Hermes Executives Highlight Plans for NFTs in Mason Rothschild Trial – WWD

Nearing the end of testimony in the Hermes-Mason Rothschild trial, a few executives from the French luxury house took the stand Friday and three experts for each side clashed about MetaBirkins.

Hermes is suing the artist, whose give name is Sonny Estival, for creating and selling 100 “MetaBirkins,” colorful faux-fur Birkin bag-inspired NFTs, in November 2021. The luxury brand claims they confused consumers, diluted the brand and impacted its in-the-works plans for NFTs. Rothschild and his legal team have insisted that the two-dimensional digital tokens were a commentary on fashion’s fur-free initiative, an experiment in replicating the luxury handbag’s perceived value and an act of artistic expression that is protected under the First Amendment. The case’s ruling, which is expected early next week, could be influential in how intellectual property infringement and First Amendment rights apply to the digital world.

The initial asking price for the MetaBirkins in Ethereum was valued around $450, and some were later resold for tens of thousands.

Maximilien Moulin, head of the Hermes innovation lab that is known as H Lab, spoke of how the company started exploring NFTs in December 2019 and potential uses for them such as authenticating products; access to private events or exclusive service; virtual products such as digital handbags for video games; using the NFT virtually as virtual art, and collectibles to celebrate loyalty. In October 2021, the company created a digital replica of a Birkin bag as a prototype that was shared internally, but was never released publicly. He also spoke of an artist-designed NFT featuring a virtual talking horse that the company has developed.

As for how MetaBirkins interfered with Hermes’ plans for NFTs. Moulin said, “The fact is it could confuse people…”

Scott Kominers, a Harvard Business School professor who is currently on leave, outlined a study he conducted that suggested that Rothschild’s MetaBirkins were more along the lines of the NFT digital brand market than the art-only NFT mark, since they also offered loyalty incentives, community-building and future purchase opportunities that are more akin to what major companies are doing. Kominers also suggested that the average daily trade price for the first 17 days that MetaBirkins were available – before being removed from Open Sea – made them “a massive outlier” compared to multiple branded entities – each of which has millions of social media followers versus the estimated 8,000 to 10,000 that Rothschild had at that time. He attributed some of that rate to a perceived affiliation with Hermes.

While being cross-examined, Adam Oppenheim of Harris St. Laurent & Wechsler, asked Kominers about his reimbursement from Hermes. Kominers said his hourly working rate is $1,500 and the rate for testfying is $2,000. He also estimated hat he had billed Hermes between $150,000 and $170,000 for his research. In addition, a research assistant, who charges $500 an hour, has been helping, Kominers said.

After Openheim noted music and tickets are among the other market sub categories beyond art-only and digital brands, Kominer said it was his opnion that MetaBirkins were trading more consistently like digital brands.

Luisa Maria Vittadini, corporate communications manager at Hermes testified that, believing it “was important to avoid any confusion” and to address the matter “with a wide net,” the company responded to a media request from The Financial Times’ Cristina Criddle, a technology reporter, who was the first to confirm that Hermes was not involved with the MetaBirkins. As another indicator of Hermes’ select approach to media coverage, she said the company opted not to respond to a media request a few days after The Financial Times’ article ran from the Business of Fashion’s Marc Bain. She also noted how other outlets like L’Officiel, Elle and The New York Post erroneously reported that Hermes was involved and corrections were later made. Despite that, a Google search of “Hermes NFTS” pulled up the original, inaccurate January 2022 headline from The New York Post,  despite that headline and story having been corrected, said Vittadini, sharing visuals to support that claim.

To highlight the possible fallout, she estimated the millions of New York Post readers, social media followers and unique monthly visitors. During the cross-examination, Jonathan Harris of Harris St. Laurent & Wechsler, reiterated that a correction had been made and that she could not know how many people read the initial story. Viitadini responded that she believed that figure was proprietary to The New York Post.

Earlier in the preceedings, MMR Strategy Group president Bruce Isaacson mapped out two surveys he had conducted with potential NFT purchasers and luxury handbag shoppers. Relying on the former for his conclusion, as the second one showed a below average rate of 3.6 percent, Isaacson said the likelihood of confusion among respondents that Hermes or Birkin were affiliated with “MetaBirkins” was 18.8 percent. During the cross-examination, he was questioned about the survey’s criteria, such as whether respondents had the means to buy $2,500 NFTs. Isaacson was also asked about how much he had billed Hermes for the survey – $130,000.

The case’s final witness, David Neal, founder of Catalyst Behavioral Sciences, repeatedly challenged Isaacson’s findings. Just as Kominers’ and Isaacson’s case-related billings were shared, so too was his – $585 an hour.  Neal is expected to conclude his testimony Monday.