Yuga Labs created Bored Ape Yacht Club (BAYC), a collection of 10,000 unique NFTs depicting cartoonish monkey avatars with various traits, expressions, and outfits. Owning one of these tokens granted not only the right to a digital image but also access to an exclusive online community with events, parties, and unique content. Originally sold for around $200, they became a status symbol, and some pieces reached prices exceeding $24 million on the secondary market, providing Yuga with 2.5% royalties on each sale. The project's popularity did not shield it from controversy. Artist Ryder Ripps, criticizing the alleged racist content associated with BAYC, created his own collection, RR/BAYC, together with Jeremy Cahen. He used identical images and identifiers as the original Yuga NFTs, claiming it was a form of protest, education, and satire. Yuga considered this a violation of its rights and sued Ripps for infringement of unregistered trademarks and cybersquatting. The dispute quickly went to the appellate court.
A key point in Ripps' defense was the argument that NFTs are not "goods" under the Lanham Act, which governs federal trademark protection in the United States. Ripps cited previous rulings regarding physical media containing intangible content, such as video cassettes or CDs, where the media itself was protected, not the content. However, the court explicitly rejected this argument, stating that NFTs differ from traditional media – they exist solely in the digital world, and their unique code and metadata constitute a separate, distinct "product" offered in commerce. This ruling is groundbreaking because it paves the way for treating NFTs the same as other goods in the context of trademarks. This means that creators and owners of collections can use legal tools to protect their brands from infringement or consumer deception.
Ripps attempted to invalidate Yuga's rights, arguing, among other things, that the sale of NFTs violated securities laws, and that Yuga allegedly abandoned its rights by failing to control how third parties used its trademarks (so-called "naked licensing"). However, the court found that there was no connection between potential violations of securities law and the function of a trademark, and that Yuga never granted formal licenses to use its trademarks. Other lines of defense, such as fair use and the right to freedom of speech, were also rejected. The court emphasized that Ripps did not limit himself to commenting on Yuga's activities, but incorporated its trademarks into his own products, which could suggest to consumers that they originated from or were authorized by Yuga.
Although the court recognized NFTs as “goods” under trademark law, it has not yet ruled on whether there was an infringement in this specific case. The key will be demonstrating the likelihood of consumer confusion, which requires a detailed analysis of several factors, including the similarity of the marks, the type of consumers, and the distribution channels. For brand owners and NFT creators, this ruling is a signal to strengthen legal protection by registering trademarks, developing enforcement strategies, and avoiding situations that could lead to “naked licensing” claims. Artists and activists who want to use well-known marks for critical or satirical purposes should do so in a way that does not suggest that the product originates from the trademark owner.
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