Cécile Lau
English Law and French Law student at King’s College London and Paris-Panthéon-Assas University, Master 1 in Business Law & Management / MBA
Sarah Khawam
English Law and French Law student at King’s College London and Paris-Panthéon-Assas University
The global luxury market reached €1.5 trillion in 2023, up 10% from 2022, setting a record for the industry and demonstrating its unparalleled resilience to global problems.[1] This growth is attributed to several factors, including consumer priorities that focus on the desirability and appearance of luxury products. In order to consistently meet public and shareholder expectations, fashion companies face an evolving competitive landscape driven by technological changes in the industry.[2] And at the centre of this change is AI, defined as a set of theories implemented to make machines capable of simulating human intelligence, which presents intriguing and different challenges from other industries.[3]
This article aims to critically examine the legal issues – including intellectual property, image rights, and employment law – raised by AI in luxury fashion, by looking at usage and consequences of AI fashion models (I) and luxury non-fungible tokens (NFTs) (II).
- The legal framework regarding the use of AI models: currently insufficiently protected but likely to evolve
In recent years, investigations have targeted major fashion retailers for their representation of models. This has been exacerbated by the use of AI modelling technology by fashion giants such as Louis Vuitton, Levi’s, and Nike. The tech companies that provide this technology have developed AI systems trained on vast datasets of images of real models to generate images for advertising campaigns, fashion catalogues, and other industry needs, instead of hiring human models. Take, for example, Shudu, a model known as the face of brands like Karl Lagerfeld and Paco Rabanne: Shudu is a digitally generated model inspired by real-life models Grace Jones and Alex Wek. This usage of AI has raised and intensified several legal and ethical debates. Although the current legal framework in this area needs to be strengthened, new legislation offers promising prospects for improvement.
First and foremost, the image rights of models are at risk as some models are concerned that AI modelling companies are using their images without their knowledge or consent.
Nowadays, according to model and activist Sara Ziff, models are often asked for their body scans without being informed of how they will be used and are limited in terms of what they can do as they typically hand over power-of-attorney to their agencies when they sign their modelling contracts. Even if models voluntarily consent to transfer their image rights, shouldn’t the law regulate this freedom so that it does not degenerate into abuse? It would be an abuse of the law for an agency to sell images or scans of models without their knowledge to AI companies specialising in creating digital models that generate images that can replace them or deprive them of potential profit. It is no secret that partnering up with AI modelling companies has undeniable benefits for fashion companies, starting with the cost savings: human models charge around $35 per hour, with top models earning $5000 for a single day, while AI agencies such as “Deep Agency” can offer their models for $29 per month.[4]
The issues surrounding the exploitation of models’ image rights are all the more worrying given that models are generally not protected by labour laws. In the US, for example, models are considered independent contractors and are therefore not covered by the National Labor Relations Act of 1935, which provides “protections against discharge and contract termination” in the event of the formation of trade unions.[5] This limits their ability to fight back against AI, as they cannot join powerful unions such as the American labour union SAG-AFTRA, which represents over 150,000 professionals in the arts, film, and marketing industries. It is therefore highly desirable that, following encouragement from non-profit organisations such as Model Alliance, a New York State legislative session is scheduled for January 2024 to vote on ‘the Fashion Workers Act’. This legislation would provide fashion models with important labour protections against abuse by AI technologies.[6]
Another hope is that the European Union’s (EU) data protection regulations may offer greater security for fashion models due to their enlarged scope and the all-encompassing definitions they contain. For example, companies processing data from an EU model must comply with the requirements of the EU General Data Protection Regulation (GDPR), including reporting any personal data breach to the data protection authority within 72 hours. [7]
In addition, AI modelling technology has implications for diversity, equality, and inclusion (DE&I) as part of environmental, social and governance (ESG) requirements. Fashion companies can use AI models to create ‘artificial diversity’ such as Levi’s partnership with Lalaland.ai to “increase the number and diversity of their models”.[8]
Can we consider the use of AI models, which do not suffer from the discrimination and prejudice that a human mannequin might, be seen as promoting diversity? These questions may lead to the adoption of new regulations, but if not, companies will be encouraged to monitor the impact of double standards on image.
It is clear, then, that technology is having a major impact on fashion models. What’s more, new technologies in luxury fashion extend to the products themselves, as we’ll see in the second part of this article.
- Luxury litigation: navigating NFT disputes in high fashion
Technology has integrated and revolutionised the world of fashion. A key example is non-fungible tokens (NFTs) – defined as a non-replicable digital asset whose ownership can be demonstrated through Distributed Ledger Technology (DLT) (e.g. Blockchain)[9]. They are being used by notable brands such as Tiffany & Co, Jimmy Choo and Gucci. For a 2021 auction, Jimmy Choo had already created an NFT collection with a sneaker in different designs of varying rarity levels valued at several thousand dollars apiece. NFTs allow luxury fashion houses to rebrand themselves and target a broader and more modern audience while maintaining the image of exclusivity and inaccessibility sought by these brands.As Carmen Kervella, author of Le Luxe et les Nouvelles Technologies, explains:
“The strength of a luxury brand lies in its symbolic capital. The value of a luxury product exceeds the tangible nature of the item: A Chanel canvas tote is around 500 hundred euros, while the Birkin handbag ranges between 25,000 and 300,000 euros. As for the virtual version of Gucci’s Dionysus bag on Roblox, it has resold for over 4000 dollars, which is more expensive than its real counterpart. The value of a luxury product goes far beyond the famous quality-price ratio that applies for FMCG brands or even premium brands.”[10]
Luxury NFTs exemplifies the successful integration of a. brand’s symbolic value into the world of haute couture. Indeed, the protection provided by smart contracts and blockchain technology ensures the exclusivity and uniqueness of each asset. Information, such as provenance, price, and ownership, is recorded and stored on the blockchain. On the other hand, blockchain technology can also be used to prove the authenticity of material products. The Aura Blockchain, for instance, is used exclusively by luxury brands such as LVMH or Prada to trace and certify products.
However, this new technology raises legal issues, particularly regarding copyright. While luxury companies were already battling traditional counterfeiting, the rise of technology has introduced a new challenge: crypto-counterfeiting, which harms the image of luxury brands and undermines their exclusivity. The most telling example is undoubtedly that of American artist Mason Rothschild and his NFT project ‘MetaBirkins’. In 2021, he drew inspiration from the famous Birkin bag by Hermès to create a series of one hundred NFT versions of the bag.
Thankfully, trademark law can be used to combat the unlawful use of a design, defeating the idea that NFTs are simply a form of ‘artistic expression’. Hermès won a lawsuit in June 2023 against the artist Mason Rothschild for his “MetaBirkins NFT project”, which they saw as a threat to the image of the brand and the exclusivity of its products.[11] US Trademark laws applied to these “MetaBirkin”, which were considered as commercial goods rather than mere works of art. The artist’s reliance on the First Amendment of the US constitution which protects freedom of expression, did not hold in this case.
Such disputes take into account several factors, including potential damage to the brand’s image, the number of items sold, their price and the artist’s intentions. In this case, the MetaBirkin would have earned the artist nearly $800,000 and was inspired by an existing project, the ‘Baby Birkin’, which had already proven successful. But generally, the outcome of a lawsuit depends on the circumstances and facts of the case, which may not always be as clear-cut as in the MetaBirkin case. One solution to this copyright problem would be to hold NFT platforms such as OpenSea, one of the leading marketplaces for the sale of NFTs where the MetaBirkins were sold, accountable.
The protection of purchasers has also been questioned. In the UK, NFTs are recognized as property in their own right, separate from the artist’s intellectual property, which allows them to be returned to their owner in the event of theft.[12]However, the specific rights conferred on purchasers of these virtual objects remain unclear, and their ability to be owned is still debated. To address this, the UK Law Commission is proposing the creation of a legal category for new objects such as cryptocurrencies.[13] However, there is currently a legal vacuum regarding the new concept of NFTs, which makes their enforceability against third parties more complex than for tangible property, which is already well established in law. In France, the rights associated with the ownership of NFTs seem to be limited to the smart contract and its contents.
Therefore, the legal framework for NFTs remains complex due to their innovative nature. New challenges are emerging with the economic boom of this technology such as computer piracy which could harm this new facet of luxury fashion if the legal framework does not adapt quickly to meet them. It will therefore be important to keep a close eye on how these issues develop, particularly with regard to the legal status of NFTs.
Despite the challenges posed by intellectual property rights and the rising integration of technologies into the industry, major luxury brands are increasingly embracing innovation. As Bernard Arnault, CEO of LVMH, noted, desirability is created through a customer’s special experience with the brand- something new technologies, like virtual showrooms, can deliver. LVMH has teamed up with Epic Games, the company behind Fortnite, to offer immersive experiences at Viva Technology, one of Europe’s largest tech and start-up events. Using Epic Games’ technology, an interactive version of Louis Vuitton’s Autumn/Winter 2023 fashion show was showcased, highlighting the transformative impact of technology on everyday life.
[1] Claudia D’arpizio et al, ‘Global luxury market projected to reach €1.5 trillion in 2023, a new record for the sector, as consumers seek luxury experiences’ (Bain & Company Media Center, 14 November 2023)
[2] Anita Balchandani et al, ‘The state of Fashion 2024: Finding pockets of growth as uncertainty reigns’ (McKinsey & Company, 29 November 2023)
[3] Larousse ‘Intelligence Artificielle’ (2024)
[4] Riddhi Setty, ‘AI Threatens to Push Human Fashion Models Out of the Picture (1)’ (Bloomberg Law News, 9 January 2024)
[5] National Labor Relations Act of 1935 (USA)
[6] Sarah Kent, ‘Is This the Year New York Regulates Fashion?’ (The Business of Fashion, 9 January 2024)
[7] Nigel Jones, ‘I am an American business. Do I have to be GDPR compliant?’ (The Privacy Compliance Hub, June 2018)
[8] Tariro Mzezewa ‘Levi’s ‘Artificial Diversity’’ The Cut’s Morning Blogger (New York, 27 March 2023)
[9] AO Kaspersky Lab ‘What are NFTs and how do they work? (Kaspersky Resource Center and Definitions 2024)
[10] Carmen Turki-Kervella, ‘Le Luxe et les Nouvelles technologies’ (Hors collection, Maxima, Octobre 2015)
[11] Blake Brittain, ‘Hermes wins permanent ban on ‘MetaBirkin’ NFT sales in US lawsuit’ (Reuters Business, 24 June 2023)
[12] Osbourne v Persons Unknown and Others (2023) EWHC 39 (KB)
[13] Law Commission, Digital Assets: Consultation Paper (Law Com No 256, 2022)