FEATURED STORY January 24, 2023

Judge Tosses First Amendment Defense In Yuga Labs V. Ryder Ripps

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On December 16, 2022, a federal district judge in California denied artist Ryder Ripps's and his partner's anti-SLAPP motion and motion to dismiss in a closely monitored action filed against them by Yuga Labs, Inc. ("Yuga"), the creator behind the monumentally successful Bored Ape Yacht Club ("BAYC") NFTs. Defendants are the creators of the Ryder Ripps/BAYC ("RR/BAYC") project, which "uses satire and appropriation to protest and educate people regarding The Bored Ape Yacht Club and the framework of NFTs."

Yuga's BAYC, of course, is the billion-dollar NFT collection of 10,000 bored apes that is credited as being one of the most successful NFT projects. Ripps, apparently known as an online provocateur and whose career as a conceptual artist has often invited controversy, along with his partner, are being sued by Yuga in a complaint filed on June 24, 2022, alleging that the use of BAYC marks in their RR/BAYC NFTs constitute trademark infringement and violate other related claims. According to defendants, RR/BAYC "is a collection of NFTs that point to the same online digital images as the BAYC collection but use verifiably unique entries on the blockchain." Defendants contend the RR/BAYC project is "appropriation art," through which they seek to bring attention to, among other things, Yuga's use of racist and neo-Nazi dog whistles in their imagery, and to teach the public about the technical nature of NFTs. Similar to the original, the RR/BAYCs have found commercial success, and Yuga alleges that defendants have reaped millions in sales and resale royalties.

Defendants filed a motion to dismiss and a California anti-SLAPP motion to dismiss the complaint. California's anti-SLAPP statute allows the early dismissal of cases aimed at chilling free speech through costly and timely litigation where the defendant shows (1) that protected expression is being challenged and (2) plaintiff fails to show that the complaint is legally sufficient. Defendants argued that the RR/BAYC project constitutes protected speech under Rogers v. Grimaldi, 785 F.2d 994 (2d Cir. 1989), previously asserted in the Hermès v. Mason Rothschild case. In a nutshell, the First Amendment protects expressive works that incorporate a plaintiff's trademark if: (1) the mark is artistically relevant to the work, and (2) the work is not expressly misleading as to the source or content of the work. Defendants further argued that their use of the BAYC trademarks were protected nominative fair use, because they were merely using the BAYC trademarks to describe Yuga's BAYC as part of their public commentary.

The Court denied the motions. It ruled that the Rogers test did not apply because "the RR/BAYC NFTs do not express an idea or point of view, but, instead, merely ‘point to the same online digital images associated with the BAYC collection.'" Defendants' actions were "commercial activities designed to sell infringing products" and was "no more artistic than the sale of a counterfeit handbag." In so ruling, the Court rejected defendants' argument that the sale of RR/BAYC NFTs could not be divorced from the underlying RR/BAYC project as a whole. The Court further found that the BAYC marks were not artistically relevant to defendants' project and that their use of the BAYC marks were expressly misleading.

Next, the Court rejected defendants' nominative fair use argument. Among other reasons, it found that the defense could not be asserted where defendants were not using the BAYC marks to sell Yuga's BAYC NFTs but to sell their own competing RR/BAYC NFTs. The anti-SLAPP motion was similarly deficient since defendants had not shown that Yuga's claims "arise from" defendants' protected speech. Defendants' public criticism of Yuga's use of allegedly racist, neo-Nazi, alt-right dog whistles were not the subject of Yuga's claims, which only challenged defendants' commercial use of the BAYC marks and were not alleging claims for defamation, slander, or libel.

Following the Hermès MetaBirkins case, this is the second time that a court has determined the applicability of the Rogers test. In Hermès, the court stated that the Rogers test applied in part to the trademark infringement analysis there because Rothschild's digital handbag images "could constitute a form of artistic expression." But the Hermès court stopped short of dismissing the complaint, since it found that Hermès sufficiently alleged that the use of its trademark in Rothschild's NFTs was not artistically relevant and was explicitly misleading, which could not be resolved at the motion to dismiss stage. Unlike Hermès, the Court here found Rogers inapplicable even at the motion to dismiss stage, because, as Yuga argued and the Court accepted, all that the RR/BAYC NFTs did were to point to the original BAYC images, without any added expression or content.

Defendants filed a notice of appeal with the Ninth Circuit Court of Appeals on that portion of the Court's decision denying their anti-SLAPP motion, and their appellate brief is due by February 21, 2023. Meanwhile, defendants have filed an answer asserting six counterclaims, including for declaratory judgment of no copyright in the BAYC images. The case is knee deep in discovery and is being vigorously litigated, including an order denying Yuga's ex parte motion to preclude its co-founders Wylie Aranow and Greg Solano from being deposed. A jury trial is scheduled for June 27, 2023.

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