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

[Gunnar Larson]

https://www.mondaq.com/uk/trademark/1316138/bored-ape-yacht-club-unregistered-trade-marks-effective-against-copycat-nfts-in-californian-summary-judgment?email_access=on

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.
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