Ryder Ripps Lodge counterclaims in Yuga Labs’ NFT lawsuit

Amid a pending appeal to the Ninth Circuit, Ryder Ripps and Jeremy Cahen have counterclaimed against Yuga Labs, accusing the company behind the Bored Ape Yacht Club (“BAYC”) collection of NFTs of “knowingly and materially misrepresenting.”[ing]” their rights in BAYC NFTs, while engaging in an “outrageous retaliatory campaign” against them, including by “lying about” and “intimidating and threatening” them. In a lengthy response dated December 27, counsel for Ryder Ripps and Jeremy Cahen deny the bulk of the claims asserted against them in Yuga Labs’ June 2022 trademark infringement complaint, setting forth defenses, arguing that Yuga’s claims over their RR/BAYC project are barred by the First Amendment, including under Rogers- the test’ and that their use of the BAYC trademarks for the RR/BAYC project constitutes fair use.

In addition to arguing that it should be shielded from Yuga Labs’ First Amendment claims (despite a federal judge in California recently finding that Rogers does not apply here), Ryder Ripps and Jeremy Cahen set out more than a dozen other defenses.

CONFIRMED DEFENSES – Defendants’ counsel alleges, for example, that Yuga Labs abandoned the BAYC Marks – thereby forfeiting its right to recover against the Defendants – due to its alleged failure to enforce the Marks and/or by “licensing any rights in the Claimed Marks without proper monitoring or quality control” (i.e. engaging in bare licensing, which is a common point of contention among trademark experts regarding the BAYC collection as a result of the fact that Yuga Labs grants BAYC NFT holders broad rights to exploit the intellectual property to their assets).

Among a couple of the other defenses put up by Ripps and Cahen…

(1) “No distinctiveness,” with the defendants arguing that Yuga Labs’ BAYC marks are “either generic or merely descriptive and have not acquired secondary meaning and therefore do not constitute distinctive, enforceable marks.” and

(2) Unclean Hands on the basis that Yuga Labs engaged in “illegal activities related to the sale and promotion of BAYC NFTs, including Yuga’s misuse of BAYC NFTs as securities, undisclosed compensation for celebrity endorsements, and/or illegal actions directed against the defendants,” among others. (Yuga Labs is among the defendants in a new lawsuit, which accuses them of maintaining a scheme to promote Bored Ape NFTs while violating federal and state laws.)

COUNTERCLAIM – The rest of Ripps and Cahen’s filing comes in the form of counterclaims, which the defendants use to double down on their overarching argument that Yuga Labs’ lawsuit is part of an “attempt to silence the creators who used their craft to call out a multi-billion company built on racist and neo-Nazi dog whistles” – and to introduce some new elements into the case, namely copyright and defamation. Ripps and Cahen claim that while “Yuga never acted against any of the dozens of commercial ‘monkey’ NFT collections, it engaged in a relentless and systematic campaign against [them]” in response to the RR/BAYC project, which consists of “artistic criticism [that] is well founded and directly linked to Yuga’s trademarks.” Against this background, they have made the following counterclaims…

(1) Knowingly Misrepresenting Infringing Activity – “Yuga knowingly and materially misrepresented, in violation of 17 USC § 512(f), that the RR/BAYC NFTs … are infringing a Yuga copyright by filing DMCA takedown notices to remove RR/ the BAYC artwork from various websites”, according to Ripps and Cahen. Yuga Labs “knew” that RR/BAYC NFTs “do not in fact infringe any of Yuga’s copyrights”, and yet “falsely alleged in multiple DMCA takedown notices that RR/BAYC NFTs are copies of Yuga’s BAYC NFTs and therefore infringe one or more of Yuga’s copyrights in BAYC NFTs.”

(2) Declaratory Judgment of No Copyright under 17 USC § 102(a) – Defendants argue that there exists “a factual controversy” as to “whether the BAYC Images are entitled to copyright protection because the BAYC Images have been generated by an automated computer algorithm where no humans were involved in deciding which of the 10,000 BAYC images were selected from the more than 1.3 billion possible permutations (except perhaps for a few custom BAYC images that Yuga may have produced with human involvement) , whose decision requires the Court to apply and interpret the copyright provisions of 17 USC § 102(a).”

(3) Declaratory Judgment of No Copyright Pursuant to 17 USC § 204(a) – They also claim that “a factual controversy” exists as to whether Yuga “retains copyright in the BAYC Images associated with BAYC NFTs it does not own, including based on The BAYC Terms & Conditions and public statements that BAYC NFT holders retain all intellectual property rights in their NFTs, the determination of which requires the court to apply and interpret the copyright provisions of 17 USC § 204(a).”

It is worth noting that as of the time of the lawsuit against Ripps and Cahen, Yuga Labs did not (and still does not appear to) have any copyright registrations for its monkey images and therefore claims copyright infringement in the complaint.

(4) Intentional infliction of emotional distress – Ripps and Cahen allege that Yuga Labs has engaged in “an outrageous campaign of retaliation” against them, with “Yuga’s motivation to conceal its own fraud and use of racist messages and images corroborating[ing] that Yuga’s attempts to harass, bully and silence Mr. Ripps and Mr. Cahen were intentional and/or committed with reckless disregard for the high likelihood that they would cause Mr. Ripps and Mr. Cahen to suffer serious emotional distress as a result. ” The defendants allege that they have indeed suffered “severe emotional distress as a result of Yuga’s campaign of intimidation.”

(5) Negligent infliction of emotional distress

(6) Declaratory Judgment of Non-Defamation – “Yuga has falsely stated that Mr. Ripps and Mr. Cahen, including through the RR/BAYC artwork, falsely criticize Yuga for using racist and neo-Nazi messages and imagery,” they allege, pointing to “Yuga’s appearance on the Full Send Podcast, where [founders] Greg Solano and Wylie Aronow described Mr. Ripps and Mr. Cahen as frauds and accused them of spreading a “conspiracy theory” as one example. As such, they claim they are “entitled to a declaration that their statements about Yuga are not and have not been defamatory.”

This counterclaim is particularly interesting given that while Yuga Lab’s lawsuit followed an apparently escalating effort by Ripps and co. to “bring attention to [Yuga Labs’s] use of racist, neo-Nazi and alt-right messages and images” using the RR/BAYC project and similar messages on social media, Yuga Labs has not asserted defamation claims against Ripps and Cahen in its complaint.

In addition to the court’s aforementioned declarations (namely, that “Yuga knowingly misrepresented that the RR/BAYC artwork infringes [its] copyright,” the BAYC images are “not eligible for copyright protection because they were not created by a human being,” etc.), Ripps and Cahen seek to have the court throw out Yuga Labs’ complaint in its entirety and a range of monetary damages.

The case is Yuga Labs, Inc. v. Ryder Ripps, et al., 2:22-cv-04355 (CD Cal.).