Ninth Circuit Judge Doubts Comparison of “Unique” NFT Space to Typical Markets During BAYC Copyright Case Arguments

On Thursday, August 15, 2024, Ninth Circuit Judge Danielle Jo Forrest questioned whether the NFT market could be compared to traditional consumer markets during an oral argument hearing in the Bored Ape Yacht Club trademark infringement appeal case.

Judge Forrest’s comments came as a three-judge panel of the Ninth Circuit Court of Appeals heard arguments in the appeal of a lower court ruling that found artists Ryder Ripps and Jeremy Cahen liable for infringing on the Bored Ape Yacht Club NFT collection owned by Yuga Labs. In April 2023, U.S. District Judge John F. Walter granted summary judgment in favor of Yuga Labs, ruling that Ripps and Cahen owed $1.6 million in damages for their infringing NFT series. Judge Walter also ordered the artists to pay over $7 million in legal fees.

During the hearing, Judge Forrest expressed skepticism about comparing the NFT market directly to traditional markets for consumer goods. “I don’t think that the NFT market is your typical consumer market,” Forrest said. “What are we even talking about? What is an NFT?” Forrest’s comments highlighted the emerging and still confusing nature of the NFT marketplace compared to established markets.

Yuga Labs’ attorney Todd Gregorian from Fenwick & West argued that Ripps and Cahen’s NFT series created consumer confusion similar to counterfeit goods. However, Judge Forrest doubted this direct comparison, questioning whether the sophisticated NFT buyers could really be confused in the same way as traditional consumers.

Artists’ attorney Louis Tompros from WilmerHale argued that the lower court erred in rejecting his clients’ fair use defense without sending the issue to a jury. Tompros said Ripps and Cahen created their NFT series as a form of appropriation art commentary on perceived issues with the Bored Ape collection. However, Gregorian said the artists were essentially running a scam to profit from Yuga Labs’ brand.

Both sides debated whether the artists’ NFTs could truly be considered counterfeits and whether consumer confusion existed in the novel NFT marketplace. Tompros agreed with Judge Forrest that NFT buyers understand the limited rights purchased, unlike traditional goods. Meanwhile, Gregorian maintained some level of deception was still possible without technical expertise to discern the different NFT collections.

The panel took the complex issues under consideration without ruling, highlighting the unsettled legal questions as digital assets become more prevalent. The case probes how trademark principles extend to novel online marketplaces with their own consumer behaviors.