- OK, this is a great law school exam problem. Only it’s happening IRL.
- Digital creator Mason Rothschild reportedly dropped a collection of 100 NFTs called “MetaBirkins” at Art Basel Miami on Dec. 2, 2021. NFT Stats indicates that the highest sales of the MetaBirkins NFTs were over $43,600. Irish Times reports that the total sales of MetaBirkins so far has been about $800,000.
- Will the real MetaBirkin please stand up? One challenge in analyzing this controversy is that there’s more than one listing of a MetaBirkin collection on OpenSea. One listing for MetaBirkins on OpenSea that has the higher sales prices states:
- “MetaBirkins is a collection of 100 unique NFTs created with faux fur in a range contemporary color and graphic executions. MetaBirkins are a tribute to Hermes’ most famous handbag, the Birkin, one of the most exclusive, well-made luxury accessories. Its mysterious waitlist, intimidating price tags, and extreme scarcity have made it a highly covetable ‘holy grail’ handbag that doubles as an investment or store of value.”
- “We are not affiliated, associated, authorized, endorsed by, or in any way officially connected with the Hérmes, or any of its subsidiaries or its affiliates. The official Hérmes website can be found at https://www.hermes.com/.”
- Then a different listing on OpenSea, with cheaper prices, states “Made by Mason Rothschild.” But it appears the collections are using the exact same images of MetaBirkin bags, putatively created by Mason Rothschild. The Irish Times reported that Rotschild criticized the “fake MetaBirkin” NFTs being sold, apparently in addition to his own authentic MetaBirkin NFTs. Let’s put aside the complicating issue of the “fake MetaBirkin” NFTs. Presumably, the higher priced MetaBirkin NFTs are from Rothschild (and the official Instagram account for MetaBirkins appears to confirm that), but this analysis makes no judgment. From news reports, we know that some MetaBirkin NFTs were sold by Rothschild. The following analysis relates solely to NFTs sold by Rothschild, not the alleged scammers.
- Hermes is not pleased. In a statement, Hermes accuses Rothschild of infringing its intellectual property for its luxury Birkin bag:
- “Hermès did not authorise nor consent to the commercialisation or creation of our Birkin bag by Mason Rothschild in the metaverse.”
- “These NFTs infringe upon the intellectual property and trademark rights of Hermès and are an example of fake Hermès products in the metaverse.”
- No lawsuit has been filed yet, but it would likely include (1) trademark infringement, (2) trademark dilution, and (3) copyright infringement claims, including alleged violations of Hermes’ reproduction and derivative work rights under copyright law. (If some buyers of the MetaBirkin NFTs were located outside the United States, there can also be alleged infringement in other countries where the buyers lived. Those IP claims would be governed by the laws of those countries. But, for now, let’s assume that only U.S. law applies.)
- For the trademark claims of infringement and dilution, Rothschild might argue his use of the word “MetaBirkin” and trade dress for the Birkin bag are a parody. The Fourth Circuit held that a pet supply company’s use of the “Chewy Vuitton” name and a trade dress on dog toys that resembled Louis Vuitton’s famous trade dress were a parody, and therefore not trademark infringement or dilution. Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, 507 F.3d 252, 260-269 (4th Cir. 2007).
- Here, though, parody might be hard to satisfy. The Fourth Circuit emphasized that, for a parody of a trademark, the parody “must also communicate some articulable element of satire, ridicule, joking, or amusement.” Perhaps an argument can be made that the “faux fur” putatively used in the MetaBirkin virtual bags in the NFTs is meant to ridicule the pretentiousness of the Hermes bag, which can sell for tens of thousands of dollars and sometimes hundreds of thousands of dollars. But that seems to be a slender reed on which to infer a parody. Just looking at the images of the MetaBirkin virtual bags, one cannot even discern the fur is faux. Indeed, an ordinary consumer might even be impressed with the MetaBirkin designs and think they come from Hermes. Consider this example:
- In press accounts, Rothschild reportedly stated his intention to foster greater awareness of cruelty-free and animal-free fashion materials. But it’s unclear the ordinary consumer would infer such intention by just looking at the MetaBirkin (versus reading the press reports).
- Likewise, it’s hard to discern ridicule in the term “MetaBirkin.” The metaverse is a fast growing sector, and many companies in the fashion industry are entering that market. (See Rachel Tashjian, Why Is Fashion So Obsessed with the Metaverse, GQ.)
- To ordinary consumers, Rothschild’s MetaBirkin bags might appear to be a tribute to Hermes, paying homage and reverence to Hermes’ iconic Birkin bag instead of ridiculing it. Indeed, several websites interpreted the MetaBirkin NFTs as “a heartfelt tribute to Hermes’ most famous handbag,” not a parody. Rothschild would have a stronger argument for parody if he called the NFTs MetaBirkin dog toys and characterized the bags as virtual dog chew toys, by comparison.
- If the parody defense fails, Rothschild would have to contest Hermes’ proof of a likelihood of confusion for the infringement claim and Hermes’ proof of tarnishment or blurring of its famous mark, assuming Hermes can prove the mark is famous.
- For the copyright claim, Rothschild would likely raise a fair use defense because he apparently admitted to copying the Birkin bag design (as the name itself MetaBirkin indicates). Here, too, parody fair use might be argued, and the test for parody under copyright law is a bit more expansive. As the Supreme Court stated in Campbell v. Acuff-Rose Music, 510 U.S. 569: “For the purposes of copyright law, the nub of the definitions, and the heart of any parodist’s claim to quote from existing material, is the use of some elements of a prior author’s composition to create a new one that, at least in part, comments on that author’s works.” A similar argument of parody as above in the context of the trademark claim can be made here. The “faux fur” used in the virtual “MetaBirkin” bags arguably “comments on” the pretentiousness of the Hermes bag. But, again, an ordinary observer or lay audience might be hard pressed to figure out the fur is faux on the virtual MetaBirkin bag (as opposed to a stylish new design for the Birkin bag). Alternatively, instead of parody, Rothschild can argue that his use was a transformative use of the Birkin design; the MetaBirkin gives the Birkin design a new message or meaning by promoting cruelty-free fashion materials. The question is whether a new message or meaning can be reasonably perceived? Perhaps, but it’s a close question that might overlap with the derivative work analysis (see below).
- Rothschild would also likely argue that the Birkin bag design, in a useful article of a bag, is not copyrightable at all under the Supreme Court’s test of separability in Star Athletica. However, that test is fairly easy to satisfy, much to the chagrin of many of my colleagues who are copyright professors. First, the Birkin bag design “can be perceived as a two- or three-dimensional work of art separate from the useful article,” either as a pictorial work or as a sculptural work. Second, the Birkin bag design arguably “would qualify as a protectable pictorial, graphic, or sculptural work—either on its own or fixed in some other tangible medium of expression—if it were imagined separately from the useful article into which it is incorporated.” In Sept. 2020, the Birkin bags were shown in an exhibition at the Victoria and Albert Museum in London. But, when you look at the Birkin bag, can you see a sculptural work (that is not merely a replica) or do you just see a purse? Some Birkin bags that have patterns on the surface would likely satisfy this prong. But other Birkin bags that are plain on the surface might fail. For a comparison, check out Sotheby’s display.
- Finally, Rothschild might argue that he didn’t copy any copyrightable element of the Birkin bag. This argument might have some force, especially if the only element that survives the Star Athletica test is the surface pattern of Birkin bags and Rothschild didn’t copy any pattern. The shape is similar, and so is the combination of some of the elements (e.g., handles, arrangement). But the shape is basic or common to a handbag, and the combination, even if original, deserves only a thin copyright if the underlying elements are not copyrightable. The fur patterns of the MetaBirkin are so different from a Hermes design–and therefore not substantially similar, a jury could conclude. However, it might be a closer question whether the MetaBirkin designs constitute infringing derivative works because they arguably “adapt, recast, or transform” the Birkin design into a new derivative work.
- One lurking issue: one technical issue about NFTs that deserves mentioning. The images displayed are typically not what constitutes the NFTs sold. Instead, the NFT is a smart contract and lines of code on blockchain, here, in what is often called a virtual token. The smart contract contains a link pointing to the file of the image displayed. Typically, the buyer is not receiving the actual file of the image, but instead, the smart contract on blockchain. But I don’t see how that affects any of the above analysis for Rothschild, assuming he created the images of the MetaBirkin bags and used those images to sell NFTs.
- The other lurking issue: let’s assume for the sake of argument the MetaBirkins are infringing. What happens to the 100 buyers of the MetaBirkins NFTs? I doubt Hermes would ever go after consumers. But they might if they try to resell the MetaBirkins NFTs. So it could be the buyers would just be stuck with the NFTs. The buyers might have some legal claims against Rothschild as well if there were a provision in the terms and conditions of the sale, whether express or implied, that the NFTs did not infringe someone else’s intellectual property.
- These are some initial impressions (not legal advice, of course).