NFT Artist Loses $9M Lawsuit to Bored Ape Yacht Club Creator

Yuga Labs Wins Trademark Infringement Case Against Ryder Ripps and Jeremy Cahen

Yuga Labs, the developer of the popular Bored Ape Yacht Club (BAYC) NFT collection, has won a landmark lawsuit against Ryder Ripps and Jeremy Cahen, the creators of a knockoff NFT collection called Ryder Ripps Bored Ape Yacht Club (RR/BAYC). A US District Judge ordered Ripps and Cahen to pay Yuga Labs nearly $9 million in profit disgorgement, legal fees, and damages, and to transfer or destroy any infringing NFTs and domain names. The judge also permanently banned them from using the BAYC identifier in any logos or trademarks.

The lawsuit, which was filed in June 2022, alleged that Ripps and Cahen deliberately used the BAYC marks to cause consumer confusion and to devalue the authentic BAYC NFTs, which are unique digital items that often sell for hundreds of thousands of dollars or more on the resale market. Yuga Labs claimed to own several unregistered trademarks under which it advertises, markets, and promotes the products and services it offers relating to the BAYC ecosystem, including BORED APE YACHT CLUB, BAYC, BORED APE and various BAYC logos.

Ripps, a self-proclaimed visual artist and creative designer who creates artwork commenting on the boundaries between art, the internet, and commerce, and Cahen, his collaborator, defended their use of the BAYC marks as a form of appropriation art intended as artistic criticism. They accused Yuga Labs of embedding “racist, neo-Nazi, and alt-right dog whistles” in the BAYC NFTs, including in the BAYC skull logo, which resembles a Nazi emblem. They also filed a counterclaim against Yuga Labs, alleging a cause of action for “knowing misrepresentation of infringing activity”, as well as other claims that were later dismissed.

Judge Rejects Defendants’ Affirmative Defenses and Counterclaim

The judge granted summary judgment in favor of Yuga Labs on all issues except damages, finding that the defendants’ use of the BAYC marks in relation to their NFTs and domain names constituted false designation of origin under the Lanham Act and cybersquatting. The judge rejected the defendants’ affirmative defenses, including that their use of the BAYC marks was protected by the First Amendment and as a nominative fair use, and that Yuga Labs had unclean hands. The judge also dismissed the defendants’ counterclaim, finding that they failed to show that Yuga Labs made any false or misleading representations to the court or to the public.

The judge ordered the defendants to pay Yuga Labs $8,612,496.50 in profit disgorgement, which represents the amount of revenue they generated from selling the RR/BAYC NFTs, and $500,000 in statutory damages for cybersquatting. The judge also ordered the defendants to pay Yuga Labs $7,000,000 in attorney’s fees and costs, finding that the case was exceptional and that the defendants acted in bad faith and with a willful intent to infringe the BAYC marks. The judge further ordered the defendants to transfer any infringing intellectual property, including codes, passwords, and credentials, to Yuga Labs within two weeks, and to dispose of any remaining RR/BAYC NFTs they have, or surrender them to Yuga Labs to burn.

Implications of the Ruling for the NFT and Crypto Markets

The ruling in the Yuga Labs v. Ripps case is significant for the NFT and crypto markets, as it establishes a precedent for safeguarding intellectual property and trademarks within the emerging and decentralized tech environments. It shows that creators and companies can legally protect their intellectual property and trademarks, even if they are not registered, and that they can enforce their rights against unauthorized and infringing use of their marks by others. It also shows that courts will not accept the defense of appropriation art or artistic criticism as a justification for trademark infringement, unless there is a clear and substantial difference between the original and the derivative work, and that there is no likelihood of confusion among consumers.

Yuga Labs’ action against Ripps and Cahen reinforces the importance of respecting the intellectual property and trademarks of other creators and companies in the NFT and crypto space, and of avoiding any actions that could harm their reputation or value. It also serves as a warning to potential infringers that they could face severe legal consequences if they violate the rights of others.

Ripps and Cahen, however, have not given up on their fight. They have announced that they are appealing the outcome in the Ninth Circuit Court of California, and that the case is ongoing. They maintain that their use of the BAYC marks was a legitimate form of artistic expression and social commentary, and that Yuga Labs is trying to censor and silence them.