The Metaverse offers exciting new opportunities for brands to engage new audiences through interactive virtual environments and immersive experiences, including virtual products that cross the digital divide. For example, many luxury goods companies are now developing flagship brands that correspond to real-world products to drive engagement and instill brand loyalty among these new (and typically younger) consumers. We offer NFTs and other digital items below. While there is still uncertainty about how this new space will shape up, the recent jury verdict: Hermès International, etc. v. Mason Rothschildfrom the Southern District of New York,¹ provides some guidance on how courts might approach Metaverse-related branding issues.

Change in legal situation

With new opportunities comes new risks. A brand’s presentation in the metaverse may differ from consumer expectations of the actual physical product. In these virtual spaces, third-party content creators may draw inspiration from and/or utilize the intellectual property of the brand owner without the brand owner’s permission. If more liberal views of fair use may converge on the new digitization of analog products, blurred legal boundaries create conditions ripe for misunderstanding and conflict. Brands should be aware of the changing legal landscape surrounding the use of IP in the rapidly growing metaverse.

Hermes vs Rothschild

There has been limited indication of how brand protection in the metaverse might be interpreted in court. But one recent lawsuit (involving a trademark infringement claim against digital “artist” Mason Rothschild by Hermès, the iconic luxury goods maker known for its Birkin handbags) seeks to better understand the limits of trademarks. It provides valuable guidance to brand owners and content creators who want to Fair use in the metaverse.

Credit: Mason Rothschild/MetaBirkins²

The case focuses on a series of digital works called “Meta Birkin” created by Rothschild, a lookalike of the Hermès Birkin bag, which Rothschild provides social commentary on the fashion industry. A fanciful interpretation of the bag.”³ Importantly, Rothschild’s digital works are commercial in nature. He markets and sells products on his NFT marketplace and his first virtual Birkin sold for his $42,000. This is about the same retail price as the actual Birkin his bag.

Rothschild argued that his work constitutes “artistic expression” that should be protected from Hermès trademark infringement claims under the doctrine of fair use derived from the First Amendment.^Four He advocated the application of the language protection test specified below. Rogers vs Grimaldiretains the general term that works of artistic expression constitute fair use and are a defense against claims of trademark infringement. otherwise The work is clearly misleading as to the origin of the work.^Five In contrast, Hermès argued that Rothschild’s Meta Birkin was decidedly unartistic and advocated a different standard that focused on a general test for trademark infringement.⁶ The court favored Rothschild as to which criteria to apply.

while holding it Rogers Despite the fact that the test applied to Hermès’ trademark infringement claim, the court denied Rothschild’s motion for summary judgment (and Hermès’ Cross Motion), stating that the test “provides defendant to infringe another’s trademark.” It does not provide a free license.”⁷ The court further stated:[w]Artistic expression of oak deserves protection,” he said, adding that “it is sold in the commercial market as well as other more utilitarian products, and the risk of consumer deception is a legitimate concern that warrants government regulation.” I have to.”⁸ Farther away, “[i]In some cases, public concerns about avoiding competitive exploitation and consumer confusion take precedence over First Amendment concerns. ”⁹

In February, a federal jury in Manhattan found Rothschild responsible for cybersquatting, trademark infringement, and dilution of Hermes’ Birkin bag trademark.^Ten Hermès successfully argued that Rothschild’s MetaBirkins should not be protected because it was an attempt to profit from the fashion house’s famous BIRKIN mark and goodwill associated with the Hermès brand. Rothschild’s assertion that he did not intend to mislead consumers as to the provenance of MetaBirkins, despite pointing out the MetaBirkins site’s disclaimer and overreliance on artistic expression under the First Amendment, is unfounded. It was enough.

of Rothschild This decision should help guide brand owners. First, the difference between virtual and tangible goods is not as important as some might have expected. Trademark rights extend to the Metaverse if there is evidence that senior trademark users can naturally extend their goods and services into the virtual world. Even if there is no trademark registration covering the virtual goods or use in the virtual world, if the virtual item is within the brand owner’s natural extension zone, the company may have enforceable trademark rights over counterfeit goods in the Metaverse. may be holdingSecond, the credibility of courts Rogers Testing means that other NFTs or virtual goods may be considered works of art protected by the First Amendment.¹¹ actual, Rothschild The court appears to have accepted that the Metabirkin was a work of art (which Rogers “unless [use of the mark] There is absolutely no artistic relevance to the underlying work”).¹² Nonetheless, the commercial element of the NFT in this case, and Rothschild’s explicit evocation of the Birkin brand and mimicking the bag, played out in favor of Hermès.

Another lesson may be learned from Hermès not offering virtual goods or actively introducing brands to the metaverse at the same rate as brands in a similar situation. By entering the metaverse, brands primarily known for their physical goods can create broader perceptions of their brands in the minds of consumers across different areas of use, thus strengthening the brand itself and increasing its protection. It can extend the reach and deter potential infringers.. In the case of Hermès, although it won its first legal case after considerable effort, it appears that there is more work to be done. : Rothschild took his lawsuit to social media, defamed Hermès’ respect for artists, and filed a lawsuit in court…a new attempt.

Regulatory guidance

Regulators are noticing a growing need for guidance in this emerging area. Last year, the FTC announced plans to revise its guide to online advertising in the metaverse and virtual reality space.¹³ The FTC’s Online Disclosure Guide, which focuses on digital advertising, was first released in 2000 and last updated nearly a decade ago. Increased clarity is expected from the revised metaverse-centric guidelines.

important point

Companies must monitor third-party use of their intellectual property in the digital world, even if their core brand is not rooted in the virtual space. moreover, Rothschild Decisions indicating that law enforcement in the territory does not require the presence of a significant metaverse will prompt companies to carefully consider their intellectual property and brand-building strategies to enhance law enforcement success in this virtual frontier. is needed.

For more information, Rothschild For decisions, metaverse-related branding issues, or related issues, please contact Aaron Hendelman, Brandon Leahy, Chloe Delehanty, or other members of Electronic Gaming at Wilson Sonsini. Trademarks and Advertising Practices.

[1] Hermès International and others v. RothschildNo. 1:22-cv-00384 (SDNY 2023), ECF No. 145.

[2] Hermès International and others v. RothschildNo. 1:22-cv-00384 (SDNY 2023), ECF 1-19 at 2.

[3] Hermès International and others v. RothschildNo. 1:22-cv-00384 (SDNY 2023), ECF 17 at 1.

[4] Hermès International and others v. RothschildNo. 1:22-cv-00384 (SDNY 2023), ECF 17 at 11-20.

[5] Ditto.

[6] Hermès International and others v. RothschildNo. 1:22-cv-00384 (SDNY 2023), ECF 1 at 3.

[7] Hermès International v. RothschildNo. 1:22-cv-00384 (SDNY 2023), ECF 140 at 19.

[8] Ditto. (Quote Rogers vs Grimaldi, 695 F. Sapp. 112, 120-121 (SDNY 1988)).

[9] Hermès International v. RothschildNo. 1:22-cv-00384 (SDNY 2023), ECF 140 at 19.

[10] Hermès International and others v. RothschildNo. 1:22-cv-00384 (SDNY 2023), ECF 145; Hermès also requested injunctive relief, but the District Court has yet to rule on that request (look ECF 168).

[11] The court’s direction to the jury Rogers A test of a work of art carried over to court. look instructions of the law to the jury; Hermes International vs RothschildNo. 1:22-cv-00384-JSR (SDNY 2023), ECF No. 143, “Instruction 14” at 21-22 (“However, if a MetaBirkins NFT, including associated images, is at least partially a work of artistic expression, , such as adding all-fur to the image of the Birkin bag.”)

[12] Rogers vs Grimaldi875 F.2d 994, 997 (2d Cir. 1989).

[13] https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-looks-modernize-its-guidance-preventing-digital-deception.