Internet & Social Media Law Blog
You have probably heard of Bored Ape Yacht Club, a collection of non-fungible tokens (NFTs) created by Yuga Labs. These NFTs are owned by A-list celebrities and exploded in popularity in 2021. Currently, Bored Ape Yacht Club NFTs can sell for millions of dollars and are arguably one of the most popular and successful NFT collections in existence. As of January 4, 2022, it is estimated that sales of BAYC NFTs have surpassed one billion dollars. Ryder Ripps, a self-proclaimed “conceptual artist,” created his own NFT collection called the Ryder Ripps Bored Ape Yacht Club (RR/BAYC) in May 2022 using the same online digital images as the BAYC NFT collection, by generating new NFTs using the URLs embedded in the Bored Ape Yacht Club smart contracts. In July 2022, Yuga Labs, Inc. filed a lawsuit in California claiming Ryder Ripps et al. has misused trademarks owned and used by Yuga Labs since April 2021 (the BAYC Marks).
In the complaint, Yuga Labs states that Defendant Ripps used the same trademarks used and owned by BAYC to promote the RR/BAYC NTFs and even sells them on the same marketplaces that Yuga Labs uses to sell its Bored Ape NFTs. Ripps also created a sales page on Foundation, a NFT marketplace, to sell RR/BAYC NFTs using Yuga Labs’ BORED APE YACHT CLUB trademark. Confusingly, Ripps created a page with the URL of https://foundation.app/collection/bayc to sell the RR/BAYC NFTs. Further, the Yuga Labs Ape Skull Logo mark and BAYC trademark are being used on the defendant’s website, https://rrbayc.com. Allegedly, Ripps deliberately created sales pages using Yuga Labs’ BAYC Marks to mislead consumers to purchase RR/BAYC NFTs and Ripps has gloated that consumers have been confused by his fake NFTs.
Anti-SLAPP motion to strike
Ripps moved to strike Yuga Labs’ state law causes of action under California’s anti-SLAPP statute alleging his RR/BAYC NFTs are protected speech made in connection with a public issue.
California’s anti-SLAPP statute, also known as the Strategic Lawsuits Against Public Participation law provides for the pretrial dismissal of certain actions that “masquerade as ordinary lawsuits” but are intended to deter ordinary people from “exercising their political or legal rights.” The defendant is required to make a threshold showing that the acts or acts of which the plaintiff complains were taken in furtherance of the defendant’s right of free speech under the United States or California Constitution in connection with a public issue.
Ripps states the RR/BAYC project was created with the specific goal of publicizing and criticizing Yuga Labs’ use of “racist,” “neo-Nazi” and “alt-right dog whistles.” Denying Ripps’ motion to strike, the Court determined that simply stating that Ripps engaged in allegedly protected speech is not enough to prevail on its anti-SLAPP motion and clarifies Ripps’ allegedly protected speech must form at least part of the basis of Yuga Labs’ claims. The Court explains that Yuga Labs’ claims arise out of Ripps’ unauthorized use of the BAYC Marks for commercial purposes rather than claims for defamation, slander or libel. Because Yuga Labs’ claims are not for defamation, slander or libel, Ripps’ arguments are not persuasive. Ripps did not show that Yuga Labs’ claims, “arise from” an “act in furtherance of their right of free speech” and the motion was denied.
Motion to Dismiss for failure to state a claim under 12(b)(6)
Defendant Ripps also filed a motion to dismiss for failing to state a claim of trademark infringement. In determining whether there is trademark infringement or rather some artistic expression protected under the First Amendment, the Ninth circuit outlined a test. A balancing test is applied to determine whether “[a]n artistic work’s use of a trademark that otherwise would violate the Lanham Act is not actionable, ‘unless the use of the mark has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless it explicitly misleads as to the source of the content of the work.’”
This test is used when an artistic expression is at issue, however, when reviewing the use of the BAYC Marks, the court determined the test is inapplicable as artistic expression is not at issue. Without applying the test, the court explained that the use of a senior user’s mark is explicitly misleading when used “as the centerpiece” of an expressive work. Ripps concedes that the BAYC Marks are used as the centerpiece of their RR/BAYC NFTs. This court further explained that even if the balancing test were applied and concluded that the use of the BAYC Marks is artistically relevant, the use of the BAYC Marks is explicitly misleading. Ripps’ sale of a “collection of NFTs that point to the same online digital images as the BAYC collection” does not constitute an expressive artistic work protected by the First Amendment.
Ripps attempted to rebut by claiming its use of the BAYC Marks is fair use. Fair use of a trademark is a defense to trademark infringement but must be proven that 1) the plaintiff’s product or service in question cannot be readily identifiable without use of the trademark, 2) only so much of the mark or marks may be used as is reasonably necessary to identify the plaintiff’s product or service, and 3) the user must do nothing that would in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.
Here, the BAYC marks are not being used to sell Yuga Labs’ BAYC NFTs, but for Ripps to sell its own competing RR/BAYC NFTs. The use of the BAYC marks prominently in various locations, including his website, suggest sponsorship by the owner of the marks, Yuga Labs. Thus, Ripps’ use of the BAYC Marks does not constitute nominative fair use and does not provide Ripps a defense to trademark infringement.
It’s not surprising that an artist claiming to provide social commentary, yet merely mirroring the same work created by another, would be challenged in court and by the court. Ripps even admits that the RR/BAYC NFTs use pointers to the same ape cartoon images as the BAYC collection, to the same customers in the same market as Yuga Labs. Clearly articulated by the court, the copying of the BAYC Marks by the Defendant is not protected under the First Amendment nor constitutes fair use. Though this case moves on to discovery, as it stands, it seems the facts and the court point in favor of Yuga Labs.