A highly anticipated trial over non-fungible tokens (“NFTs”) tied to images that resemble Hermès Birkin bags kicks off in New York today. The MetaBirkins case got its start in January 2022 when Hermès lodged trademark infringement and dilution claims against artist Mason Rothschild, accusing him of “attempt[ing] to capitalize on the goodwill of a leading luxury brand” and its “iconic” Birkin bag by way of a collection of 100 MetaBirkins NFTs. Last year, Judge Jed Rakoff of the U.S. District Court for the Southern District of New York denied Rothschild’s motion to dismiss on the basis that Hermès’ allegations that he was using its trademarks in a way that is not artistically relevant and that the MetaBirkins title “explicitly misled” the public into thinking the NFTs were associated with Hermès, created a factual dispute that could not be resolved via a motion to dismiss. Keeping the case in play, the court set the stage for trial.
The closely watched lawsuit “raises issues of first impression that could set significant legal precedent in the realm of fair use and clarify the balance of free speech and trademark protection as applied in the metaverse and beyond,” ArentFox Schiff’s Yusef Abutouq, Elizabeth Cohen, Michelle Cooke, and Dan Jasnow stated in a recent note. A number of interesting and nuanced issues stand out in the case, particularly in light of efforts by brands and third-party creators, alike, to engage with consumers – and generate revenue – in the virtual world, where the applicability of traditional trademark tenets are being tested in real time. A few of those notable issues (more to come), include …
To what extent do “real world” rights apply in the virtual world?
Primarily, the case highlights the potential (although – unlikely – I think) disconnect between the existence of companies’ trademark rights in the so-called “real world” and those that can be enforced in the web3 realm. Or more specifically, whether Hermès can successfully block unauthorized use of its Birkin mark (which it uses across a variety of “real world” goods/services) in connection with the sale of NFTs. Hermès lacks trademark registrations for its name and Birkin mark for use on digital goods and is not using those marks in the metaverse and/or offering up NFTs tied to its famed bags (yet?), but it is worth noting that the court, nonetheless, denied Rothschild’s motion to dismiss Hermès’ trademark infringement claim.
To make its case for trademark infringement, Hermès needs to show that it has a valid mark (in other words, that its “real world” rights in the Birkin mark extend to the virtual world), and that Rothschild used the same or a similar mark in a way that is likely to confuse consumers. As for where its alleged rights in the Birkin mark for use on virtual goods/NFTs come from, Hermès has argued that offering virtual goods is within its “natural zone of expansion,” particularly given that “fashion brands have entered and are continuing to grow in the metaverse.”
In a note this summer, Fish & Richardson’s Cynthia Johnson Walden and Sarah Kelleher stated that “arguments exist that infringement of trademarks in connection with virtual goods and services should be covered by the ‘natural zone of expansion’ doctrine, meaning that brand owners can rely on existing rights to pursue enforcement.” By way of example, they argue that “consumers shopping for a new Gucci handbag in the virtual world” are likely to assume that a handbag bearing Gucci trademarks is “being offered by (or at least authorized by) the fashion house, meaning such an expansion by the fashion house would be a natural one.”
At the same time, Leason Ellis’ Martin Schwimmer previously told TFL that a company’s “existing trademark portfolio will probably cover the most predictable of their activities in the metaverse.” So, just as Nike does not need to file applications for “shoes sold over the internet,” he said that “they will not need to file for shoes sold via the metaverse.” The same likely holds true for Hermès.
Even so (as indicated by the sheer influx of trademark applications lodged with the USPTO over the past couple of years), brands and creators are in need of clarity, and Michael Best & Friedrich LLP’s Laura Lamansky asserted recently that the MetaBirkins case will “hopefully shed some light on … how far a brand’s rights in its trademarks or products extend in the digital space [and] what artists can and cannot create and render virtually.”