The meteoric rise of non-fungible tokens (NFTs) has ignited a legal debate about their place in intellectual property law. A recent amicus brief filed by the International Trademark Association (INTA) with the U.S. Court of Appeals for the Ninth Circuit delves into this debate, specifically focusing on whether NFTs qualify as “goods” under the Section 1125(a) – the Lanham Act’s unfair competition provision.
The recent case at the center of this debate, Yuga Labs, Inc. v. Ryder Ripps, Jeremy Cahen, concerns the popular Bored Ape Yacht Club (BAYC) NFT collection. Yuga Labs, the BAYC’s creator, alleges that Ripps and Cahen infringed upon its trademarks by creating and distributing competing NFTs that utilized the BORED APE YACHT CLUB (BAYC) trademark family
The crux of the lawsuit hinges on the definition of “goods” within the Lanham Act. Traditionally, trademark law has been applied only to physical, tangible products. Capitalizing this historical trend, Ripps and Cahen argue that NFTs, existing solely in the digital realm, are ‘software tokens,” not physical and tangible products that are eligible for trademark protection, and that Yuga Labs did not have enforceable trademark rights. They bolster their argument by citing the United States Patent and Trademark Office’s (USPTO) rejection of Yuga Labs’ trademark applications for its NFTs and a Supreme Court case, Dastar Corp. v. Twentieth Century Fox Film Corp., which they interpreted as establishing tangibility as a prerequisite for trademark protection.
In its amicus brief supporting the plaintiff, the INTA argued the Lanham Act’s reach extends to marks used for NFTs and other intangible assets. The INTA highlighted the Lanham Act’s broad language which refers to trademarks used with “any” goods or services, without a limiting provision that explicitly stipulates that the physicality of goods or services are a prerequisite. To support this argument, the INTA cited the recent Southern District Court of New York’s decision in Hermès International v. Rothschild, where the Court held that NFTs can be considered “goods” under the Lanham Act.
The INTA’s brief extends beyond a strict textual interpretation of the Lanham Act. It emphasizes the importance of consumer perception in trademark law. Consumers already associate Yuga Labs’ trademarks with the underlying NFT assets and the various benefits they offer, such as access to exclusive online communities or participation in metaverse experiences.
Looking Ahead
The Court’s decision in the BAYC case is likely to be a landmark decision that sets a precedent for how NFTs are treated under trademark law in the United States. If the Court sides with the INTA, it would establish a clear path for NFT creators to protect their digital assets under the Lanham Act. This would be a significant development for the burgeoning NFT market, fostering innovation by providing creators with the legal confidence to invest in and develop their NFT projects. Additionally, it could bolster consumer confidence by ensuring authenticity and reducing the risk of confusion or fraud within the NFT marketplace.
Conversely, a decision against the INTA could create a chilling effect on the NFT market. Without clear legal protections for trademarks associated with NFTs, creators may be hesitant to invest heavily in their projects, fearing that imitators could easily copy their work. This could stifle innovation and hinder the overall growth of the NFT market. Furthermore, consumers may be less willing to participate in the NFT market if they are unsure of the authenticity or ownership rights associated with digital assets.
The BAYC case serves as a microcosm of the larger conversation surrounding intellectual property and the digital age. As technology continues to evolve and new forms of creative expression emerge, legal frameworks will need to adapt to keep pace. The Court’s decision will be a crucial step in determining how intellectual property law applies to the digital world, with significant implications for creators, consumers, and the future of the NFT market.