https://finance.yahoo.com/video/h-rmes-sues-metabirkin-nft-190522448.html
In this article, an American law professor professes his opinion that an NFT project called “MetaBirkins,” consisting of procedurally-generated digital art that is an obvious representation of a famous series of Hermes Birkin bags, does not violate any of the IP rights of Hermes. Kal Raustiala contends that the project would be covered by fair use, and that “…the bottom line is, art is art.” I am entirely unqualified to comment on whether or not this is correct within American law, but I do believe that in Canadian law, this would be incorrect.
Copyright law, as we have learned, does not apply to fashion designs. This means that fair dealing (or the American fair use) is not of use for the NFT creator.
Passing off, however, stands a much better chance success should Hermes wish to sue. That Hermes has goodwill in their products is obvious. That there has been misrepresentation to the public is less obvious, but still likely provable. The similarity between the bags and the NFTs is blatant, and the NFTs even share the Birkins name. Furthermore, many brands have launched metaverse or NFT projects using their existing marks and designs, including McDonald’s, Star Trek, Archie Comics, to name a few. It is far from hard to believe that a consumer would be tricked into thinking they were buying an NFT that was created by the actual Hermes company. Many NFT projects promise real-world benefits to buying in, so it would not even be implausible that consumer might think real Hermes products might come their way if they bought a MetaBirkin. The question at the core of misrepresentation is whether the ordinary consumer might be confused, and I think this is a very real possibility. The final aspect of passing off is actual or potential damage, and I think the possibility of damage to Hermes goodwill is very real. NFTs have attracted enormous amounts of criticism for the massive waste of electricity associated with the blockchains they are sold on. Many projects have been introduced by known brands only to be cancelled immediately after massive community backlash (e.g. the STALKER 2 NFTs). I think there is a real chance that MetaBirkins would diminish Hermes’ goodwill and cause them potential losses in sales. While these losses would be hard to quantify, remedies such as injunctions to take down the project, or orders for disgorgement of profits, might be attractive to Hermes.
Trademark law also may be of use to Hermes. Having just checked the trademark registry, I can tell you that the Hermes Birkin bag is registered in Canada as a distinguishing guise (registration number TMA818368). The main question to be determined would be whether MetaBirkins constitutes a confusing use or not. A preliminary question: are NFTs goods? Well, they’re not services. Goods seems a strange word to use, but an NFT is essential title to a unique digital asset, and I think that would qualify as a good. S. 6(5) gives us a list of factors which go to confusion. I do not think the mark has a very high degree of distinctiveness—to me, a non-fashionista, it seems interchangeable with any other handbag. The length of time in use weighs in Hermes’s favour—the bags have been around since 1984 while the MetaBirkins were released less than 6 months ago. The nature of the wares leads to interesting questions: how similar in nature are digital metaverse handbags to regular handbags. I think the similarity is fairly low—Birkins are used to store things in and carry around, and MetaBirkins exist only to be traded for digital in online markets. The most important factor, however, (Masterpiece) is the resemblance of the mark, and this weighs in Hermes’s favour. The bags are blatant replicas, and even, crucially, share the same name. The only difference is that the NFTs are furry, whereas the real bags are plain leather. All in all, I think a court would find that the use is confusing. The mere fact that one is virtual and one is not should not be a barrier, as per S&S productions Inc v Possum Lodges.
As a side note, it is worth noting that the NFTs do not seem to be doing very well. Most of the recent listings of MetaBirkins for sale have expired without a sale, and the only offers being made are far below the prices the current owners paid for them (https://looksrare.org/collections/0x566b73997F96c1076f7cF9e2C4576Bd08b1A3750#activity).
Communications Law
Interesting piece, Liam! I think the situation becomes even more complicated when the NFT is tied to a physical product like in the ongoing Nike v StockX dispute. StockX, like MetaBirkins, used Nike’s marks and getups in its NFTs, but those NFTs allowed their owners to redeem the physical products displayed on the NFTs at any time. StockX is arguing that the purpose of the NFTs is merely to authenticate ownership over the physical product, which is stored in StockX’s own climate-controlled facilitate, to allow for transactions of property without transfering the possession, allegedly to save shipping costs, etc. So, StockX claims that the NFTs are not stand-alone products, but something akin to images and descriptions used by e-commerce platforms to sell physical products. If StockX’s argument prevails, Nike’s whole claim would be uprooted because the principle of exhaustion applies. Will be interesting to see how courts resolve these uncertainties as we see more and more IP cases involving NFTs!