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What happened: A California federal
court found NFTs by Ryder Ripps and Jeremy Cahen infringed Yuga
Labs’ successful Bored Ape Yacht Club (BAYC) NFT collection.
Ripps and Cahen argued, in part, that Yuga Labs did not own any
trademark rights in its BAYC NFTs, because NFTs are intangible and,
therefore, unprotectable. However, the court agreed with other
courts that tangibility is not a requirement for trademark
infringement liability and NFTs are goods that may be protected.
The court also rejected Ripps and Cahen’s contention that their
NFT collection was “appropriation art” to hold Yuga Labs
accountable for alleged racist, neo-Nazi, and alt-right elements in
the BAYC NFTs. Although Ripps and Cahen’s NFTs were entered on
a separate blockchain, the court determined they appropriated and
misused images from the BAYC NFTs, likely causing confusion in the
marketplace.
The decision for Yuga Labs validates intellectual property
rights in the emerging NFT and blockchain space by enforcing
trademark protection against counterfeits with strict consequences
for infringers. The court ordered Ripps and Cahen to pay damages
totaling over $1.5 million and transfer their NFT smart contract to
Yuga Labs. In addition, the court found Ripps and Cahen to be
exceptional defendants who obstructed progress during the
proceedings. Accordingly, the court determined that Yuga Labs is
entitled to recover attorneys’ fees and costs from Ripps and
Cahen and requires the parties to agree on the recovery amount
within a short timeframe, confirming the court’s willingness to
set jurisdictional scope and standards of conduct in the emerging
space.
Why we care: The court’s ruling
for Yuga Labs provides additional guidance and clarification as to
how existing IP laws protect creator rights in the NFT, blockchain,
and Web3 landscapes, and confirms that willful infringers and
ill-intentioned parties can expect severe consequences.
Case: 2:22-cv-04355, U.S. District Court for the Central
District of California
“In this case, the Court concludes that confusion is likely
given the complexity and required sophistication to understand the
blockchain and verify provenance,” Walter wrote in his April
decision. “Defendants knew that their RR/BAYC NFTs were likely
to be confused with Yuga’s BAYC NFTs and that at least some
purchasers of their RR/BAYC NFTs would have difficulty identifying
the RR/BAYC NFTs as a different and distinct product from
Yuga’s BAYC NFTs.”
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This article is presented for informational purposes only
and is not intended to constitute legal advice.
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