Yuga Labs has been handed a win – for the most part – in the latest round of its trademark-centric lawsuit over RR/BAYC, a collection of NFTs that it says make use of “the very same” marks that it uses to promote and sell its Bored Ape Yacht Club (“BAYC”) NFTs. In an order on March 17, Judge John Walter of the U.S. District Court for the Central District of California granted Yuga Labs’ special motion to strike the intentional infliction of emotional distress and negligent infliction of emotional distress counterclaims lodged against it by defendants Ryder Ripps and Jeremy Cahen, and determined that it is entitled to be compensated for its attorneys’ fees and costs as a result. At the same time, the court granted Yuga Labs’ motion to dismiss the defendants’ declaratory judgment of no copyright but … refused to toss out their “knowing misrepresentation of infringing activity” claim.
The Background: Yuga Labs first filed its trademark infringement, cybersquatting, intentional interference with prospective economic advantage, etc. lawsuit against Ripps and Cahen (the “defendants”) in June 2022. Ripps and Cahen subsequently lodged an answer and claims of their own, accusing Yuga Labs of “knowingly and materially misrepresent[ing]” its rights in the BAYC NFTs, and engaging in an “outrageous retaliatory campaign” against them, including by “lying about” and “intimidating and threatening” them, thereby, resulting in emotional distress. Specifically, the defendants have alleged that they received threats from Yuga Labs partner Guy Oseary and that Yuga “systematically contacted the media and individuals with public speaking platforms, including at least four journalists, in an effort to falsely portray [them] as scammers and liars.”
Ripps and Cahen – who argue that the RR/BAYC project uses “satire and appropriation” to criticize Yuga Labs’ BAYC collection, which they contend is “embedded with racist and neo-Nazi dog whistles” – set out six counterclaims: (1) knowing misrepresentation of infringing activity; (2) declaratory judgment of no copyright under 17 U.S.C. § 102(a); (3) declaratory judgment of no copyright under 17 U.S.C. § 204(a); (4) intentional infliction of emotional distress; (5) negligent infliction of emotional distress; and (6) declaratory judgment of no defamation. (The court notes that in their opposition, the defendants “withdrew their declaratory judgment [of no defamation] claim to allow this matter to be more efficiently adjudicated,” and thus, the court dismissed this counterclaim without prejudice.)
In January, Yuga Labs responded with a motion to strike and dismiss, arguing that, among other things, the defendants’ emotional distress claims center on conduct that “falls squarely within” California’s anti-SLAPP statute and that the defendants “cannot show a ‘probability of success’ (or any chance of success)” because its alleged conduct is “nowhere near the ‘extreme and outrageous’ standard required to sustain such claims and because [the defendants’] own allegations and public statements establish that they have not suffered any injury as a result of Yuga Labs defending itself.”
Fast forward and the court sided in large part with Yuga Labs in its order last week …
Emotional Distress Counterclaims – The court agreed to dismiss the defendants’ emotional distress claims on the basis that the conduct challenged by these claims falls within the anti-SLAPP statute’s protection for “litigation-related activities, speech made ‘in a public forum in connection with an issue of public interest,’ and ‘any other conduct … in connection with a public issue or an issue of public interest.’” In addition to finding that California’s anti-SLAPP statute applies to the claims at hand, the court concluded that the defendants’ emotional distress allegations “do not support a finding of ‘extreme or outrageous’ conduct … particularly in light of the fact that the parties are in the middle of a very contentious public litigation and dispute.”
As distinct from “emotional distress of such substantial quality or enduring quality that no reasonable person in civilized society should be expected to endure,” which is the type of distress that meets the high bar for this type of claim to succeed, Judge Walter found that “the alleged conduct in this case amounts to garden-variety litigation-related activities, public relations activities, and a handful of miscellaneous communications incidental to this public dispute between the parties.”
Accordingly, the court found that the defendants failed to demonstrate the probability of prevailing on their emotional distress claims, and thus, held that Yuga, as the prevailing party on its Special Motion to Strike, is entitled to its attorneys’ fees costs incurred in moving to strike those claims.
Declaratory Judgment of No Copyright Counterclaims – In separate counterclaims, Ripps and Cahen ask the court to declare that Yuga does not possess a copyright in the BAYC images. Siding with Yuga, the court held that “the parties agree that Yuga” – which has not actually lodged copyright infringement claims against the defendants – “does not possess any copyright registrations, and as a result, there can be no case or controversy as to the issue of copyright infringement between Yuga Labs and [the defendants] because Yuga ‘cannot sue for infringement of a copyright’ that it has not registered.”
In dismissing the claims, the court shot down the defendants’ argument that “having an unregistered copyright is not an obstacle to [a lawsuit] because it takes only five working days to register a copyright through the Copyright Office’s special handling process.” Such an argument is “unpersuasive and precisely the kind of hypothetical question that federal courts are barred from adjudicating under Article III,” per Judge Walter.
Knowing Misrepresentation of Infringing Activity Counterclaim – Still yet, Ripps and Cahen allege that Yuga “knowingly and materially misrepresented” that they infringed its copyright by filing DMCA takedown notices with various NFT marketplace platforms. Opting not to dismiss their claim that Yuga Labs violated the DMCA in doing so, the court held that such a claim is “more appropriately resolved on a motion for summary judgment.”
Leave to Amend Would Be Futile – Finally, the court held that “this is a case where it would be futile and, thus, unnecessary to provide [the defendants with] an opportunity to amend.” With respect to their declaratory judgment of no copyright counterclaims, the court said that amendment would be futile because “Yuga does not have a copyright registration for its BAYC images and, as a result, cannot file a copyright lawsuit.” Moreover, “Yuga has not threatened [them] with a copyright lawsuit.” As for their emotional distress counterclaims, the court held that amendment would be futile because Ripps and Cahen failed to demonstrate that they would be able to successfully allege that “Yuga engaged in ‘extreme and outrageous’ behavior, that they suffered severe or serious emotional distress, or that Yuga owed them a special duty.”
The case is Yuga Labs, Inc. v. Ryder Ripps, et al., 2:22-cv-04355 (C.D. Cal.).