Virtual Birkin Bags on Trial in Hermès Case Testing IP Rights

Beginning Monday, Mr. Rothschild’s MetaBirkins go on trial in New York in a case at the intersection of trademark law and constitutional protections for freedom of expression. Hermès is seeking to stop Mr. Rothschild from using its brand, the destruction of the NFTs and his profits plus other financial damages. Mr. Rothschild says his MetaBirkins are artwork protected by the First Amendment.

Neither Hermès nor its lawyers responded to requests for comment. Mr. Rothschild declined to comment.

Legal analysts say the trial represents an important early test of how a company can exercise its rights against virtual assets it didn’t authorize.

The specter of the unregulated metaverse is top of mind for companies that worry their brands will be used—and abused—as virtual reality expands, said Thomas Brooke, an intellectual property lawyer with Holland & Knight LLP.

The case “will give us more guideposts for what to do with NFTs,” Mr. Brooke said. “With any new technology the courts are often having to apply existing law and figure out what works.”

NFTs, blockchain-based unique assets that can be collected and traded, exploded in recent years as investors have flocked to marketplaces where tokens are sold. Lawsuits have followed, with retail brands and other companies claiming trademark and copyright infringement.

Among other pending cases,

Nike Inc.

is suing online marketplace StockX over virtual sneakers depicting the brand’s well-known swoosh that it sold as NFTs in combination with the resale of Nike sneakers. StockX denied the claims and said the introduction of the tokens expedites the process of authenticating and processing the physical items it sells.

Other cases have settled before trial, including a copyright dispute between Hollywood director Quentin Tarantino and Miramax LLC over the director’s attempt to auction off exclusive scenes from the 1994 film “Pulp Fiction,” in the form of NFTs. In another, Jay-Z’s label, Roc-A-Fella Records, stopped the label’s co-founder from selling the rapper’s debut album as an NFT.

In the Birkin matter, Mr. Rothschild received a percentage of each NFT sale. He said his project was designed to explore the issue of conspicuous consumption. The images, he said, aren’t replica Birkins, but rather art that depicts an imaginary bag.

“My MetaBirkins project as a whole was an artistic experiment to explore where the value in the Birkin handbag actually lies—in the handcrafted physical object, or in the image it projects?” Mr. Rothschild said in a legal declaration.

He analogizes his work to

Andy Warhol

‘s famous prints depicting Campbell Soup’s iconic cans. The soup maker, after initial skepticism, didn’t take legal action against the pop artist and later embraced his work.

Mr. Rothschild’s lawyers rely heavily on an 1989 case in which an appeals court rejected claims by actress

Ginger Rogers

that Italian director

Frederico Fellini

‘s movie, “Ginger and Fred,” in which two cabaret performers imitate her and partner

Fred Astaire,

misled the public into thinking she was connected to the film. The ruling endorsed protections for artistic expression, so long as it doesn’t create consumer confusion.

The Rogers precedent is currently being revisited in a case pending at the Supreme Court, involving a lawsuit brought by the makers of Jack Daniel’s, who are asserting trademark claims against a company that made a dog toy that is a replica of the brand’s whiskey bottle.

Hermès sued Mr. Rothschild in January 2022, labeling him a “digital speculator who is seeking to get rich quick.” The company argues his MetaBirkins diluted its brand and confused consumers, while allowing him to profit unlawfully off the goodwill of its sought-after luxury product.

“He seeks to make his fortune by swapping out Hermès’ ‘real life’ rights for ‘virtual rights,’” the company said in court documents.

Hermès said that while it hasn’t yet minted or sold any NFTs, Mr. Rothschild’s actions pre-empt its ability to offer products and services in virtual marketplaces.

U.S. District Judge Jed Rakoff in Manhattan, who is presiding over the case, has rejected requests from both sides to rule in their favor ahead of the jury trial, which begins with jury selection Monday.

New York University law professor Amy Adler said the central issues in the case are in many ways the latest chapter in the age-old debate about the applicability of trademarks in the world of art. Still, “there’s a question of whether this case will serve as a game-changer for intellectual property law,” she said.

Write to Erin Mulvaney at [email protected]