“A Handbag?!” The Battle over a Birkin

In this article we look at the current US lawsuit of Hermès International et al. v Mason Rothschild and its potential impact on NFTs and English IP law.

A Billion-Dollar Bag

Possibly the most talked-about Intellectual Property (IP) dispute in the world right now is being played out in a New York courtroom, as fashion giant Hermès International faces off against digital artist, Mason Rothschild.

The case focusses on Rothschild’s 2021 NFT ‘Metabirkins’ project, which featured 100 digital handbags covered in brightly coloured fur, in the distinctive ‘Birkin design/style’. If you’re unfamiliar, a ‘Birkin’ is a style of notoriously expensive and hard to acquire luxury handbag made by Hermès, for which the French luxury goods company has registered extensive IP protection (extending in some countries to 3D trade marks of the iconic design). The reason for this level of protection? Hermès claims that the Birkin brand has generated over one billion dollars in sales in recent years, so it is understandably keen to protect the bag.

The Hermès’ lawsuit claims that “Metabirkins” infringes trade mark rights by causing confusion and misleading the public into thinking that the NFTs originate from the French luxury goods brand itself.

Is that too big a leap to make? Is such confusion between the two really likely? If these questions had been posed even three years ago, in the infancy of the Metaverse and NFTs, you could have easily said yes, it’s bonkers to suggest that the public would accept that a digital handbag resembling a fluorescent Muppet could have been created by Hermès (a distinguished brand tracing its lineage back nearly 200 years). However, a lot has happened in the last few years: crypto is now mainstream, and we have seen major luxury brands including Chanel, Gucci and D&G issuing NFTs, taking commanding positions in new virtual worlds (Metaverse, Roblox etc.).

Hermès on the back foot?

So, this should be an open-and-shut case for Hermès; easy to win? Well, not necessarily: Hermès must convince the court that its ‘real world’ trade mark rights apply in the virtual world. The brand is also a relative latecomer to the virtual world; Metabirkins was potentially ‘first to market’ in that respect.

Therefore, the case is of vital importance for Hermès, to protect its Birkin brand and its future forays into a new, very lucrative, digital marketplace where digital goods such as designer handbags are purchased and worn by player avatars.

The case is also important for the IP world at large: the judgment should provide much needed clarity on how ‘real world’ trade mark rights extend to the virtual world.

Could it Apply in the UK?

Taking a slight step back here: the Metabirkins case is a lawsuit filed in the US, so what impact could it have on cases across the pond here, in the jurisdiction of England and Wales? Could the same litigation be brought here, by brands seeking to enforce IP rights against NFT projects pushing boundaries in the virtual world?

The short answer, in my view, is yes, and it’s only a matter of time before we see litigation here.

Section 10 of the Trade Marks Act 1994 (the Act) provides for an infringement action to be brought where there is misuse of a registered trade mark, including where a similar mark causes a likelihood of confusion with the original mark/brand. There is also another potential ‘bite of the cherry’ under s.10(3) of the Act: which prevents a third party from misusing a registered mark by seeking to ride on the coattails of the reputation associated with it (referencing it for the sake of appearing associated).

Do disclaimers help/hinder?

Disclaimers are not the shield people think they are when facing an infringement action, and they must be approached carefully.

In the Metabirkins case, Rothschild relies on the following disclaimer: “We are not affiliated, associated, authorized, endorsed by, or in any way officially connected with HERMÈS, or any of its subsidiaries or its affiliates”. Hermès is not impressed with this however, and actually claims the statement itself makes unfair use of its trade mark. This may be a stretch, but I can see a similar argument being raised in the UK, under s.10(3) of the Act.

The Takeaway – for NFT Projects

As an NFT creator, you have to be careful that the work you create as part of the NFT project does not infringe the IP rights of another party: whether that’s the copyright in an original work, or the trade mark held by a brand. For example, if you’re aware of a potential infringement risk, it is safer to obtain a licence (permission) to use a particular element of IP from its owner before creating and launching any project.

If you are unsure on this issue, we would recommend you speak with an experienced IP lawyer.

The Takeaway – for Brands

If you have a brand (elements of it) you wish to protect, there are many good reasons to consider trade mark registration; as an IP litigator, I can confirm it’s easier and more certain to enforce a registered right than an unregistered one. However, with rights’ ownership comes an imperative: to enforce your rights when you are aware they are being infringed, otherwise if you fail to do so, it can set a dangerous precedent and could harm your existing rights.

The Future

The UK trails US litigation trends by nine to twelve months, so we can expect to see these types of cases arising from NFT projects here soon: a clear warning to both NFT project creators and brands.

If the US court delivers judgment how we think it may, there could be a lot more litigation brought by brands in the near future.

Please contact us today if you’d like to discuss the issues raised here further.