Headline: Yuga  Labs should get used to being in Court.

Date:

Body:  Have you ever had a REALLY good idea, and then, somebody steals it, and it turns out to be worth millions of dollars?  This has never happened to me, but I did suggest to a bread company that they try making breakfast bars and 6 months later, guess what I saw at Giant?    I hope they enjoy their stolen money.  (The timing seems coincidental, but, could be innocent.)  Well, this might’ve happened for real, to Yuga Labs.    They are the ones who brought the Bored Apes NFTs to the world stage.  It is their claim that several digital artists including Ryder Ripps produced copycat versions of the apes.

Their contention is that each celebrity who purchased an ape did so as part of their individual identities; essentially their digital selves.  So, when there are look-alike NFT’s, they suffer something akin to brand dilution.  They are seeking damages and attorneys’ fees.  But, as all apes have a tail, this has a tale attached too.  Originally, the artist was served with a DMCA takedown “strike” from Yuga Labs, but Yuga rescinded it later.   This suggests to some that Yuga was admitting they had a weak case.  At issue seems to be a question of what rights convey each time a Bored Ape is sold.

On the other hand, there is a class-action suit  being pursued AGAINST Yuga Labs too.

The idea here is that Yuga Labs started their own currency NFT and made promises about its definite probability to increase in value  Unfortunately, the NFTs have lost a lot of value, since it was started.  Currently, the law firm is looking for people who have been injured by  this issue.  Key to recovery from Yuga is the class proving that the NFTs were actually securities.  Some securities lawyers seemed  to indicate that this finding would not be made.

Normally, this determination would be made by the Howey test.  But many believe that it will not even come to this.“You know when something is a security? When the SEC decides it wants to regulate it—then it becomes a security,” said Fyre. “The real question is, does the SEC want to regulate this particular market? And the reality is, the SEC does not want to regulate the art market.”  But, Yuga Labs also  started their own digital currency, ApeCoin, and this could be more of an issue for them, as it might appear more like a share in a company.

The Verdict

One particularly infamous bank robber was asked why he chose to rob banks.   He looked at the detective and said, “That’s where the money is.”  Yuga Labs serves as an interesting case.   They created a tremendously valued product.  As a result, there were people who tried to make a look-alike product, and Yuga Labs has to defend against this.  But there is also some question about the valuation of that product, and Yuga has to respond to these parties as well. 

I bring all of this up because I seriously doubt if Yuga Labs will be the only company forced to both pre-emptively enforce their brand, and also defend against people who might feel cheated.  Right now, most of the NFTs are visual in nature, either images or video clips.   But, in the future, the definition could become much, much broader.  When there are NFTs that go into the would of sounds, maybe even smells, we’re going to have some pretty interesting legal ground to break.

REFERENCES

https://blockchain.news/news/yuga-labs-files-lawsuit-against-artist-producing-bayc-copycat-collection

https://www.theblock.co/linked/154206/yuga-labs-sues-artist-in-bored-ape-yacht-club-nft-case

https://decrypt.co/105871/yuga-labs-threatened-with-possible-class-action-lawsuit

https://futurism.com/the-byte/yuga-labs-lawsuit-copies-bored-apes

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

 

Comments (2)

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