Attorney Steve® NFT Law Essentials - Parody, Satire from competing brands (note, this is NOT a copyright infringement case, interestingly).
I have reviewed the lawsuit. Here is my take, let me know if you would like me to elaborate or expand on any of these responses:
- Plaintiff has the clear edge: Viewing Yuga's allegations, if all is found to be true, it appears likely to me that Yuga Labs will prevail in the lawsuit if it goes to trial (which I doubt it will since I believe Yuga labs should be very well-financed, and I am not sure how committed Defendant will be to hooking horns, or should we say bananas, on these set of facts).
- Claims look viable: The false designation of origin, trademark, and unfair competition causes of action appear to have very strong factual support, and there was a good amount of pictoral evidence provided in the pleading itself that appears convincing. Of course, allegations must be proven.
- Defendants missed the PARODY mark in my opinion: There is/was a way to “do parody right” (parody is protected by the “fair use” laws), but it requires a clear “poking fun at the original” and these rights can diminish if not meeting the threshold standards for parody, especially in a manner that makes it appears they are seeking to financially exploit the creative efforts and investment of the Plaintiff, Bored Ape Yacht Club. “Satire” was mentioned, but satire receives far less legal protection than parody does and, at best, I think that is what you have here, a very weak version of satire. In my opinion, RR/BAYC faces the very real potential for an injunction and substantial legal liability for several key reasons:
- Apes, skull logo, look and feel (commercial impression), NFT numbers and brand names used appear to be identical in numerous circumstances. The skull logo and brand name is part of a pending trademark application. For now, Plaintiff is relying on common law trademark rights and the pending application with the USPTO. If the Defendants wanted to have a chance at success, they could have altered the skull to try to make it more clear they want to poke fun at the original(which is the basic test needed to show parody/fair use), and they could have changed the names and numbers (ex. #1058 was not changed to #8501), and changed the “bar” or club. This would have helped make it clear that they were transforming their apes into something new and making fun of the originals in the process, for further example by calling it the “boring-ass yacht club” or something like that. I don't see Defendant succeeding on any defense frankly.
- Defendants' depiction of the “CLUB” appears to be exactly the same of Plaintiffs. They should have tried to alter the actual club as well if their goal was to be funny and achieve a parody, which they could be legally entitled to profit from and which would serve as a potential defense (ex. they could have made it an upscale Yacht Club with a suit and tie Apes). Of course, this is not legal advice, but I do think NFT creators have to be aware of this, and the potential that parody competitors can be a real issue that they cannot legally prevent, and an area potential creators may be looking at as the blockchain world continues to expand.
- Bad faith and bad motives may be at issue as well: While there was a decent attempt at satire/parody in one of the images (Defendants Ape #863) and perhaps other aspects, Defendants appear to harbor ill-will and bad faith toward the Plaintiff (ex. the DMCA takedown and Twitter comments which I won't repeat here), and have a direct profit motive on top of that. It is doubtful the Central District court judge will find amusement in this combination. The law seeks to protect businesses and their investments from others trying to take a “free ride” or acting as a “copycat” of their brand, especially where intellectual property rights are concerned.
- The same marketplace used: Defendants apparently sell on the same marketplace (ex. OpenSea.io) this can become very confusing for NFT purchasers who want to make sure they are buying the real Bored Ape, especially at some of the prices you see for the Bored Apes, and where it is not absolutely clear Defendant is seeking to perpetrate a parody or transforming the Apes into something totally new (which could be legal). However, as it stands, it looks to me like Defendant's competing business is likely to cause consumer confusion (the trademark test for infringement) and is more copycat in nature as Plaintiff has alleged.
- Big Money is at stake for companies and NFT investors (this marketplace needs to be protected in the form of fair and legitimate competition as it is in the early growth stage): A potential NFT purchaser would not likely know which NFT brand they are purchasing if they are buying the NFT”s on the same marketplace with similar logos and appearance of their respective clubs. People deserve to know clearly what brand they are dealing with. At the prices people are paying for these Apes, (not to mention their potential future value), this is more than a trivial legal issue.
At the end of the day, I believe Plaintiff has a clear legal edge. Likely, you will see either a confidential settlement with an agreement to cease and desist permanently as to the BAYC or, they may seek to force Defendant out of the Ape business, (at least this business venture).
The Morale of the story is before you monkey around with an Ape on the cover of the Rolling Stone, you better have your bananas in order.
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