American artist Mason Rothschild was ordered to pay $130,000 in damages to Hermes Wednesday for selling virtual bags in the form of NFTs without the luxury brand's permission.
The sentence, issued by a jury in a New York federal court, is seen as a landmark case in the hot debate over intellectual property rights and non-fungible tokens.
NFTS, which became popular in early 2021, are digital works that cannot be replaced with anything else or modified and are therefore unique.
Each has a digital certificate of authenticity which, in theory at least, cannot be tampered with: it is registered in a blockchain, like cryptocurrencies.
Rothschild created a series of digital versions of Hermes's Birkin handbag.
The "MetaBirkins" were trailed online as "a tribute to Hermes' most famous handbag," but the company quickly sued.
The January 2022 lawsuit alleged that Rothschild had infringed the brand's intellectual property by making and selling the MetaBirkins.
The French fashion house argued that the NFTs were "likely to cause confusion and mistake in the minds of the purchasing public."
It said they falsely create the impression that the goods are "authorized, sponsored, or approved by Hermes when, in fact, they are not."
Their sale made more than $1.1 million, according to documents produced by Hermes in court.
Rothschild argued that NFTs were protected by the First Amendment right to freedom of expression, a stance the jury rejected.
"It's great day for big brands. Terrible day for artists and the First Amendment," Rhett Millsaps, one of Rothschild's lawyers, told AFP.
A spokeswoman for Hermes said the house "was compelled to act to protect consumers and the integrity of its brand."
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