Bored Ape Creators Prevail In Trademark Litigation
Against Artists Who Launched NFTs “Appropriating” the Apes05/03/2023Earlier this year, we wrote about some of the NFT-related litigation working its way through courts around the country. Recently, one of those cases culminated in a substantial win for Yuga Labs, creator of the famous “Bored Ape Yacht Club” NFT collection.
In 2021, Yuga Labs launched the Bored Ape Yacht Club (BAYC), a collection of NFTs built on the Ethereum blockchain, featuring unique pictures of cartoon apes. Owners of an Ape also enjoy access to perks such as an online club, exclusive online and in-person events, and certain intellectual property rights to commercially exploit their Ape’s image. BAYC quickly took off, with celebrities and NFT collectors snapping up Apes; since then, prices for the NFTs have fluctuated widely (as has the value of the cryptocurrency in which collectors generally buy and sell them) but Apes currently trade at values well into five or even six figures.
In early 2022, conceptual artists Ryder Ripps and Jeremy Cahen created their own line of ape NFTs, known as the Ryder Ripps Bored Ape Yacht Club (“RR/BAYC”). The RR/BAYC NFTs point to the same online digital images as the BAYC collection, but use verifiably unique entries on the Ethereum blockchain. Ripps and Cahen contend that their use of pointers to the BAYC images is a form of appropriation art, and that their project had several purposes, including: (1) bringing attention to what they view as Yuga’s “use of racist, neo-Nazi, and alt-right messages and imagery”; (2) exposing Yuga’s purported “use of unwitting celebrities and popular brands to disseminate offensive material”; (3) creating social pressure to persuade Yuga to “take responsibility for its actions”; and (4) “educating the public about the technical nature and utility of NFTs.” But Yuga claimed that RR/BAYC constituted trademark infringement, and sued. See Docket No. 2:22-cv-04355 (C.D. Cal.). The causes of action included various federal trademark claims (false designation of origin under 15 U.S.C. § 1125(A), false advertising under 15 U.S.C. § 1125(A), and cybersquatting under 15 U.S.C. § 1125(D)), as well as state law claims for unfair competition and false advertising under Cal. Bus. & Prof. Code §§ 17200 et seq., and a variety of common law claims.
The defendants sought to dismiss Yuga’s claims at the pleading stage on a variety of grounds, including that Yuga’s trademark infringement claims were legally insufficient under the free speech test in Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989). The Rogers test is meant to balance competing interests at stake when a trademark owner claims that an expressive work infringes on its trademark rights. They also invoked nominative fair use, which is a defense to trademark claims (and is related to, but not the same as, the fair use defense that applies in copyright law). But the court was unpersuaded, holding that the Rogers test was not even applicable here because RR/BAYC was not an expressive artistic work at all; rather, it pointed only to the same online digital images as BAYC. And even if the Rogers test applied, the court concluded that the defendants’ use of the BAYC Marks were not artistically relevant, and were explicitly misleading. The court also rejected the nominative fair use defense, noting, among other things, that nominative fair use does not apply where, as here, a defendant uses a mark to refer “to something other than the plaintiff’s product.” The court also rejected the defendants’ attempts to dismiss the other claims at the pleading stage.
After the motion to dismiss was resolved, the parties engaged in discovery. The court also struck certain counterclaims advanced by the defendants. And in March, Yuga Labs sought summary judgment.
Summary Judgment Ruling
In its motion, Yuga sought (among other things) partial summary judgment on its claim for false designation of origin. As a threshold matter, the Defendants argued that NFTs are intangible and thus ineligible for trademark protection. The court rejected that argument, ruling that trademark law does not require goods to be tangible for Lanham Act liability to attach. Defendants also argued that Yuga had transferred all trademark rights to the holders of the Ape NFTs and could not assert claims now. The court was likewise unconvinced, noting that BAYC provided holders a copyright license but not a trademark license.
Defendants also argued that disputed issues of fact precluded summary judgment on the issue of consumer confusion. But the court held that confusion was likely as a matter of law, given the evidence, including that the parties’ goods were being promoted and sold in the same online NFT marketplaces.
Additionally, defendants sought to avoid trademark liability by invoking an “unclean hands” defense, urging that Yuga’s own misconduct should bar its recovery. They pointed to alleged misconduct by Yuga in compensating celebrity endorsers without disclosing their compensation, as well as Yuga’s purported sale of “unregistered securities.” But the court held that, for unclean hands to apply, the misconduct alleged had to have some connection or relationship to the trademark dispute at issue, and here, there was no such connection.
This ruling is not the final word on this litigation. First, the district court has held that Yuga is entitled to monetary damages and injunctive relief, but the amount of damages has not yet been determined. Second, the defendants are appealing several aspects of the ruling, so the Ninth Circuit Court of Appeals will be taking another look at many of the issues raised here.
But the decision is nonetheless notable on several fronts. As one commentator noted, the ruling confirms that NFTs are protectable under trademark law just like tangible goods. Indeed, the court’s decision on this point cited a recent New York ruling in the MetaBirkins case (see here for our post on that). Second, the court in the Yuga case was unimpressed by the defendants’ argument that their appropriation of BAYC was expressive at all, indicating courts’ continued skepticism of purported “appropriation art” when it bumps up against another creator’s intellectual property (a recurring challenge in copyright fair use case law as well). Further, the Supreme Court recently heard oral arguments in a case which examines how First Amendment concepts like freedom of expression and parody should be handled in trademark disputes, and which may even reconsider or adjust the Rogers test that was applied here.
Overall, this case is part of an important, complex, and ongoing conversation about how creations that borrow significantly from preexisting content should be handled under our legal regimes for intellectual property. We’ll continue to follow the litigation and the issues closely.
Art Law Blog