UK: Bored Ape Yacht Club Unregistered Trade Marks Effective Against Copycat NFTs In Californian Summary Judgment

In a significant decision for NFT content owners worldwide, the producers of the Bored Aped Yacht Club NFT collection, Yuga, have successfully used unregistered trade mark rights and claims of false designation of origin under the US Lanham Act (as well as domain name squatting claims) to obtain a summary judgment against individual defendants who had created an NFT collection pointing to, that is, reusing, Yuga's Bored Ape Yacht Club (BAYC) images (Yuga Labs, Inc. -v- Ripps, et al. 21 April 2023, CV 22-4355-JFW(JEMx), US District Court, Central District of California).

This case follows the recent decision of the New York court (in the Meta-Birkin case) and the Rome court (in the Juventus case) to allow the use of registered trade mark rights to prevent others using brand names in relation to NFTs.

Read more about these decisions and NFTs in general in our series The IP in NFTs.

Background

Yuga is the creator of BAYC, one of the world's most well-known and successful Non-Fungible Token (NFT) collections. Yuga states that BAYC NFTs often resell for upwards of hundreds of thousands of dollars, and that prominent celebrities are holders of BAYC NFTs. Yuga maintains that much of the BAYC NFT collection's value arises from their rarity because only 10,000 BAYC NFTs exist and each is entirely unique.

Yuga noted that it owns no registered trade marks covering the BAYC collection, but claimed that it owns several unregistered trade marks, including "BORED APE YACHT CLUB," "BAYC," "BORED APE," the BAYC Logo, the BAYC BORED APE YACHT CLUB Logo, and the Ape Skull Logo (BAYC trade marks). Yuga said that it has used these marks since around April 2021 in connection with advertising, marketing, and promotion of its products and services nationwide and internationally through multiple platforms, including the BAYC website, NFT markets such as OpenSea, and social media platforms, such as Facebook, Instagram, and Twitter.

The first defendant Ripps is a visual artist and creative designer whose works comment on what is described as the boundaries between art, the internet and commerce. From around November 2021, Ripps began criticising Yuga and the BAYC collection through his Twitter and Instagram profiles, podcasts, and cooperation with investigative journalists. Fundamental to this case, in around May 2022, Ripps, along with another, created their own NFT collection, known as the Ryder Ripps Bored Ape Yacht (RR/BAYC).

The defendants' NFT collection was being promoted under the branding "Ryder Ripps Bored Ape Yacht Club" and pointed to the same online digital images as Yuga's BAYC NFT collection but used verifiably unique entries on the Ethereum blockchain. The defendants contended that this RR/BAYC collection served several purposes, including bringing attention to their criticisms of Yuga, creating social pressure demanding that Yuga take responsibility for its actions, and educating the public about the technical nature and utility of NFTs.

False designation of origin and trade mark use and infringement

Yuga succeeded in claims of "false designation of origin" under the Lanham Act which "prohibits the use of false designations of origin, false descriptions, and false representations in the advertising and sale of goods and services" as well as in its claims of infringement of its unregistered trade mark rights. In order to succeed under false designation of origin under the Lanham Act, "a claimant must demonstrate that: (1) it has a protectable ownership interest in the mark; and (2) the defendant's use of the mark is likely to cause consumer confusion."

The defendants argued that Yuga did not own any trade mark rights in the BAYC trade marks because NFTs are intangible and as a result are ineligible for trade mark protection (not being "goods" as such). However, the California court agreed with the New York court's conclusions in the Hermes v Rothschild (Meta-Birkin) case earlier this year (see our report here) quoting the court in that case and confirming that "goods [need not] be tangible for the Lanham Act to attach".

The defendants also argued that even if the NFTs were "tangible goods", Yuga could not fulfil the requirement for the marks to be used in commerce to have trade mark status. The court concluded that Yuga had used the marks "in commerce", at least because it sold 10,000 BAYC NFTs. Indeed the defendants' stated aim of producing their NFT collection, to draw attention to their perceived criticisms of Yuga, would not have been necessary had Yuga not already established significant brand recognition and goodwill from the use of the BAYC marks in commerce.

The court also found that the purported licence given by Yuga to holders of its BAYC NFTs was a copyright licence only, and did not purport to confer any rights in the unregistered trade marks. Accordingly, the defendants' argument that Yuga had transferred or abandoned their trade mark rights could not succeed.

Finally, the Court found that the defendants' use was likely to cause confusion. The court agreed that the Yuga marks were conceptually and commercially strong and therefore it was more likely for there to be confusion when they were used by the defendants, and in any case the marks being used by the defendants were almost identical as were the goods in relation to which the marks were being used. There was also actual evidence of confusion presented but the court felt it was not necessary to consider it, as the other factors weighed so heavily towards a finding of confusion.

The damages to be awarded will be decided at trial.

Defences

In defence, the defendants' argued that their RR/BAYC collection is an expressive work protected under the First Amendment (the Rogers test) and/or that the affirmative defence of nominative fair use applied, because the collection was intended to be a commentary on BAYC and Yuga. The court swiftly dismissed these arguments, finding that the defendants' sale of RR/BAYC is "no more artistic than the sale of a counterfeit handbag" and so the Rogers test did not apply – in addition, fair use was not applicable because the defendants used the BAYC marks to sell and promote their own product, RR/BAYC, and not to critique the BAYC marks themselves.

Cyber-squatting

Yuga also raised a cause of action under cyber-squatting. The defendants had registered and used the domain names https://rrbayc.com/ and https://apemarket.com/. To succeed in the cyber-squatting claim, Yuga needed to establish that the domain names were identical or confusingly similar to their trade marks and had been registered with a bad faith intent to profit from their use of Yuga's marks. The court concluded that incorporating Yuga's marks into the domain name established this – rrbayc.com incorporating the BAYC mark and, perhaps more generously, apemarket.com incorporating Yuga's BORED APE mark and "other APE-based marks and merely adds the descriptive word market". The defendants were also found to have registered domain names in bad faith with an intent to profit. Accordingly, Yuga's claim under this ground succeeded.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.