Jury Finds Creator of MetaBirkins Liable Under Trademark Law

After three days of deliberation, a federal jury in New York delivered a verdict in favor of luxury fashion brand Hermès International SA in its lawsuit against artist Mason Rothschild over his sale of "MetaBirkins" nonfungible tokens (NFTs).

Specifically, the jury found Rothschild liable for trademark infringement, trademark dilution and unlawful cybersquatting. The jury also found that Rothschild's MetaBirkin NFTs failed to qualify as protected speech under the First Amendment.

Background

Rothschild, also known as Sonny Estival, created and sold approximately 100 MetaBirkin NFTs in late 2021, which prompted Hermès to sue Rothschild under federal trademark laws, claiming that Rothschild's NFTs infringe its famous Birkin handbags both in name and appearance.

Rothschild advanced the theory that his MetaBirkin NFT project served as an "artistic experiment" focusing on society's fixation with status symbols like luxury handbags. His argument that his NFTs are works of art protected by the First Amendment – no different from Andy Warhol's well-known renditions of Campbell's soup cans – would seem to be better suited to a copyright dispute.

In 1994, the U.S. Supreme Court held that 2 Live Crew's rendition of "Pretty Woman" qualified as fair use under U.S. Copyright Law, despite taking significant elements from Roy Orbison's 1964 hit single, "Oh Pretty Woman." (See Campbell v. Acuff-Rose Music Inc., 510 U.S. 569 (1994).) Justice David Souter, writing for the Supreme Court, made clear that analyzing the factors to make such a determination of "transformative use" constitutes a subjective test; the factors must be applied on a case-by-case basis.

Accordingly, Rothschild relied upon the decades-old "Rogers" legal test. First defined in a case brought by famed dancer Ginger Rogers against the producers and distributors of a Fellini film called "Ginger and Fred," the standard allows artists to use a trademark without permission so long as such use meets a minimal level of artistic relevance and does not explicitly mislead consumers. (See Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989).)

Further Analysis

While there are similarities between the Campbell test and Rogers test, under trademark law, trademark disputes focus on consumer attitudes and understanding of the source of goods. Trademark law requires a court to determine whether consumers are likely to believe that the allegedly infringing words, logos, packaging or product design were used, endorsed, authored or sponsored by the brand owner. However, under copyright law, copyright disputes do not take consumer attitudes into consideration. Instead, they center on the purpose and character of use, the nature of the original work, the substantiality of the material used and any effect the use will have on the market for the original.

Here, however, Hermès did not bring its claims under copyright law but rather trademark law and introduced evidence at trial supporting its claims of likelihood of confusion, including survey evidence, marketing methods and trade channels. Additionally, Hermès introduced evidence showing that Rothschild's endeavor was not purely artistic but heavily commercialized as he encouraged others to market his MetaBirkins to drive up their value. And, although not currently selling NFTs in the marketplace, Hermès also offered evidence that it contemplates entering the virtual reality market with its own digital products, thus staking its trademark claim in the metaverse as well as the physical realm.

Interestingly, the Supreme Court will be taking on a trademark parody case over a dog toy that uses elements of the well-known Jack Daniels whiskey bottle. The defendant VIP Products LLC argues that its "Bad Spaniels" dog toy is a parody and also relies upon the Rogers case, employing arguments similar to those made by Rothschild. Although this dispute has nothing to do with NFTs and there are many divergent facts, the Supreme Court's ruling in that case will almost assuredly have some bearing on Rothschild's likely appeal of the trial court's decision to the U.S. Court of Appeals for Second Circuit.

At this stage, brand owners, artists and those working in the field of virtual reality have more guidance as to limits on third-party use of well-known brands and designs, but the courts are likely to continue grappling with this developing field over the next several years.

For more information, contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.