On Friday, June 23, 2023, Judge Jed Rakoff issued a highly anticipated decision, permanently enjoining artist Mason Rothschild from selling “MetaBirkin” NFTs, which depict furry, digital versions of the Hermès signature Birkin handbag. The ruling followed a jury trial and unanimous verdict finding Rothschild violated Hermès’s trademark rights in the “Birkin” mark.

The court also denied Rothschild’s motion for judgment as a matter of law, rejecting his argument that the MetaBirkin NFTs were protected by the First Amendment and that the court had erred in failing to distinguish between Rothschild’s intent upon adopting the mark and after adopting the mark. Finally, the court rejected Rothschild’s request to interview jurors.

Judge Rakoff’s ruling reaffirms the jury’s verdict and holds important lessons for sellers of NFTs that claim First Amendment protection for their use of trademarks as a form of artistic expression.

Background

In November 2021, Rothschild began selling 100 NFTs linked to digital depictions of faux-fur Hermès Birkin bags. Rothschild adorned his “bags” with colorful patterns, polka dots, and famous artworks like the Mona Lisa. Rothschild named the collection “MetaBirkins” and promoted the NFTs on his website www.metabirkin.com and on social media. Rothschild claimed that the collection was “inspired by the acceleration of fashion’s ‘fur-free’ initiatives and embrace of alternative textiles.” Within months, Rothschild sold more than $1 million in MetaBirkin NFTs.

On January 14, 2022, Hermès sued Rothschild in the U.S. District Court for the Southern District of New York for a range of trademark violations, including infringement, dilution, and cybersquatting. Hermès alleged that Rothschild was “a digital speculator” who merely added the generic prefix “meta” to denote “fake Hermès products in the metaverse.”

Rothschild claimed his actions were shielded by the First Amendment as artistic expression, and he moved to dismiss under the Second Circuit’s Rogers v. Grimaldi test. Under Rogers, the First Amendment requires dismissal of a trademark claim brought against a work containing some degree of “artistic expression” unless the challenged use of the mark “has no artistic relevance to the underlying work” or “explicitly misleads as to the source of or the content of the work.” Rogers v. Grimaldi, 875 F.3d 994, 999 (2d Cir. 1989).

Judge Rakoff denied Rothschild’s motion, holding that while the MetaBirkin images were artistic works, the complaint alleged facts sufficient to plausibly argue that Rothschild’s use of MetaBirkin was not artistically relevant to the works, and was explicitly misleading. He also denied the parties’ summary judgment motions, ruling that genuine disputes of fact existed as to whether the NFTs were artistic works and whether they explicitly misled consumers.

At trial, Rothschild reiterated his position that the NFTs commented on animal cruelty involved in leather good production. Meanwhile, Hermès stressed that Rothschild’s actions would impair its ability to enter the metaverse space itself and that consumers would be confused as to the source of Rothschild’s MetaBirkin NFTs.

After a nine-day trial, the jury unanimously found Rothschild liable for trademark infringement, dilution, and cybersquatting on the basis that the MetaBirkins were likely to confuse consumers. The jury awarded Hermès $133,000 in damages, consisting of $110,000 of estimated profits from the sale of the NFTs and $23,000 for cybersquatting for registering the metabirkins.com domain.

After the verdict, Hermès moved for a permanent injunction. Rothschild moved for judgment as a matter of law or, alternatively, for a new trial. Rothschild also requested leave to interview the jurors. 

Rothschild’s Motion for Judgment as a Matter of Law and for a New Trial

Judge Rakoff denied Rothschild’s motion for judgment as a matter of law or, alternatively, for a new trial.

The court first rejected Rothschild’s contention that the jury improperly was instructed to consider the trademark claims before considering whether Hermès had proved the First Amendment did not shield Rothschild from liability. According to Rothschild, this sequencing suggested that the First Amendment was a defense that Rothchild bore the burden to prove. After first positing that Rothchild may have waived this argument, the court explained that the order of its instructions was correct, particularly given that the jury was instructed that Hermès was required to prove each element.

The court then rejected Rothschild’s argument that the substance of the jury instructions was incorrect. At trial, the court instructed the jury to consider the test in Rogers v. Grimaldi, which requires dismissal of a trademark claim brought against a work containing some degree of “artistic expression” unless the challenged use of the mark “has no artistic relevance to the underlying work” or “explicitly misleads as to the source of or the content of the work.” Judge Rakoff noted that the Rogers test might no longer apply given the Supreme Court’s recent decision in Jack Daniel’s v. VIP Products, a case we discussed here. But the court explained that the issue need not be decided because, as in Jack Daniel’s, Rothchild used the trademark to designate a source for his own goods. Jack Daniel’s held that the Rogers test—even if still the law—does not apply in such situations. 

Regardless, the court found it properly instructed the jury to find liability only if Rothschild “actually intended to confuse potential customers into believing that Hermès was associated” with the NFTs. The court rejected Rothschild’s argument that it was error not to instruct the jury to consider his intent both before adopting the mark and then after adopting it, as “there is little difference between an intent to confuse at the time of adoption of the mark and after its adoption. . . . the relevant question is whether Rothschild intended to ‘induce members of the public to believe the [artwork] was prepared or otherwise authorized by [the trademark holder].’”

The court quickly disposed of Rothschild’s argument that, even assuming he intended to deceive consumers, no reasonable juror could have found he was liable for infringement based on traditional trademark infringement factors. Judge Rakoff found the jury had ample evidence to find a likelihood of confusion, including a survey showing actual confusion.

Hermès’ Motion for a Permanent Injunction

Judge Rakoff granted Hermès’ request for a permanent injunction. 

Hermès argued that—despite the jury verdict—Rothschild had continued to promote the sale of MetaBirkins NFTs on social media platforms and to list the NFTs for sale on various marketplaces. In granting the motion, the court held that each of the eBay Inc. v. MercExchange factors considered in deciding whether to grant an injunction weighed in favor of injunctive relief. 

• The court relied on the rebuttable presumption of irreparable harm under the Trademark Modernization Act of 2020, which the Second Circuit has interpreted to shift the burden of persuasion to the trademark infringer. The court found that Rothschild failed to rebut that presumption in the face of evidence that “consumers did mistake an association between Hermès and the MetaBirkins NFTs.” 
• Then, the court found monetary damages inadequate to remedy the harm to Hermès, noting that “Rothschild appears to concede this point” by arguing for a narrow injunction rather than that no injunction should issue at all.
• On the balance of hardships, the court rejected Rothschild’s argument based on alleged harms he would suffer if unable to sell infringing products. The court rejected Rothschild’s arguments based on his alleged First Amendment rights as inconsistent with the jury’s verdict, which necessarily found that Rothschild had waived such rights by “intentionally design[ing]” his NFTs to “mislead potential consumers.”
• The court found the injunction in the public interest because the public has an interest “in not being confused.” The court also rejected Rothschild’s final argument that no injunction should issue due to Hermès’s alleged “bad faith” and “dishonest” conduct, finding such allegations to be “entirely meritless.”

As to the scope of the injunction, the court enjoined Rothschild and any person acting in concert with him from using the Birkin marks or otherwise misleading the public about the source of the MetaBirkins NFTs. The court further ordered Rothschild to transfer the www.metabirkins.com domain name to Hermès and to disgorge his profits derived from the MetaBirkins NFTs from the beginning of trial to the present. The court also ordered Rothschild to communicate the results of the order to purchasers of the NFTs.

Rothschild’s Motion to Conduct Jury Interviews

Finally, Judge Rakoff rejected Rothschild’s request for leave to interview the jury foreperson and four other jurors. In support of his motion, Rothschild relied on a post-verdict social media comment by one juror concerning trademark law and a post-verdict statement of another juror identifying the Rogers case by name, which was not previously provided to the jurors. The court rejected this evidence as showing any impropriety. Referring to this as “perhaps [Rothschild’s] most frivolous” motion, the court found the allegations that the jurors had considered material, prejudicial, and erroneous information outside the record to be “serious accusations” “made without the slightest support.” Comparing Rothschild’s request to a case in which such a request was granted due to evidence that a juror had been offered monetary compensation in exchange for a verdict, the court held that the “difference in the quality of evidence . . . could not be more stark.”

Takeaways

There are key takeaways from Judge Rakoff’s decision.

• The court’s order, which reaffirmed the jury’s verdict and issued a strong remedy in favor of Hermès, is one of the first injunctions issued for trademark violations by NFTs. The case is a cautionary tale for NFT sellers who exploit others’ trademarks under the guise of artistic expression. The court reaffirmed the jury’s verdict that Hermès trademark rights in physical, real-world Birkin handbags extended to NFTs linking to virtual, metaverse handbags.
• In one of the first decisions discussing the Supreme Court’s recent Jack Daniel’s opinion, Judge Rakoff refrained from deciding whether Rogers remains good law. While Rogers stands on increasingly shaky ground, it remains clear that where a trademark is used to signal the source of the work—artistic or not—the Rogers test cannot be invoked to shield an accused infringer.

[View source.]