The convergence of non-fungible tokens (NFTs) with trademark law has sparked significant legal developments that set important precedents in digital asset regulation. One notable case involved Yuga Labs, Inc., creators of the Bored Ape Yacht Club (BAYC), suing Ryder Ripps and Jeremy Cahen over their satirical NFTs mimicking BAYC.
NFTs as "Goods" Under the Lanham Act
The Ninth Circuit Court ruled that NFTs qualify as "goods" under the Lanham Act, a federal law safeguarding trademarks. This decision aligns with a U.S. Patent & Trademark Office report recognizing digital assets' commercial nature and unique identifiers, subjecting them to trademark protections.
Trademark Infringement and Fair Use
Yuga Labs alleged infringement due to similar marks and images used by the defendants. The court reversed the district court's summary judgment in favor of Yuga, emphasizing the necessity to analyze the "forward confusion" standard. While the defendants argued their use was satirical, the court dismissed First Amendment protections because BAYC marks functioned as source identifiers, focusing instead on consumer confusion about origin.
Cybersquatting Claims
The Ninth Circuit reversed summary judgment on cybersquatting claims, deeming domain names like rrbayc.com confusingly similar. However, apemarket.com lacked sufficient similarity, highlighting the importance of domain name analysis in such cases.
DMCA and Declaratory Judgment
Yuga's claims under the Digital Millennium Copyright Act (DMCA) were affirmed without evidence of bad faith or misrepresentation. The court dismissed defendants' declaratory judgment claims for lack of jurisdiction, preventing their reassertion elsewhere.
Trademark Enforceability and NFT Sales
The court upheld Yuga's trademark rights despite arguments about unregistered NFT sales, distinguishing artwork from mark usage. This underscores the need for careful licensing agreements in digital transactions.
Implications for Businesses
This case establishes that traditional trademark principles apply to NFTs, providing a legal framework for digital disputes. Businesses should consider these precedents to navigate trademark enforcement and fair use complexities.