November 15, 2022

A Meta Dispute Raises Mega Questions

Over the past few years, NFTs have emerged from nowhere to become a big deal — even if a lot of people are fuzzy on the details of what an NFT is. And, as with any new creation, especially one that reaches across art, entertainment, finance and culture, conflicts over NFTs raise new legal issues. On this, I’m especially fascinated by Hermès International vs. Rothschild, 22 Civ. 384 (S.D.N.Y.). It raises so many questions: What is art? Who is an artist? What is an NFT? How do art and commerce interact and where does the First Amendment fit into all this?

This is a very “meta” case (in more ways than one).

It’s a simple story. In 2021, Mason Rothschild, a Los Angeles-based digital artist, launched his “MetaBirkin” project. The project involved the sale of 100 NFTs, each linked to a digital image created by Rothschild. The images are of imaginary, Birkin-style bags covered in distinctively colored fur. (Birkin bags are very expensive handbags made by Hermès, the French luxury fashion brand. They are often made from leather or exotic animal skins and can cost more than $100,000.)

Rothschild promoted MetaBirkins on social media with hashtags like #NotYourMothersBirkin and #MetaBirkin and created a Discord group for followers. His stated intention was to use the NFTs to raise awareness of the fashion world’s “fur-free” initiatives and promote the use of ethical textiles. Sales of these NFTs quickly took off.

Hermès was not amused and sent Rothschild a cease and desist letter. A few weeks later, it filed suit, claiming, among other things, trademark infringement, unfair competition and cybersquatting stemming from the use of “MetaBirkin” and hashtags containing the word “Birkin.” OpenSea, the world’s largest NFT marketplace, removed the MetaBirkins from its site and resale prices, which had reached as high as $46,000 for a single NFT, plummeted.

Hermès makes several arguments, but its central claim is that Rothschild is misleading consumers into thinking Hermès authorized the NFTs and otherwise trading on Hermès’ goodwill. Here, the company points to posts on Rothschild’s social media accounts and in the news indicating confusion over Hermès’ relationship to MetaBirkins.

It also vehemently argues that the Court should ignore Rothschild’s images of fanciful, fake fur covered Birkin-style bags because “[t]he MetaBirkin NFTs are data recorded on the Ethereum blockchain,” which Rothschild could swap out for something completely different and unrelated. In other words, Hermès argues Rothschild’s work is just bits of code that can be disassociated from the images. Thus, according to Hermès, his work is not art and, therefore, outside the scope of the First Amendment. In support of this claim, Hermès notes that when the MetaBirkins were first minted, the image was covered in a shroud and didn’t show the actual picture being sold. It also repeatedly claims that Rothschild is a marketer and not an artist.

In response, Rothschild asserts the First Amendment allows him to make and sell art that depicts Birkin bags. In his words: “I am not creating or selling fake Birkin bags. I’ve made works of art that depict imaginary, fur-covered Birkin bags. I have the right also to use the term ‘MetaBirkins’ to describe truthfully what that art depicts, and to comment artistically on those bags and the Birkin brand.” What’s more, he goes on, “[t]he fact that I sell the art using NFTs doesn’t change the fact that it’s art.”

Mason Rothschild also claims his use of “Meta” is an indication that the images are part of a commentary and argues that Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989) requires the Court to dismiss Hermès’ case.

As a refresher, the dancer Ginger Rogers sued the makers of a movie called “Ginger and Fred,” claiming that the movie’s use of her name impermissibly implied that she sponsored the movie, which was about fictional cabaret performers named Ginger and Fred. The Second Circuit rejected her claims. It held that the First Amendment requires courts to dismiss trademark claims involving artistic works unless the public’s interest in avoiding consumer confusion outweighs the public interest’s in free expression. With celebrity names in titles, the court held that a trademark claim must be dismissed unless “the title has no artistic relevance to the work whatsoever, or if it has some artistic relevance, unless the title explicitly misleads as to the source or content of the work.”

Based on this, Rothschild argues that the images associated with his NFTs have sufficient artistic content to bring this case within the ambit of Rogers and he has not explicitly misled anyone about the source of the NFTs. Specifically, he notes that it is not in his interest to have consumers think the NFTs were created by Hermès because he wants to be credited as the artist.

It’s hard to say where the court is going to come out on this, but it doesn’t seem terribly likely that Hermès will prevail here. Courts don’t want to be in the business of deciding what is and isn’t art and are likely to err on finding something is art. Moreover, the lengths to which Hermès goes to try to disassociate the images from the NFTs would seem to support a conclusion that the images are, in fact, art.

And, while it’s true that Rothschild could substitute the images linked to the NFTs, that’s pure speculation and doesn’t bear any relationship to the actual facts here. If anything, the fact that in the minting process the NFTs were associated with images on a pedestal covered with a shroud make it seem even more like these digital images are, in fact, art because that specifically calls to mind the unveiling of a statue or other artwork.

Thus, for Hermès to prevail, it’s going to have to show the NFTs explicitly misled people about their source. It’s hard to see that happening.

This will be fascinating to see where the court comes out and watch for this case’s impact on the new, evolving world of NFTs, the market for them, and how they further develop.