Trial Lawyer Breaks Down Legal Considerations for NFTs and Trademark Law

Creating digital art via a non-fungible token (NFT) that closely reflects something created by a brand may not be enough to keep some creators from facing legal ramifications, said David Leichtman, a managing partner at law firm Leichtman Law PLLC.

Leichtman, a trial lawyer with over 20 years of experience, said on CoinDesk TV’s “First Mover” on Tuesday that under trademark law what a brand is protecting “is the value of the brand,” including its name or logo.

On Monday, Yuga Labs, the parent company of the Bored Ape Yacht Club NFT project, reached a settlement with developer and smart contract builder Thomas Lehman after the company filed a complaint focusing on Lehman’s role in coding Ryder Ripp's project "RR/BAYC.”

Ripps' project, considered to be a copycat, is a series of 10,000 NFTs that replicate the same names, features and traits as the Bored Ape Yacht Club’s NFTs.

A separate and ongoing court case filed in June by Yuga Labs alleging trademark infringement looks to getting “the cooperation of the defendant,” according to Leichtman. He said the lawsuit was filed to gather more evidence against Ripps. The pending case focuses on whether Ripps and Lehman purposely used Yuga Labs’ logos and Board Apes names to sell Ripps' products.

“The judge in that case determined that the works at issue were not artistic works, which might merit some different kinds of tests and trademark law than if it was just pure commerce,” Leichtman said.

In Yuga Labs’ case, he said, the company carefully crafted its trademark complaint so as to focus on the company’s name and the use of its logo, not the underlying ape art.

According to Leichtman, under copyright law someone is not entitled to copyright the underlying images if they’re created by artificial intelligence (AI).

The situation would be different if Ripps’ images “were just painted,” Leichtman said. He pointed out that NFTs can be “tradable like a stock or security,” but they operate under a different trading system than the stock market.

“So really what we have here [is] it’s sort of a digital right, but it’s not an intellectual property right,” he said. “I can trade the ownership right … but trading the ownership right … does not entitle me to sell a physical good, or to sell the copyright in the piece of art.”

That comparison could be made for the recent trademark battle between NFT artist Mason Rothschild and Hermès, which is close to ending after a years-long battle over Rothschild's “MetaBirkins” NFT project.

However, that case is different, Leichtman said, because Rothschild “didn't sell a physical good, nor did [he] sell a bag, but [he] did sell the image of the bag as an NFT.

“The question then becomes, since they're not exact copies of the Birkin bags and they're artistically derivative of the Birkin bags, what rights does Hermès have?”

Deliberations are still taking place, Leichtman said, and it may come down to “whether or not that relevant consuming audience for Hermès products would’ve been confused by the defendants’ work,” and whether Rothschild intended to mislead the public.

See also: Hermès vs. MetaBirkins: The NFT Case That Could Have Major Trademark and Artistic Consequences