Act—the standard test for trademark infringement—have been violated. The Langham Act’s false-advertising section, Section 43 (a), qualifies a TM infringement accordingly:

Any person who, on or in connection with any goods or services, or any contact for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact which—

1. Is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

2. In commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities.

While Rothschild’s MetaBirkins undoubtedly satisfy both of these prongs—having deceived consumers into believing he and his NFT artworks were affiliated with or were products of Hermès—Rothschild counters, arguing that his First Amendment right to freedom of expression—and therefore, artistic expression—should prevail. He claims that the Langham Act should be construed to apply to artistic works only where the public interest in avoiding consumer confusion outweighs the public interest in free expression. In sum, he believes his artwork garners more public interest in free expression than it confuses consumers.

Four of Rothschild’s outlandish MetaBirkin designs. Credit: @metabirkins (Instagram).

Unfortunately for Rothschild, the Court upholds the public interest in avoiding consumer confusion, concluding that, even if the “MetaBirkins” satisfied the “artistic relevance” prong, the amended complaint contains sufficient factual allegations that Rothschild’s use of the “MetaBirkins” mark is explicitly misleading and thus still actionable under the Langham Act.

Rothschild was not pleased, posting a series of pictures to his Instagram with the caption, “Things didn’t shake out my way but the fight is far from over...knocked down. Not dead.”

Photos from Mason Rothschild’s Instagram. From left to right: a sketch of the artist in court, Rothschild’s team’s binder of proposed trial exhibits, and Rothschild’s response letter to the initial suit. Credit: @masonrothschild (Instagram).

Not only does this decision answer the smaller question of whether source indicator or artistic expression prevails in cases of IP law infringement, but it helps set the precedent for answering an even bigger question: Should brands’ protected marks in the physical world extend to the metaverse?

With this decision, not only has the Court prioritized protecting brand recognition over artistic expression, but it has paved the way for protecting physical fashion’s abstract counterparts in the metaverse. Up until this point, the metaverse was a veritable free-for-all, where artists ran rampant without laws to reign in their creativity, which more often than not bordered on infringement. While some high fashion brands were undeterred—Gucci created its own NFTs and metaverse shopping experiences, with most of its virtual pieces selling for more than their physical complements—most luxury brands have been hesitant to acknowledge, much less venture into the world of Web3.

Prior to this decision, LVMH Founder and Chairman, Bernard Arnault, had deemed the metaverse a “purely virtual world,” saying that, “until now, we are in the real world and we sell real products.” He goes further, saying, "To be sure, it’s compelling, it’s interesting, it can even be quite fun. We have to see what are the applications of this metaverse and these NFTs."

Now, in the wake of this historic decision and with renewed confidence that their trademarks will be protected from artistic infringement, I expect more brands to enter virtual reality than ever before. Not only would the advent of brands like Louis Vuitton and Dior into the Web3 market legitimize the often-scoffed-at Metaverse, but it would also expand these brands’ revenue streams, helping bolster their already-astronomical profits through the sale of metaphysical goods that cost them less to make than their physical products.

Ultimately, this decision not only signifies the beginning of safeguarded virtual fashion, but the advent of an entirely new legal frontier.

To read more about the IP law in the metaverse, check out my other article: TM v. VR: How brands are navigating trademark protection in the metaverse.

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