Recently, the Ninth Circuit Court of Appeals made significant decisions regarding Yuga Labs, the innovative force behind the Bored Ape Yacht Club (BAYC) NFT series. This move will undoubtedly impact the ongoing legal saga involving the artistic endeavor of Ryder Ripps and his partner Jeremy Cahen.
Legal Developments for Yuga Labs
On a notable Wednesday, the Ninth Circuit Court partially reversed an earlier decision in Yuga Labs’ lawsuit against Ripps and Cahen, sending the case back to district court. The court emphasized that Yuga Labs still needs to substantiate its claims related to trademark infringement and cybersquatting.
In 2022, the duo launched the Ryder Ripps Bored Ape Yacht Club (RR/BAYC), mirroring Yuga Labs’ original NFTs. They contended that their initiative served as a satirical critique of the original collection, which they alleged incorporated elements of racism and associations with extremist ideologies.
Yuga Labs retaliated in 2022 by filing a lawsuit alleging that Ripps and Cahen misled buyers by selling what were claimed to be equivalent NFTs under a satirical guise, thus damaging Yuga’s reputation. After a district court ruling deemed Yuga Labs the rightful owner of the BAYC trademarks, the company celebrated the decision as a victory for the broader Web3 community.
Originally, a judge awarded Yuga Labs $1.6 million in damages, which later escalated to $9 million following the dismissal of Ripps and Cahen’s counterclaims. This counteraction included a challenge under the Digital Millennium Copyright Act (DMCA), questioning whether Yuga Labs held copyright over its NFTs.
The district court subsequently ruled against the counterclaims, granting Yuga Labs significant summary judgment and dismissing the defendants’ attempts to leverage the DMCA.
Implications for NFT Owners
The recent appellate ruling brings significant clarity to NFT registration within Trademark Law, asserting that NFTs can indeed be trademarked under the Lanham Act. The court recognized these digital assets as “goods,” reaffirming Yuga Labs’ priority in the use of the Bored Ape trademarks.
However, the Ninth Circuit reversed the prior summary judgment regarding trademark infringement and cybersquatting, ruling that Yuga Labs had not sufficiently demonstrated that consumers were likely to confuse the RR/BAYC NFTs with authentic Bored Appes.
Moreover, the court concluded that Ripps and Cahen’s usage of Yuga Labs’ trademarks did not qualify as “nominative fair use,” nor was it an “expressive work” that would receive First Amendment protections.
The court articulated that it could not determine, as a matter of law, that a reasonable consumer in the market would be confused about the origin of the goods carrying Yuga’s marks. This statement is crucial in assessing the legal landscape for NFT artists and brands.
Yuga Labs’ co-founder, Greg Solano, emphasized the significance of these trademark protections in a statement, stressing that they benefit every NFT holder. He expressed confidence in resolving matters in the district court, where previous judgments have already established a precedent against the RR BAYC founders.
