Image: Yuga Labs

Ryder Ripps and Jeremy Cahen are arguing against Yuga Labs’ bid for partial summary judgment in the trademark lawsuit waged against them, asserting in a new filing that the company behind the Bored Ape Yacht Club (“BAYC”) lacks valid trademarks, in part, because such rights do not extend to non-fungible tokens. The opposition follows from Yuga Labs lodging a motion for summary judgment with the U.S. District Court for the Central District of California earlier this month, in which it asserts that the court should decide its false designation of origin and cybersquatting claims on the basis that it owns the “valid and enforceable” BAYC marks, that Ripps and Cahen made use of those marks in connection with their “confusingly similar” RR/BAYC NFT project, and that it is entitled to damages and injunctive result as a result.

In their newly filed opposition, Ripps and Cahen (“defendants”) assert that while Yuga Labs – which recently revealed a multi-year partnership with Gucci – is “seek[ing] partial summary judgment on [its] infringement and cybersquatting claims, as well as a handful of defenses and [their knowing misrepresentation of infringing activity] counterclaim, each of Yuga’s arguments is fatally flawed.” 

Focusing primarily on Yuga Labs’ false designation of origin claim, Ripps and Cahen argue that Yuga Labs fails here, as it cannot show either of the threshold elements: ownership of the asserted trademarks – namely, BORED APE YACHT CLUB, BAYC and BORED APE word marks, and the BA YC logo, BA YC BORED APE YACHT CLUB logo, and the Ape Skull logo – or likelihood of confusion.

In terms of ownership, the defendants attempt to chip away at Yuga Labs’ claims by citing Dastar and arguing that the Supreme Court “has held that trademarks are limited to ‘tangible goods that are offered for sale.’” That is an issue here, per Ripps and Cahen, as the “‘goods for which Yuga claims trademark rights are NFTs,” which are “not ‘tangible good[s] to which trademark law applies under Dastar.’” (The defendants also point to a recent Office action in which the USPTO stated that an “NFT is not a good in trade,” and thus, Yuga must “specifically identify the underlying digital or physical items represented by the NFT for proper classification and identification.”)

(Note: This is not the first time Dastar has been raised in connection with NFTs. Counsel for MetaBirkins-maker Mason Rothschild argued in his Feb. 2022 motion to dismiss that “even if Rogers were not directly on point and dispositive in this case – which it is – the Supreme Court’s decision in Dastar would be fatal to” Hermès’ trademark infringement claim, as Dastar “unambiguously holds that only misrepresentations of the origin of physical goods are actionable under the Lanham Act.” The court disagreed with Rothschild on this, with SDNY Judge Rakoff stating that in making the Dastar argument, Rothschild was “ignoring decades of application of the Lanham Act to virtual goods and services … including digital commodities.”)

“Even if … NFTs were ‘tangible goods’ subject to trademark law,” the defendants contend that “Yuga – because it lacks any federal registrations [for the allegedly infringed marks] – must meet the ‘use in commerce’ requirement,” which it cannot do. This is partially because “Yuga’s sale of BAYC NFTs cannot form the basis for a ‘use in commerce claim,’ because those sales were illegal” – as they constitute “unregistered investment vehicles” – and thus, “not a lawful use in commerce.”

Beyond that, the defendants assert that Yuga Labs lacks rights in the BAYC trademarks because its “terms and conditions gave away all of Yuga’s rights” – “including any underlying trademark rights in the Bored Ape that Yuga may have owned” – to purchasers of the BAYC NFTs. Similarly, and in what appears to be a potentially stronger argument that the Dastar one, Ripps and Cahen claim that Yuga allegedly lacks valid trademark rights because its practice of granting BAYC NFT holders broad rights to leverage the intellectual property tied to those NFTs (including the BAYC trademarks) amounts to naked licensing, a phenomenon that “occurs when a trademark owner grants a license but ‘fails to exercise quality control over the licensee’ resulting in ‘an involuntary forfeiture of trademark rights.’” 

Finally, the defendants allege that Yuga has also failed to police unauthorized uses of its marks, and thus, “there is a material dispute as to whether Yuga’s failure to police resulted in abandonment,” per Ripps and Cahen, who cite “widespread usage [of the BAYC marks] by competitors leading to a perception of genericness among the public who sees many sellers using the same term.” 

Moving on to likelihood of confusion, Ripps and Cahen argue that there are “numerous material disputes” that weigh against summary judgment. For instance, the defendants argue that while their RR/BAYC NFTs might point to the same images as Yuga Labs’ BAYC NFTs, they still amount to “different products in different markets.” In particular, the defendants maintain that the “satirical” RR/BAYCs NFTs “are distinct tokens on the blockchain sold on different marketplaces, the size of the collections are different, the prices are different by orders of magnitude, the underlying contracts have different addresses, and the tokens display different names.” 

The defendants further state that Yuga Labs has not established a likelihood of confusion, and instead, “relies on a handful of anecdotal social media posts and flimsy survey evidence for its conclusion that consumer confusion is indisputable.” And such “anecdotal evidence of supposed confusion likewise cannot support summary judgment.” 

Not finished, Ripps and Cahen push back against Yuga Labs’ Anti-cybersquatting Consumer Protection Act claim, and also argue that Yuga Labs is not entitled to summary judgment on their First Amendment (citing Rogers here) or fair use defenses or on their counterclaim that it submitted improper takedown notices in violation of copyright law. 

The opposition comes after Yuga Labs was handed a partial win this month, with C.D. Cal Judge John Walter granting its special motion to strike the intentional infliction of emotional distress and negligent infliction of emotional distress counterclaims that Ripps and Cahen lodged against it 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 case is Yuga Labs, Inc. v. Ryder Ripps, et al., 2:22-cv-04355 (C.D. Cal.).