13 February 2023

The Hermès Case: A controversial Legal Battle over Virtual Property Rights

  • Articles
  • Legal
  • Data / Technology / IP
  • Litigation / Arbitration

The metaverse is on everyone's mind and virtual worlds are experiencing a hype. Among numerous other legal issues, in particular IP protection plays a significant role in the metaverse.

  • Dr. Jonatan Baier

    Legal Partner

  • Luca Hitz

    Senior Legal Associate

One of the most high-profile cases in this context is the Hermès case which may end a year-long battle between the French luxury fashion house and NFT artist Mason Rothschild over his MetaBirkin NFT collection. This legal dispute about ownership and control over virtual assets has the potential to set a precedent for the treatment of virtual assets in the future.

Hermès’ MetaBirkin Lawsuit

The Hermès lawsuit involved digital artist Mason Rothschild's MetaBirkins NFT collection. The digital and virtual Birkin is a tribute to the famous Hermès bag, in which Rothschild has simulated over 100 individual NFTs inspired by the Birkin, using faux fur and a range of colours and graphics. However, the bags are not made by Hermès and are not real. The MetaBirkins were for sale on OpenSea, a peer-to-peer marketplace for NFTs, with a retail value of $1.1 million.

The French luxury fashion house Hermès considers its trademark rights to the US word mark "Birkin" and various Hermès trademarks as well as its copyright infringed by the MetaBirkins. In addition, unfair misrepresentation was alleged under applicable national competition law. The artist, on the other hand, invoked the creation of a work of art that engages with Hermès branded products in a particular way. Hermès filed a lawsuit in the Southern District of New York. Last week, the jury decided in favour of Hermès.

Verdict: Trademark Infringement

On February 8th, 2023 a nine-person jury in New York ruled in favour of Hermès and decided that the companies trademark rights were infringed by Rothschild and that Rothschild did, in fact, profit from Hermès' goodwill by producing NFTs based on the design house's Birkin bags. Hermès was awarded $133,000 in total damages. The jurors also found that Rothschild’s NFTs were not protected by the freedom of speech. The reason behind this ruling was that the MetaBirkins were seen as more similar to commodities - which are subject to strict trademark laws that prevent copycats – than to artworks where appropriation is protected. Rothschild already announced that he intends to appeal the decision.

Trademark rights in the Metaverse in a Swiss Context

The verdict of the Hermès case was made by a US court based on US trademark laws. Nevertheless, some of the findings may also have an influence on the way how Swiss courts would look at such a case. The metaverse is still an emerging legal niche and no court practice in Switzerland exists. It is to be seen whether Swiss courts will adopt the practice established by the Hermès case.

In general, and as long no actual case law exists, we advise our clients to claim additional virtual goods in their trademark application in order to be protected the best possible way. The Swiss Federal Institute of Intellectual Property as well as the European and US trademark office accept applications for virtual goods.

Dispute Resolution in the Metaverse

The Metaverse in general and NFTs specifically provide fertile grounds for new types of disputes to arrive – one type of disputes will be IP-related. The MetaBirkin case is one of the first cases decided by state courts addressing trademark infringements by NFT creators. Many more will follow, and future disputes will presumably also involve Metaverse platforms. This holds particularly true as some Metaverse platforms let users equip their avatars with clothing or items held as NFTs. Accordingly, we will also see different dispute resolution methods being applied to resolve such disputes. Will the outcome differ depending on dispute resolution method used? We will see – watch this space! 

Follow our MMEtaverse campaign: a more detailed analysis of these topics is already in the making.
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