In the Yuga Labs case against NFT artist Ryder Ripps, Yuga has achieved a crucial victory!
Ripps and Cahen (the co-defendant) were accused of infringing on Yuga's intellectual property, using it to construct their own NFT project, RR/BAYC.
The case has been ongoing for several months. Yuga Labs claimed that the defendants used its BAYC marks to sell identical-looking NFTs, in the same market that Yuga sells its BAYC NFTs, causing consumer confusion and harm to Yuga's brand and intellectual property.
Judgement:
On 21 April 2023, a Federal Court in California granted Yuga's motion for Summary Judgement for their false designation of origin and cybersquatting claims, as well as on the defendants fair use claims. The Court found that the defendants’ First Amendment and the raised ‘Rogers’ arguments didn’t stand as artistic expression.
The defendants’ first counterclaim, alleging that Yuga "knowingly and materially misrepresented'' that they infringed copyright by filing DMCA takedown notices with various NFT marketplaces, were found to not be substantiated.
Moreover, the defendants’ affirmative defence of unclean hands, which was based on Yuga's alleged misconduct in celebrity endorsements and securities violations, could not shield them from liability because Yuga's alleged misconduct was unrelated to the parties' trademark dispute.
The Court outlined that Yuga had the right to protect their BAYC trademark. Applying copyright and trademark rules to NFTs is mainly new territory, and the defendants’ contended that Yuga transferred its trademark rights to those who bought BAYC NFTs. However, another setback for RR/BAYC was the denial of its claim that Yuga had transferred trademark rights to customers who bought BAYC NFTs. The Court emphasised that, while Yuga Labs' terms and conditions permit holders personal and commercial usage, they do not grant "a trademark licence to use the BAYC marks."
Additionally, the court rejected the arguments that Yuga lacks trademark rights because NFTs are intangible. The court highlighted a recent copyright dispute between the unauthorised NFT line ‘MetaBirkins’, which uses pictures of counterfeit Birkin bags, and the high-end fashion label Hermès to support its decision. In that instance, a New York Court determined that actual items are not necessary for trademark rules to be in force and ordered MetaBirkins designer Mason Rothschild to pay Hermès $133,000 in damages.
Yuga is entitled to monetary damages as well as injunctive relief, with the amount and the exceptional case decision (for higher damages and attorney fees) is yet to be determined.
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