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Non-Fungible Tokens (NFT) Newsroom

Yuga Labs Scores Another Victory with Summary Judgment Win

Yuga Labs Scores Another Victory with Summary Judgment Win

In our prior post, we wrote about the closely-watched Yuga Labs v. Ryder Ripps case and how the defendants’ motion to dismiss and anti-SLAPP motion were denied. Since then, Yuga Labs has filed a motion for partial summary judgment seeking summary adjudication in its favor on a couple of its claims alleging false designation of origin and cybersquatting, as well as seeking dismissal of certain of defendants’ affirmative defenses and counterclaim. On April 21, 2023, the District Court for the Central District of California granted Yuga’s motion in part, and denied it in part on the issue of whether the case deserved an award of enhanced damages and attorney’s fees, because Yuga has reserved the issue of damages for trial.

Yuga, the team behind the popular Bored Ape Yacht Club (“BAYC”) NFTs, is suing Ryder Ripps and Jeremy Cahen, who used the same BAYC images through a process of reminting and sold them as Ryder Ripps (“RR”)/BAYC NFTs. Defendants regard their RR/BAYC project as “appropriation art,” through which they seek to bring attention to, among other things, Yuga’s alleged use of racist and neo-Nazi dog whistles in their imagery, and to teach the public about the technical nature of NFTs. Yuga alleges that defendants reaped millions in sales and resale royalties by selling the RR/BAYC NFTs.

There are at least three interesting takeaways from the court’s decision. First, in granting summary judgment to Yuga on the false designation of origin claim (which is essentially a trademark infringement claim for unregistered marks), the court recognized that NFTs could constitute “goods” for purposes of the Lanham Act, and rejected the argument that Yuga’s NFTs are ineligible for trademark protection under Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003). The same argument was raised by Mason Rothschild in the Hermès v. Rothschild battle, and the argument goes like this: in Dastar, the US Supreme Court held that Lanham Act renders actionable misrepresentations as to the origin of tangible goods, but not misrepresentations as to the author of any idea, concept, or communication embodied in those goods. Because NFTs are intangible, defendants argued that Dastar dictates that trademark laws do not apply. To buttress this point, defendants raised that the US Patent and Trademark Office communicated to Yuga in an office action on one of its trademark applications that “Applicant [Yuga] should note that a non-fungible token or NFT is not a good in trade…. NFTs are downloadable units of data stored on a blockchain…that authenticate and prove ownership rights to digital or physical items. An NFT is not the digital or physical item itself, nor does it contain the digital or physical item; rather, it only contains information about the item. It is comparable to a certificate of authenticity/ownership for a physical item.”

The court was not convinced. It adopted the analysis by the Hermès court, which said Dastar did not impose any requirement for goods to be tangible, and found that NFTs constitute “goods for purposes of the Lanham Act.” In so finding, the court also relied upon a law review article which analyzed that “focusing only on tangibility misses important characteristics of NFTs that suggest that they can be treated as ‘goods’ under the Lanham Act.” The court rejected the notion of treating NFTs as mere ownership receipts or software code containing functional instructions telling a computer what to do, instead adopting the view that the value of NFTs lies in their connection to a particular brand, creator, or content, thus capable of being treated more like “goods.” In this vein, the court again relied on reasoning from the Hermès court, which held that the MetaBirkins NFTs should be understood to refer to both the NFT and the associated image, because “[i]ndividuals do not purchase NFTs to own a ‘digital deed’ divorced from any other asset: they buy them precisely so that they can exclusively own the content associated with the NFT.”

Rothschild is currently trying to overturn the jury verdict in a motion for judgment as a matter of law or for a new trial citing multiple grounds, including that Dastar precludes the trademark claim.

Second, the court rejected defendants’ argument that Yuga owned no trademark rights because it transferred them to purchasers or abandoned them through naked licensing and failure to police. As noted previously, Yuga’s terms of use provide, among other things, that “[w]hen you purchase an NFT, you own the underlying Bored Ape, the Art, completely.” Defendants also referenced deposition testimony by Yuga’s former CEO, who was still acting as CEO at the time he was deposed, testifying that “All IP rights are actually granted to the member and to the owner. We have none of those rights, and we don’t actually take a licensing fee.” Defendants further argued that many NFT purchasers created their own brands using the BAYC marks, including uncritical copycat collections, which BAYC failed to police or exercise quality control.

In declining the arguments, the court construed Yuga’s terms of use to provide only a copyright license, but not a trademark license to use the Bored Ape marks. The court did not discuss the effect, if any, of Yuga’s former CEO’s deposition testimony. Accordingly, defendants’ naked licensing theory failed, because no trademark license was at issue. Defendants’ abandonment theory was similarly rejected, with the court stating that the filing of the lawsuit was strong evidence that Yuga had not abandoned its rights.

Third, the court reiterated its prior rejection of Rogers v. Grimaldi as the applicable test to determine whether defendants’ actions should be examined through the lens of the First Amendment. In advocating this test, defendants pointed to websites it created ( and, which contain their criticism of Yuga and BAYC and an artistic statement, and argued that the inquiry to determine whether the work was expressive required looking not only at the work itself but the activity “auxiliary” to the work. The court again disagreed and found that “Defendants’ sale of what is admittedly a collection of NFTs that point to the same online digital images as the BAYC collection is the only conduct at issue in this action and does not constitute an expressive artistic work protected by the First Amendment.” The court did not specifically address the argument that it was required to look at not just defendants’ NFTs, but to “auxiliary” matters.

The obvious impact this decision has is that it confirms, or strengthens Yuga’s trademark rights. It well-positions Yuga with the ability to pursue, potentially, even a bona fide purchaser of the BAYC NFTs who, laboring under the impression that it purchased a valid license, may be freely using the Bored Ape trademarks. The decision should caution those purchasers that whatever rights they purchased do not include any trademark rights, and that using the marks may render them liable to Yuga for trademark infringement unless the usage falls within the protection of Rogers, or the fair use doctrine, which—if this court’s decision and the Hermès verdict is any indication—is not easily obtained.

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By: Mioko C. Tajika