Luxury goods titan Hermès has been handed a major victory in its pioneering lawsuit involving trademark infringement through non-fungible tokens (“NFTs”). A federal jury in Manhattan recently found that an artist’s NFT collection of “MetaBirkins” infringed and diluted the famous Hermès Birkin handbag and associated trademarks, and the artist’s use of the domain name MetaBirkins.com constituted cybersquatting. The case is a first-of-its-kind examination of trademark infringement in emerging digital markets such as the metaverse, closely watched by sellers of consumer goods and retail industry insiders as more and more companies connect with their customers using Web3 technologies. The case is Hermès International et al. v. Rothschild, Case No. 1:22-cv-00384 (Southern District of New York).

Adorning the arms of countless celebrities, featured in numerous films, television shows, and songs, the Birkin handbag by Hermès is an instantly recognizable legend in the world of luxury goods. And with such tremendous status, imitation is not always the sincerest form of flattery.

Hermès sued Los Angeles-based artist Sonny Estival (a/k/a Mason Rothschild) in January 2022 for Rothschild’s creating, advertising, and selling an NFT collection of “MetaBirkin” handbags at his website www.metabirkins.com and through various “MetaBirkin” social media accounts. The digital handbags are fuzzy and furry imitations, as shown below, of real-life Birkin handbags (famously made of high quality, and oftentimes exotic, leathers):

Hermès claimed that Rothschild’s work damaged the fashion house’s ability to market its iconic handbags – which often are sold for tens-of-thousands, if not hundreds of thousands of dollars – in emerging digital markets online.

Rothschild defended his actions under the First Amendment, claiming his “MetaBirkin” NFTs were constitutionally-protected art, commenting on “the cruelty inherent in Hermes' manufacture of its ultra-expensive leather handbags,” and therefore shielded from liability. Rothschild claimed his “MetaBirkin” NFTs are no different than Andy Warhol’s famous Campbell’s soup can paintings, in that transformative art such as his may imitate famous trademarks and products without liability for infringement.

A federal jury in New York City disagreed, finding Rothschild liable for trademark infringement, trademark dilution, and unlawful cybersquatting for the Metabirkin.com domain name. Rothchild has been ordered to pay to Hermès $110,000 in profits and resale commissions, as well as $23,000 in cybersquatting damages.

Next steps

This case has been closely followed by many as it represents one of the first and most prominent litigations involving trademark infringement claims involving real-life goods refracted into the nascent world of digital assets and blockchain technology. The verdict bodes well for brand owners who are looking to expand their wares into the metaverse, mint and market NFTs or digital twins alongside their physical goods, or otherwise connect with consumers using Web3 technologies. The verdict creates precedent that brand owners have the right to control how their real-life goods are exploited as virtual goods, particularly as more and more consumer-facing companies simultaneously seek to offer goods in these emerging online spaces alongside NFT artists and disruptors. With that being said, an appeal of this decision is likely and it will be important to track how the Second Circuit Court of Appeals reviews this jury verdict.

Authored by Meryl Bernstein, Elizabeth Boison, Anna Kurian Shaw, Andrea Gregory DiSandro and Brendan Quinn.