Tag: crypto

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.

Whether you own or trade in them or think they’re little more than a speculative bubble, you can’t deny that NFTs – or Non-Fungible Tokens – have entered the public consciousness in recent times.

What are NFTs?

Firstly, what even are these strange digital tokens that have been causing such a wave of interest across popular culture? 

Non-fungible tokens are essentially unique and irreplaceable digital tokens containing valuable information stored on a blockchain – essentially a database of transaction records – with the Ethereum blockchain being the most popular. Think of them as a digital asset that represents real-world objects like music, digital trading cards, in-game items, and videos – but the real craze has been for NFTs in the digital art format which has taken the art world by storm. 

Art World

The prevalence of NFTs can perhaps be attributed to the continued endorsements of high-profile names, mainstream media coverage, and social media hype which boosts a market whose products arguably have no actual intrinsic value. However, the seismic shift this new art form is causing can be clearly seen through nearly $41 billion being spent on NFTs by the end of 2021 – making the market nearly as valuable as the global art market. One of the most well-known NFT artists is Mike “Beeple” Winkelmann, whose NFT “Everydays: the First 5000 Days” sold for an astounding $69 million at Christie’s in March 2021.  According to Christie’s, the sale put “Beeple” “among the top three most valuable living artists,” behind only David Hockney and Jeff Koons.

Popular Culture

Celebrity endorsements for NFTs and such collections as “The Bored Ape Yacht Club” has been a significant catalyst in the explosion in popularity of NFTs. “The Bored Ape Yacht Club” is one of many exclusive NFT digital art collections, with only 10,000 Bored Apes NFTs in existence. Access to an exclusive club known as “the swamp club” is also granted to each owner of one of the rare ape-themed NFTs. Owning NFTs from an exclusive collection usually grants access to prestigious real-world events or Discord group chats with the world’s elite, thus increasing their value beyond mere aesthetic appeal.

Many influential people display their allegiance to their NFT community by changing their social media profile picture to a cartoonish picture of their colourful animated ape NFT, for example. Such celebrity endorsements range from billionaire Elon Musk, Twitter co-founder and CEO Jack Dorsey, and footballer Lionel Messi to artist Damien Hurst, online personality KSI, and former One Direction singer Liam Payne, to name a few.

Companies are also jumping on the trend, with Spotify recently announcing plans to add blockchain technology and non-fungible tokens to its streaming service, a move that many are optimistic will help to boost artists’ earnings. Twitter, Facebook, Instagram, and Reddit are also some of the latest social media heavyweights to announce plans to enable the trading and displaying of NFTs on their platforms. Snoop Dogg has also emerged as a prominent player in the market, selling more than $44 million worth of NFTs over the course of five days in support of his new album, sending shockwaves across the music industry in the process. For context, the album would have needed to amass 7.3 billion streams to earn him that same amount of alleged revenue. 

Concerns & The Law

NFTs have, however, prompted security concerns that need to be addressed if they are to convert the doubters. These issues include such scenarios as if the platform an NFT is built on goes out of business the NFT might not be accessible and thereby lose all value. Also worth noting is the rise in NFT fraud with one of the simplest forms of fraud coming in the form of people selling NFTs from artworks that they do not own the right to use. Litigation PR skills could be needed to convince a sometimes sceptical mainstream media that the theft of NFTs by unanimous individuals acting online is as damaging as the misappropriation of real-world assets. To ensure such online characters are held accountable for their actions there will also need to be an adaption of the law for a new third category of legal “things” to exist – a tertium quid – to sit alongside those of ‘chose in possession’ and ‘chose in action’.

The NFT market has also been unsteady in recent times with a significant slowdown in the market seen through the number of accounts buying and selling NFTs falling from 380,000 at its peak in November 2021 to 194,000 currently, along with a startling drop of 48 percent in the average selling price in the same period, according to NonFungible – the world’s largest NFT data resource. This also correlates with the cryptocurrency market which widely peaked in November 2021, such as the Ether cryptocurrency which uses the Ethereum blockchain upon which many NFTs are positioned, issuing a stark reminder of the digital assets market volatility.

Ukraine

The war in Ukraine has seen a significant flow of cryptocurrency and NFT donations coming into the country to help fund its war efforts against the invading Russian forces. The Ukrainian government is even releasing an NFT collection to add to this unconventional fundraising vessel, with each token carrying a piece of art representing a story from a trusted news source documenting the war. This opening of the door for media-related NFTs could mean that in the future we may well see a collection of NFTs released by broadcasters on our own shores. NFT collections of archive footage from the two World Wars and later conflicts to fundraise for Remembrance Sunday, or famous newspaper front pages from the past could be just a few of the copious digital products on the horizon. If it makes money it makes sense. Rather than just reporting on the subject from the outside looking in, the media world would be interwoven with it. You would reasonably assume that this would cause a greater sense of seriousness and urgency to develop around the reporting of the subject, particularly around allegations of fraud.

Final Note

Do NFTs represent the future of the internet as it edges towards its new phase of the “Web3” and the metaverse which will transform a myriad of industries, or are they just a huge digital pyramid scheme that is yet to implode? Whatever the outcome, there is something to note from a PR standpoint and that is the power of the endorsement and hype in bolstering the emergence of NFTs and cryptocurrencies in the past couple of years. 

This familiarisation and repackaging of NFTs to make them appear “cool” to own – and smart to invest in – by some of the most influential people on the planet have fanned the flames of society’s interest and allowed the NFT train to continue down its uncertain tracks. 

Is this the start of a new era? We’ll have to wait and see.  

By Declan Flahive

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