In Brief:  The unauthorized copying of NFTs results in a judgment for false designation of origin and cybersquatting.

Here’s What Happened:

Bored Ape Yacht Club, also known as Bored Apes, Bored Ape or BAYC, is a non-fungible token (NFT) collection. The collection features profile pictures of cartoon apes that are generated by an algorithm. The Bored Apes NFT collection is limited to only 10,000 NFTs which Bored Ape says makes them unique. The parent company of Bored Ape Yacht Club is Yuga Labs. Yuga owns several unregistered trademarks, including "BORED APE YACHT CLUB," "BAYC," "BORED APE," the BAYC Logo, the BAYC BORED APE YACHT CLUB Logo, and the Ape Skull Logo (collectively, the "BAYC Marks").

Artist and creative director Ryder Ripps has built websites for the likes of Kanye West, who is now known as Ye, and Kenzo and designed album covers for musicians such as Grimes and Pop Smoke. Basically, he finds things on line and repurposes them. Ryder has shown his work in respected New York galleries.

Yuga alleged that Ryder copied Yuga’s NFTs calling them “RR/BAYC NFTs” and deliberately embedded racist, neo-Nazi, and alt-right dog whistles in the BAYC NFTs without Yuga’s authority or permission. Ryder used and registered and domain names which were similar to Yuga’s domain names.

Yuga sued Ryder. Yuga brought a motion for partial summary judgment on two counts of the complaint which were for false designation of origin and cybersquatting.  

The court found that given the strong brand recognition and trademark rights of the BAYC trademarks, Ryder did not have the right to mint and sell his own RR/BAYC NFT collection. Ryder “intentionally designed” the RR/BAYC NFTs and sales websites to resemble Yuga Labs’ branding. So Ryder created a likelihood of confusion with Yuga’s marks. In fact, Yuga was able to show actual confusion which weighed in Yuga’s favor.

The court didn’t buy any of Ryder’s defenses. The court rejected Ryder’s defense that his expression was “no more artistic than the sale of a counterfeit handbag.” Even if Ryder’s copies had artistic relevancy, he still wouldn’t be protected by the First Amendment. Ryder used the BAYC Marks in the same marketplaces to identify and sell NFTs bearing the exact same images.

The court entered partial summary judgment for Yuga. The issue of damages will be adjudicated at a later date.

Why You Should Know This: Sometimes it’s hard to pinpoint the wrong committed by a defendant. You know a wrong was committed but where does it fit in the inventory of causes of actions that could be brought? Yuga considered the false designation of origin and cybersquatting counts to be stronger than any of the other counts it brought which included false advertising, common law trademark infringement and unjust enrichment. In doing so, Yuga successfully went to the heart of what Ryder did. 

Case Information: Yuga Labs, Inc. v. Ripps, 2023 U.S. Dist. LEXIS 71336 (Dist. Ct. C.D. Calif. April 21, 2023).

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