In a case concerning digital artworks that are linked to non-fungible tokens and have the same design as Hermes’ well-known Birkin bag, a jury found in Hermes’ favour. The jury delivered its verdict earlier this morning, finding that MetaBirkins creator Mason Rothschild is liable on all three counts of trademark infringement, trademark dilution, and cybersquatting and that he is not protected by First Amendment rights. Hermes was given a judgement of about $133,000 in damages.

In January 2022, Hermes filed a lawsuit against Rothschild in the U.S. District Court for the Southern District of New York, alleging that Rothschild had engaged in trademark infringement, dilution, unfair competition, and cybersquatting through the sale of a collection of 100 METABIRKIN NFTs that illegally used Hermes’ HERMES trademark, BIRKIN trademark, and BIRKIN trade dress. Hermes demanded monetary damages as well as an injunction. Rothschild’s improper use of Hermes’ Birkin bag trade dress and iconography is an aggravating circumstance, but Hermes had also contended throughout the trial that what actually prompted Hermes to pursue Rothschild was his use of the BIRKIN trademark for NFTs. Hermes contends that the NFTs themselves, which have value apart from any accompanying imagery, are what was at issue when Rothschild used the Birkin trademark to allude to and advertise them.

Hermes’ first framing of the case was not accepted by Rothschild, who claimed that “MetaBirkins is the title of an art project and a collection of 100 artworks; it is not a [trade]mark.” Relying heavily on the test established by the Second Circuit in Rogers v. Grimaldi and the work of artists like Andy Warhol, Rothschild argued that his adoption and use of the MetaBirkins name was protected free speech under the First Amendment because the MetaBirkins artworks and associated NFTs are art and commentary on Hermes’ Birkin handbag, and therefore, should not constitute infringement, dilution, or cybersquatting.”

Given that it is one of the first cases to focus on claimed infringement – and dilution – of “real world” trademark rights in the virtual world, the case has drawn a lot of attention.

The prosecution’s focus on the distinction between real-world and virtual products makes the result particularly important since it may support the argument that digital commodities are legitimate “things” that can be infringed upon.

Several additional cases are still ongoing that will continue to influence trademark dealings in the virtual world, thus this decision is far from being the last in this evolving field of law. Another trademark lawsuit involving NFTs, Nike v. StockX, is currently in court in the Southern District of New York, and Yuga Laboratories v. Ryder Ripps is testing NFT-related trademark issues in federal court in California. By deciding whether or not the Rogers test applies to commercial items in the Jack Daniel’s Properties v. VIP Products case, the Supreme Court may have a substantial impact on “expressive works.” In the event that Rothschild files an appeal, the outcome of the “Bad Spaniels” case, which is anticipated to be decided by the Supreme Court this term, is likely to have an effect on the Hermes v. Rothschild case.

We are pleased to offer advice on how to protect your trademarks in the metaverse as this emerging area of law continues to evolve. We will be delighted to keep our clients informed of these decisions as well as any others made in this constantly developing sector.