From Hermes Int'l v. Rothschild, an opinion issued today by Judge Jed Rakoff (S.D.N.Y.):
Around December 2021, defendant Mason Rothschild created digital images of faux-fur-covered versions of the luxury Birkin handbags of plaintiffs Hermes International and Hermes of Paris, Inc. (collectively, "Hermes"). Rothschild titled these images "MetaBirkins" and sold them using so-called "NFTs" (non-fungible tokens), explained further below. In response, Hermes filed a complaint, subsequently amended, claiming trademark infringement, trademark dilution, and cybersquatting….
Unless otherwise indicated, the following factual allegations are taken from the amended complaint. Hermes is a luxury fashion business known for, among other products, its unique Birkin handbag, which sells for anywhere from thousands of dollars to over one hundred thousand dollars. Hermes owns trademark rights in the Hermes and Birkin marks as well as trade dress rights in the Birkin handbag design.
NFTs, or "non-fungible tokens," are units of data stored on a blockchain that are created to transfer ownership of either physical things or digital media. When NFTs are created, or "minted," they are listed on an NFT marketplace where NFTs can be sold, traded, etc., in accordance with "smart contracts" that govern the transfers. Because NFTs can be easily sold and resold with a transaction history securely stored on the blockchain, NFTs can function as investments that can store value and increase value over time.
When an NFT is linked to digital media, the NFT and corresponding smart contract are stored on the blockchain and are linked to digital media files … to create a uniquely identifiable digital media file. {This means that an NFT could link to a digital media file that is just an image of a handbag or could link to a different kind of digital media file that is a virtual handbag that can be worn in a virtual world. Fashion companies are just starting to branch out into offering virtual fashion items that can be worn in virtual worlds online (most commonly, for now, in the context of videogames, but with potential to expand into other virtual worlds and platforms as those develop), and NFTs can be used to create and sell such virtual fashion items. However, while Hermes calls what Rothschild sells "digital handbags," they do not dispute that what Rothschild sells are digital images of (faux fur, not leather) Birkin bags, and not virtually wearable Birkin bags.} The NFTs and smart contracts are stored on the blockchain (so that they can be traced), but the digital media files to which the NFTs point are stored separately, usually on either a single central server or a decentralized network.
Fashion brands are beginning to create and offer digital replicas of their real-life products to put in digital fashion shows or otherwise use in the metaverse. NFTs can link to any kind of digital media, including virtual fashion items that can be worn in virtual worlds online. Brands sometimes partner with collaborators in offering co-branded virtual fashion products.
Defendant Mason Rothschild is a "marketing strategist" and "Entrepreneur" who "come[s] from the fashion industry." In or around May 2021, Rothschild created a digital image entitled "Baby Birkin," which depicted a 40-week-old fetus gestating inside of a transparent Birkin handbag. Rothschild sold the NFT linked to the "Baby Birkin" digital image for $23,500; it later resold for $47,000.
In or around December 2021, Rothschild created a collection of digital images titled "MetaBirkins," each of which depicted an image of a blurry faux-fur-covered Birkin handbag. Rothschild used NFTs to sell these "MetaBirkins" digital images. Each NFT in the "MetaBirkins" collection is titled with a number from 0 to 99 and not the "MetaBirkins" name. The NFTs have sold for prices comparable to real-world Birkin handbags.
