As anticipated by those watching this space, Hermès filed a lawsuit in New York federal court against Mason Rothschild, an individual who created a collection of non-fungible tokens (NFTs) called “MetaBirkins,” which depict fuzzy versions of the iconic Hermès Birkin bag. The complaint alleges that Rothschild advertises the MetaBirkins “using the Hermès Federally Registered Trademarks” and “rips off Hermès’ famous BIRKIN trademark by adding the generic prefix ‘meta’ to the famous trademark BIRKIN” and that the use of the Birkin trademark misleads consumers and misidentifies the source of goods. As a result, Hermès’s complaint asserts claims for trademark infringement of the Birkin word mark, trade dress infringement, trademark dilution, false designation of origin, cybersquatting, and injury to business reputation and dilution under federal and state law.

In early December 2021, Rothschild started selling the MetaBirkins, the first of which sold online for a whopping $42,000. (By contrast, an authentic Hermès Birkin bag retails for approximately $13,000.) Shortly thereafter, Hermès sent a cease-and-desist letter to Rothschild and asked OpenSea, the NFT marketplace selling the MetaBirkins, to remove the infringing NFTs from its website, asserting that the MetaBirkin NFTs violated Hermès’s intellectual property. Although OpenSea removed the listings, Rothschild moved the MetaBirkins to another online exchange and continued to advertise and sell the MetaBirkins on his website. And in a futile attempt to appease Hermès, Rothschild added a disclaimer to his website stating that the MetaBirkins were “not affiliated, associated, authorized, endorsed by, or in any way officially connected” with Hermès, but inexplicably linked the disclaimer to the Hermès website, thus eliciting an allegation from Hermès that the disclaimer only caused further confusion among consumers that Hermès was sponsoring the MetaBirkin NFTs.

Additionally, after receiving the cease-and-desist letter, Rothschild took the dispute to social media to publicly defend his actions. In a series of Instagram posts, Rothschild asserted that his actions were protected from liability by the First Amendment and that the MetaBirkin NFTs were his artistic interpretations, likening his work to that of Andy Warhol’s famous Campbell Soup artwork. He also claimed that his activities constituted fair use and thus were permissible under the law.

Previewing Rothschild’s defenses in its complaint, Hermès pushed back on Rothschild’s First Amendment argument by asserting: “Although a digital image connected to an NFT may reflect some artistic creativity, just as a t-shirt or a greeting card may reflect some artistic creativity, the title of ‘artist’ does not confer a license to use an equivalent to the famous BIRKIN trademark in a manner calculated to mislead consumers and undermine the ability of that mark to identify Hermès as the unique source of goods sold under the BIRKIN mark.” Hermès further stated that the success of the MetaBirkin NFTs “arises from [Rothschild’s] confusing and dilutive use of Hermès’ famous trademarks.”

The luxury brand also maintained that Rothschild is not entitled to fair use protection because the use of the Hermès marks in connection with advertising the MetaBirkin NFTs is commercial in nature. Further, Hermès alleges that Rothschild’s use of the MetaBirkin term as his own trademark also stands in the way of his fair use defense. This is because a fair use defense does not provide protection from liability if the defendant uses the allegedly infringing mark as the defendant’s own trademark or source of goods. The MetaBirkins themselves were facing issues of counterfeits – where counterfeiters were creating tokens with similar names and selling fake versions of the MetaBirkin NFTs. Ironically, as outlined in the complaint, Rothschild claimed trademark rights in the term “MetaBirkins” when complaining of counterfeiters. To Hermès, Rothschild’s attempt to claim the term “MetaBirkins” as a source identifier is fatal to Rothschild’s fair use defense.

As in most trademark infringement cases, the remedies sought by Hermès include injunctive relief (e.g., stop selling and turn over access to the MetaBirkin NFTs) and damages (Rothschild’s profits). What makes this case different, however, is that the infringing goods are stored on blockchain technology, and in most cases, such transaction records cannot be changed once they have been entered. It also raises issues as to the third parties who purchased a MetaBirkin NFT and whether they will be allowed access to their NFT if a court rules against Rothschild.

This complaint is likely to be the first of many, and it raises a multitude of new issues in the world of NFTs and virtual fashion. Many brands are developing their own NFTs, filing trademark applications for virtual goods and services, and many have already entered the brave new world of the metaverse. Trademark law provides protections for many tangible items, but the extent of these protections in the digital world as well as what remedies can be granted are yet to be explored. When entering and exploring the virtual realm, brands, artists, and consumers of virtual goods should be aware of the trademark implications.