Hermès sues Metabirkin NFT creator: 'Art is art,' law professor says

Kal Raustiala, a law professor at UCLA, joins Yahoo Finance Live to discuss Hèrmes' lawsuit against the creator of Metabirkin NFTs.

Disclosure: Professor Kal Raustiala authored a book with Christopher Sprigman, a partner at Lex Lumina LLC, the law firm representing NFT creator Mason Rothschild

Video Transcript

- Welcome back to Yahoo Finance. Well, there is a growing scramble to claim a stake in the metaverse and monetize it. But there's also growing scrutiny surrounding intellectual property rights and trademarks tied to the NFT boom that's ensnaring artists and major brands. Here to help explain some of the legal questions being raised is Kal Raustiala, UCLA Law Professor.

Kal, thanks so much for joining us. So it seems like the lines are blurring between what a company says constitutes its intellectual property rights and what artists are claiming as fair use. And one example making headlines is a turf war that's brewing between luxury brand Hermes, famous for its iconic, very expensive, luxury Birkin bags, and the artist behind the Metabirkin, Mason Rothschild.

And we actually had him on our show recently. So I want you to take a listen to what he had to say about his entry into this virtual foray, if you will, and then get your reaction on the other side.

MASON ROTHSCHILD: For me, there's nothing more iconic than the Hermes Birkin bag. And I wanted to see as an experiment to see if I could create that same kind of illusion that it has in real life as a digital commodity. And I feel like I've kind of accomplished that with the statistics that we kind of have today is being able to put together this kind of digital commodity that everybody loves, bringing it into the digital world with this introduction of the metaverse.

- So Kal, I just want to give you some context on all of this. His creations fetched up to $45,000 apiece, and his entire collection works out to about $1.2 million, according to Marketplace Wearables. So now Hermes says he's infringing on its trademark and IP rights. He says he's selling them as though they were art prints. So who's right? And how do you navigate trademarks and art in the metaverse?

KAL RAUSTIALA: Sure. So first of all, in some ways what's going on here is very old. So if you think back to Andy Warhol and the Campbell's soup cans, that was an example of using a brand in art. And in fact, at that time, Campbell's was very happy that he did that. They wrote him a letter praising it.

Of course today, things are different. And in this particular case, obviously Hermes is not happy. And it's not surprising. A lot of brands try to police their trademarks pretty vociferously. But the bottom line is, art is art. And so at one level, what he's doing is no different than what Warhol did. And fair use probably does cover it.

- So I'm wondering then, Professor, if you could break down sort of what you intrinsically own when you buy an NFT. We see them going for crazy amounts of money. My question would be, if I have this NFT, do I own the rights to then go and resell it? Or do I still need to get the licensing rights from whoever initially has the IP?

KAL RAUSTIALA: Sure. That's an excellent question and an area where I think a lot of people have been confused in this case and in other cases. So first of all, the NFT itself, it's a non-fungible token. You can buy and sell that. And people have resold them. And of course, the notion is that you will be able to resell them in the future. That's why they're valuable.

On the other hand, NFTs often are pointing to, as in this case, some underlying artwork. Just like when you buy a painting, you don't then own the underlying copyright in that painting. You can't then put that on a t-shirt, for example, if you buy a Picasso or a maybe more a better example would be a contemporary artist still under copyright. So the NFT is distinct from the underlying artwork that it typically points to. And no, you can't then go and monetize that artwork. But you can buy and sell the NFT all you like.

- Another NFT issue that's getting a lot of buzz right now is between Miramax and director Quentin Tarantino over the cult classic "Pulp Fiction" What's the story there? And how do you think the impact resonates on NFTs in Hollywood?

KAL RAUSTIALA: Sure. So we were just talking about art, which is really one of the areas that's blown up in the last year with NFTs. They go back a few years. But basically, most people, I think, have heard of them in the last year because of the astronomical prices paid for certain art NFTs. But now that wave is hitting Hollywood. And the Miramax Tarantino lawsuit is the first out of the gate.

That lawsuit-- so first of all, Tarantino today is closing the auction on the very first NFT that he's selling from Pulp Fiction. So that auction opened, I believe, on Monday. It's going to close in about two hours. So just to say, Miramax did not successfully stop it. They may succeed in the future. But at least he's begun.

The deeper issue is really who gets to monetize older films, or in this case, aspects of the film, specifically aspects of the screenplay. And at bottom, like a lot of things with NFTs, they can seem confusing. This is really a case about a contract between Miramax and Tarantino written in the 1990s, so well before anyone thought of this.

And so the basic issue is, is he allowed to mint an NFT around the script or not? There's really nothing more to it than that. I can talk more about what's in the contract, but that's the basic gist of it. But this is not the last we're going to hear of it in Hollywood.

- You know, it's nothing new to see innovation a few steps ahead of the law, right? We saw it with the internet. We're seeing it with crypto. What kinds of rules do you expect we'll see in the future regarding NFTs?

KAL RAUSTIALA: Yeah, that's a really excellent question. I think with a lot of things, as you mentioned, the innovation takes place, and then the regulation comes after, or the rules come after. So with NFTs, there are really no court cases right now to look to. There's one or two that are maybe kind of next to the question, but not exactly on point.

So to take the Tarantino case, if that one were to go to a judgment, that would be a big deal, and that would begin to lay down some markers on what's possible. On the other hand, there's so much money in NFTs, that I think a lot of the parties that might have a dispute may, in fact, be more interested in seeing, can we simply move on to minting more NFTs?

So rather than fighting over the division of the pie, let's bake more pies while the oven is hot. And in this particular case, Tarantino has gotten incredible, incredible coverage, in part because of the lawsuit. In fact, you have to wonder, did he collude with Miramax? They're both amping up the market for this in a way that's really kind of fascinating.

But the rules are going to eventually unfold, just like with crypto. We're going to see noises about regulation. We'll see court cases. And eventually, we'll have more clarity. But until then, it's like a gold rush. And in your previous segment, you talked about the Wild West, about the railroads. This is like the gold rush. And just like in the original gold rush, property rights are really unclear. And so we're going to need to hammer those out pretty fast.

- Yeah, it is definitely like the Wild West of the metaverse and definitely more regulation to come, very interesting to see what happens if any of those cases actually make it to court and see what the fallout is from there. We'll have to leave it there. Kal Raustiala, thank you so much, UCLA Law Professor, for your time today.