Month: February 2023

The latest battle of the handbag, aka the high-stakes lawsuit brought by French luxury design house Hermès in the US against the artist Mason Rothschild over his ‘MetaBirkin’ NFT collection was hardly going to go unnoticed. Not only did the subject matter offer great headline and photo opportunities for business, tech, crypto, art, fashion and legal news outlets alike, but there were important principles at stake for the burgeoning world of NFTs and luxury brands. 

Some say Hermès took a risk filing such a dispute to be heard before a jury and taking on the so-called artistic community. However, its success in protecting its brand was a legal and reputational triumph setting a precedent for other brands and NFT creators in the relationship between digital art, NFTs and the physical fashion it purports to replicate. 

The Birkin handbag

Hermès was established in 1837 and, inter alia, they are known for designing and producing the iconic and highly sought after Birkin handbag. The Birkin handbag has been synonymous with high fashion, exclusivity and wealth since it burst onto the cultural scene in 1984 with its value being seen through the two-year-long waiting list and the hundreds of thousands of pounds each one can fetch at auction. Unsurprisingly, Hermès owns trademark rights for the “Hermès” and “Birkin” marks as well as trade dress rights in the design of the handbag.

‘MetaBirkin’

The artist Rothschild, whose real name is Sonny Estival, began selling ‘MetaBirkin’ NFTs in 2021 that portrayed the highly coveted Birkin handbag adorned with various eccentric items like fur, tusks and even a Santa hat, rather than the typical leather of the genuine Hermès handbag. He intended this as a comment “on the animal cruelty inherent in Hermès’ manufacture of its ultra-expensive leather handbags”. The NFT collection proved a hit with fans shown through the range reportedly making over $1 million for Rothschild through online sales. 

See you in court

Hermès filed a lawsuit in January 2022, arguing that consumers only purchased Rothschild’s NFTs because the Birkin name wrongly led them to think the product was endorsed by Hermès.

In response, Rothschild argued that his ‘MetaBirkin’ NFT project was an “artistic experiment” that commented on society’s adoration of luxury goods and its displays of wealth. He adopted a fair use defence in line with the First Amendment of the U.S. Constitution, referring to the example of Andy Warhol’s depictions of Campbell’s soup cans. 

Furthermore, Rothschild relied on the ‘Rogers’ legal test from the landmark Rogers v. Grimaldi case from 1989 that allows trademarks to be used without permission being granted so long as a) the title of the work has some artistic relevance to the underlying work and b) that the title is not explicitly misleading as to the source of the content of the work. However, Hermès claimed that these NFTs were not only created purely for financial gain and not protected under free speech as an artistic expression but they also diluted the Birkin name and violated Hermès’ trademarks. Hermès further argued the ‘MetaBirkin’ experiment had damaged its future prospects in the NFT world where other luxury brands are already active. 

Hermès wins

On February 8, the jury in the Southern District of New York reached its finding that Rothschild’s unauthorised versions of the Birkin handbag constituted trademark infringement, trademark dilution, and cybersquatting, since Rothschild used the ‘MetaBirkins.com’ domain name that was deemed confusingly similar to that of the luxury fashion house. Hermès was awarded US $133,000 in damages.

Interestingly, the jury also found that Rothschild’s unauthorised use of the Birkin handbag as an NFT was not a protected form of speech under the First Amendment of the U.S. Constitution as it was explicitly misleading to consumers. The jury found that the ‘MetaBirkin’ was more akin to consumer goods, which are subject to trademark regulations, than free speech-protected works of art, and that Rothschild did this to profit from Hermès’ goodwill.

NFT legal precedent

Whilst Hermes can now claim that it fiercely defends its brand from replicas in both the real and virtual worlds, this lawsuit also has implications for the wider world of NFTs. The ruling has been reported as a blow to creators looking to use online space to sell replications of established brand products for financial gain, representing a win for IP protection for luxury brands in general. One headline even went so far as to report that the judgment meant NFTs are not art.

Clearly, there will be further cases in this new frontier where technology and art – and the legal principles to be applied – collide. Meantime, this case offers various other lessons and consideration points.  Commentary in established media was, unsurprisingly, more pro-Hermès than the spectrum of debate on social media, where the David v Goliath battle was sometimes viewed more sceptically. It highlights not only the threat to big brands but also the potential for a new realm of customers that this new technology can bring.

Crypto Experience

By Declan Flahive

22/02/2023

Bell Yard advises ONTIER, the firm whose client, Dr Wright, authored the Bitcoin White Paper, under the pseudonym, Satoshi Nakamoto, creating the blueprint for a new digital asset over 15 years ago.

Having been ‘doxxed’ as Satoshi in 2015, he faced relentless online hostility from individuals and entities with a vested interest in alternative digital coins. Dr Wright soon determined to prove his identity through the courts, establishing and enforcing his copyright in the White Paper and numerous patents relating to the blockchain.

Bell Yard’s role has been to promote ONTIER’s incremental successes in the English legal cases being brought and/or challenged by the firm on Dr Wright’s behalf, so as to marginalise the online abusers and to achieve public recognition, through court judgments, that Dr Wright is indeed who he says he is.

We work in close conjunction with Dr Wright’s personal PR team, while remaining dedicated to our task of promoting the litigation outcomes. 

We are currently advising on the communication around a ground-breaking action against 16 bitcoin developers to establish their duty to restore access to stolen/lost private keys to those who can demonstrate, to the satisfaction of a court, their ownership of the wallet in which digital currency is stored.   We also support ONTIER in the various copyright infringement cases ongoing, as well as defamation actions in UK and Norway.  Running in parallel is a huge case (brought by ONTIER on behalf of an entity beneficially owned by Dr Wright), against digital currency exchanges Kraken and Coindesk, valued in the hundreds of billions of pounds.

Summary

Not only are these various litigations complex, involving multi-parties across multiple jurisdictions, they are also at the cutting edge of digital currency development, with Bitcoin gaining increasing traction towards mainstream acceptance.  There can be few litigation PR instructions of such novelty and magnitude and we remain fortunate to be advising such a creative and brilliantly innovative legal team and end client.

Bell Yard’s contact details can be found here.

Tax is back as a theme and a story to groans and cheers, depending on your perspective. Mrs Sunak’s non-dom saga laid the ground. Liz Truss’ low-taxes-for-growth campaign and Kwasi’s kamikaze budget got everyone talking about it last summer. Dan Neidle, formerly of Clifford Chance and now an unencumbered independent expert, has since pushed the envelope further with his revelations about Nadhim Zahawi’s tax affairs and, more recently, his tie-up with the i-newspaper to ask questions of former Labour party Chairman Ian Lavery.

Given the Spring Budget is only a month away and the end of the tax year looms in early April, there will be no let-up on tax-related stories in the media. And with this specialist subject taking centre stage on the political battlefield once more, with calls for a windfall tax on energy companies, a wealth tax and effectively a tax on public schools, we can expect tax to remain a hot topic for the foreseeable future.

Tax advisers have long had a PR tightrope to walk. On the one hand, it’s great to be seen as an expert in CGT, DPT, IHT, IR35 and the like. On the other hand, advisors will wish to avoid giving away the crown jewels of advice mechanics or teeter into territory that could be said to encourage tax avoidance.  The last thing any firm wants is a spotlight for the wrong reasons on its modus operandi or heaven forbid its clients, either from the media or HMRC. Mr Loophole may be able to trade on his nick-name, but not many can do the same.

There are also litigation funders increasingly willing to take on the tax expert fraternity. Just ask Andrew Thornhill KC and Jonathan Peacock KC who, separately, found themselves subject to negligence allegations from film-finance fund investors left out-of-pocket when HMRC tightened their rules. Both cases eventually settled without admission of liability but not before a fanfare of publicity and arguably dents to their hard-earned reputations.

HMRC may be attracting its own bad press at the moment for slow responses and low prosecution rates but on matters of tax denied to public coffers the media is on its side.

So what is good PR advice to anyone caught in the cross-hairs of a tax story?

If you are an individual in the public eye:

• Try not to make tax ‘mistakes’ in the first place! Make sure you understand the steps you are taking, or advisors are taking on your behalf. If you are investigated or required to pay a penalty to HMRC don’t obfuscate. Worse – don’t bring in reputation lawyers to ‘kill’ media interest.
• If you get into dispute with HMRC be prepared for this process to play out in public. Eamonn Holmes has talked about the stress he experienced during his case.
• If the wind changes on what is legal or ‘within the rules’, apologise and swiftly pay back any tax owed.  This isn’t a panacea to all ills, but it’s a start. Gary Barlow found that ‘the smell’ of a tarnished reputation doesn’t easily dissipate, but the passage of time helps.
• If what you are doing is legal but ‘a bad look’ and you’re in the public eye, think twice. Jimmy Carr spoke of his regret at investing in a perfectly legitimate offshore tax scheme (Jersey based K2) after media exposure, a public outcry and his investment decision being branded ‘morally wrong’ by David Cameron. He has actually dealt with the issue quite well in repeated media interviews since, admitting his ‘terrible error of judgment’ and promising to conduct his financial affairs ‘more responsibly in future.’  In contrast Nadhim Zahawi was criticised for apologising to his family but not the wider public for his ‘careless mistake’, which resulted in a deficit to the public purse – far from optimal for a former Chancellor of the Exchequer, however short-lived in the post.

For companies under scrutiny for their tax affairs:

• Apologising and changing behaviour can be unrealistic in a world where corporate profits are king and the tax system is usually the issue. Yes, Amazon is known to pay minimal direct taxes on its UK based profits, for example, but it can do this legitimately within the tax rules and with clever structuring of its global business operations. Media messaging should therefore emphasize an assiduous adherence to UK tax rules and the fact allowances are available to all UK companies.
• It also makes sense to catalogue the total £s spent on investment in the UK, number of people employed here and any UK CSR initiatives for which the company can claim credit, to mitigate critical stories.
• Whilst companies on the backfoot may find customer loyalty isn’t seriously impacted as a result of tax exposés, this may well change with the purpose-led attitudes of Gen Z, who seem much more willing to act on their principles when it comes to consumer purchasing decisions.
• In a general economic slow-down, an increasing number of think tanks and lobby groups (such as TaxWatch and the Fair Tax Foundation) will look to expose the tax affairs of big corporations. They feed their calculations to the media and by doing so aim to keep the pressure on the Government to review the rules and on HMRC and consumers to hold these companies to account.   

If you are a tax adviser:

• Be aware, there are downsides as well as upsides to commenting in the media.
• Focus expert marketing-oriented commentary around tax deadlines, winners and losers, obvious top tips and common mitigation steps.
• Work with your clients if the media spotlight falls on them to ensure consistent messaging with your firm and that technical accuracy and emotional intelligence underpin reactive responses. 

High-profile clients dodging their tax paying responsibilities makes great media copy, and never more so in this climate of a cost-of-living crisis. There is rarely a reputational ‘win’ in such tax-matters, merely damage limitation.

By Louise Beeson

15/02/2023