In a significant decision for NFT content owners worldwide, the producers of the Bored Aped Yacht Club NFT compilation, Yuga, have successfully used unregistered trademark rights and false designation of origin claims under the US Lanham Act (as well as domain name squatting claims) to obtain a summary judgment against individual defendants who had created a collection of NFTs pointing to, i.e. reusing, Yuga’s Bored Ape Yacht Club (BAYC) Pictures (Yuga Labs, Inc. -v- Ripps, et al. April 21, 2023, CV 22-4355-JFW(JEMx), US District Court, Central District of California).
This case follows the recent decision of the court in New York (i The Meta Birkin case) and the Rome Court (i Juventus case) to allow the use of registered trademark rights to prevent others from using brand names in relation to NFTs.
Read more about these decisions and NFTs in general in our series The IP in NFTs.
Background
Yuga is the creator of BAYC, one of the world’s most famous and successful Non-Fungible Token (NFT) collections. Yuga states that BAYC NFTs often resell for upwards of hundreds of thousands of dollars and that prominent celebrities are holders of BAYC NFTs. Yuga claims that much of the BAYC NFT collection’s value comes from their rarity because there are only 10,000 BAYC NFTs in existence and each one is completely unique.
Yuga noted that it does not own any registered trademarks covering the BAYC collection, but claimed that it owns several unregistered trademarks, including “BORED APE YACHT CLUB,” “BAYC,” “BORED APE,” the BAYC logo, BAYC BORED APE YACHT CLUB logo and the Ape Skull logo (BAYC trademarks). Yuga said it has been using these marks since around April 2021 in advertising, marketing and promoting its products and services nationwide and internationally through multiple platforms, including the BAYC website, NFT markets such as OpenSea and social media platforms such as . such as Facebook, Instagram and Twitter.
The first defendant, Ripps, is a visual artist and creative designer whose work comments on what is described as the boundaries between art, the internet and commerce. Beginning around November 2021, Ripps began criticizing Yuga and the BAYC collection through his Twitter and Instagram profiles, podcasts, and collaborations with investigative journalists. Fundamental to this case, around May 2022, Ripps, along with another, created his own NFT collection, known as Ryder Ripps Bored Ape Yacht (RR/BAYC).
The defendants’ NFT collection was promoted under the brand name “Ryder Ripps Bored Ape Yacht Club” and pointed to the same online digital images as Yuga’s BAYC NFT collection, but used verified unique entries on the Ethereum blockchain. The defendants claimed that this RR/BAYC gathering served several purposes, including bringing attention to their criticism of Yuga, creating social pressure demanding that Yuga take responsibility for its actions, and informing the public of the technical nature and utility of NFT- is.
False designation of origin and trademark use and infringement
Yuga succeeded on “false designation of origin” claims under the Lanham Act which “prohibits the use of false designations of origin, false descriptions, and false representations in the advertising and sale of goods and services” as well as in its claims of infringement of its unregistered trademark rights. To succeed under false designation under the Lanham Act, “a claimant must demonstrate that: (1) it has a protected interest in the mark; and (2) the defendant’s use of the mark is likely to cause consumer confusion.”
The defendants argued that Yuga did not own any trademark rights in the BAYC trademarks because NFTs are intangible and, as a result, are not eligible for trademark protection (not being “goods” as such). However, the California court agreed with the New York court’s conclusions in Hermes against Rothschild (Meta-Birkin) case earlier this year (see our report here) which cited the court in that case and confirmed that “ware [need not] be tangible for the Lanham Act to attach”.
The defendants also argued that even if the NFTs were “tangible goods”, Yuga could not satisfy the requirement that the marks to be used in commerce have trademark status. The court concluded that Yuga had used the marks “in commerce,” at least because they sold 10,000 BAYC NFTs. Indeed, the defendants’ stated objective of producing their NFT collection, to draw attention to their perceived criticism of Yuga, would not have been necessary if Yuga had not already established significant brand recognition and goodwill from the use of the BAYC marks in commerce.
The court also found that the purported license granted by Yuga to holders of its BAYC NFTs was a copyright license only, and did not purport to grant any rights to the unregistered trademarks. Accordingly, the defendants’ argument that Yuga had transferred or abandoned their trademark rights failed.
Ultimately, the court found that the defendants’ use was likely to cause confusion. The court agreed that the Yuga marks were conceptually and commercially strong and that, therefore, there was a greater likelihood of confusion when used by the defendants and, in any event, the marks used by the defendants were almost identical to the goods in conditions for which the marks were used. Actual evidence of confusion was also presented, but the court felt it was not necessary to consider it, as the other factors weighed so heavily in finding confusion.
The compensation to be awarded is decided during the trial.
Defense
In defense, the defendants argued that their RR/BAYC compilation is an expressive work protected under the First Amendment (the Rogers test) and/or that the affirmative defense of nominative fair use applied, because the collection was intended to be a commentary on BAYC and Yuga. The court quickly rejected these arguments, finding that the defendants’ sale of RR/BAYC is “no more artistic than selling a fake handbag” and so Rogers test did not apply – in addition, fair use was not applicable because the defendants used the BAYC marks to sell and market their own product, RR/BAYC, and not to criticize the BAYC marks themselves.
Cyber crouching
Yuga also filed a suit under cyber-occupation. The defendants had registered and used the domain names, and to succeed on the cybersquatting claim, Yuga had to establish that the domain names were identical or confusingly similar to their trademarks and had been registered in bad faith with the intent to profit from their use. of Yuga’s marks. The court concluded that incorporation of Yuga’s marks into the domain name established this – rrbayc.com incorporated the BAYC mark and, perhaps more generously, apemarket.com which incorporated Yuga’s BORED APE mark and “other APE-based marks and merely adds the descriptive word market “. The defendants were also found to have registered domain names in bad faith with the intention of making money. Accordingly, Yuga’s claim succeeded on this basis.
