Yuga Labs Wins Key Victory in NFT Infringement Case Against Ryder Ripps – Trademark

On December 16, 2022, the United District Court for the Central District of California handed NFT powerhouse Yuga Labs a decisive victory in its closely watched case against Ryder Ripps, the creator of a Bored Ape Yacht Club (“BAYC”) rip-off, Ripps’ repudiation motion to dismiss and anti-SLAPP motion. Signaling a tough road ahead for Ripps, the court rejected his argument that his project was an artistic expression, finding instead that Ripps’ sale of NFTs was “no more artistic than the sale of a counterfeit handbag.” Here’s a breakdown.

Background

Yuga Labs is the creator of BAYC, “one of the world’s most famous and successful NFT collections,” and the owner of various BAYC-related trademarks. Ripps is a self-proclaimed “conceptual artist” and outspoken critic of Yuga Labs. In May 2022, Ripps dropped his own NFT collection known as Ryder Ripps Bored Ape Yacht Club (“RR/BAYC”). The NFTs of RR/BAYC point to the same digital artwork files as the BAYC NFTs, with ownership of both collections recorded on the Ethereum blockchain.

Lawsuits and proposals for dismissal/strike

On July 24, 2022, Yuga Labs sued Ripps and his partner, asserting, among other causes of action, various trademark-related claims under the Lanham Act. The defendants filed a motion to dismiss for failure to state a claim and a motion to strike pursuant to California’s anti-SLAPP statute, which “provides for the pretrial dismissal of certain actions known as Strategic Lawsuits Against Public Participation, or SLAPPs , which “disguise as common law suits” but are intended to deter ordinary people “from exercising their political or legal rights or to punish them for doing so.” The main issue in the motions was that the RR/BAYC NFTs be protected as works with artistic expression and criticism by Yuga Labs.

Inventory

The court rejected both petitions.

Firstthe court rejected Ripps’ argument that the RR/BAYC NFTs were works of artistic expression that justified application of the free speech test for trademark use established by Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989). The court concluded that “the sale of RR/BAYC NFTs is no more artistic than the sale of a counterfeit handbag, making
Rogers test inapplicable.” The court further held that although Rogers test applied, Ripps fails the test because RR/BAYC’s use of the BAYC marks was (a) not “artistically relevant” and (b) “explicitly deceptive.”

Secondthe court held that Ripps’ use of the BAYC marks did not constitute “nominative” fair use because Ripps did not use the BAYC marks to sell
Yuga Labs BAYC NFTs, but to sell their own competing RR/BAYC NFTs.

Third, the court denied Ripps’ anti-SLAPP motion, holding that he failed to demonstrate that Yuga Labs’ claims “arise out of” Ripps’ protected speech. Although, as Ripps argued, he created the RR/BAYC project “with the specific goal of publicizing and criticizing” Yuga Labs, the court noted that “it is not enough for defendants to simply say that they engaged in allegedly protected speech that is relevant to plaintiffs’ claim to prevail on their anti-SLAPP motion.” The “allegedly protected speech must form at least part of the basis of the plaintiff’s claims.” The court concluded that the allegations did not arise from Ripps’ speech because “the only conduct at issue” was his sale of NFTs pointing to Yuga Labs’ digital artwork, not any of Ripps’ colorful comments. Notably, Yuga Labs did not sue for “defamation, slander, or libel,” but only for Ripp’s “unauthorized use of the BAYC marks for commercial purposes.” Thus, the anti-SLAPP statute did not apply.

Why this decision is important

The Yuga Labs case highlights the importance of understanding the technology underlying IP claims in cases involving NFTs. Looking under the hood, the court saw that Ripps’ RR/BAYC NFTs pointed to the same digital assets as Yuga Labs’ BAYC NFTs. Based on this nuance, the court rightly saw Ripps’ NFTs as nothing more than a collection of forgeries that did not warrant much consideration as a form of artistic expression under Rogerstest.

This decision contrasts with another recent trademark/NFT ruling. In that case, Hermès, the company behind the iconic “Birkin” bags, filed a trademark claim against the creator of digital images of faux fur-covered versions of the handbags titled “Metabirkins” sold as NFTs. Unlike
Yuga Labsthe court in that case held that Metabirkin’s “could constitute a form of artistic expression” and therefore Rogers test used. While allowing the trademark claims to proceed, the court found that the complaint contained “sufficient factual allegations that the use of the trademark is not artistically relevant and that the use of the trademark is explicitly misleading as to the source or content of the work.” The court recognized that the digital Metabirkins were new expressive works potentially subject to protection.

But NFTs that just point to another person’s work? Not so much.