A developer of a controversial NFT project spearheaded by Ryder Ripps has settled with Yuga Labs.

Thomas Lehman, the developer responsible for generating new NFTs using URLs embedded in Bored Ape Yacht Club smart contracts, said in a statement following the settlement that he rejects claims made by Ripps’ RR/BAYC.

“I am happy to have resolved the Yuga Labs, Inc. v. Lehman trademark lawsuit,” Lehman said in the statement. “It was never my intention to harm Yuga Labs’s brand. I reject all disparaging statements about Yuga Labs and its founders and appreciate their positive contributions to the NFT space.”

Yuga followed up with a statement of their own.

“Yuga Labs believes that creators, especially those in the nascent web3 space, must be able to rely on the law to protect their work against IP theft. Today, Yuga Labs reached a settlement with Thomas Lehman, developer for RR/BAYC. We are pleased that Mr. Lehman acknowledged his role in assisting former cohorts, Ryder Ripps and Jeremy Cahen, to infringe on Yuga Labs’ trademarks in developing, marketing, and selling counterfeit NFTs. Yuga Labs looks forward to holding Mr. Ripps and Mr. Cahen responsible for their infringement backed by a campaign of vicious and baseless lies and appreciates Mr. Lehman’s rejection of their actions.”

The settlement is adjacent to an ongoing case Yuga Labs brought against artist Ryder Ripps and Jeremy Cahen in June 2022, which stems from a collection of 9,500 copycat NFTs they sold in January 2022, netting them a total of $1.6 million USD, according to court filings.

CryptoSlate has reached out to Ryder Ripps about Lehman’s settlement but has not received a response.

Yuga Labs claims Ripps used several identical digital art images of their original BAYC collection, thereby infringing Yuga Lab’s rightful trademarks to promote an alleged scam to mislead consumers, harass Yuga, and enrich themselves.

For his part, Ripps maintains his action was part of a wider conceptual art practice that involves the use of what is known as “appropriation,” think Marcel Duchamp’s urinal, and claims that it is, therefore, a form of protectable artistic expression.

In October 2022, Ripps’ lawyers motioned the court to dismiss the BAYC trademark lawsuit on the grounds that RR/BAYC was protected free speech, relying on the precedent set by a previous case, Rogers v. Grimaldi, adding it is entitled to nominative fair use protection, a motion the court denied last December.

In the motion that was denied, Ripps’ defense relied on what is known as the “Rogers Test,” a legal standard in the United States that is used to determine the validity of a trademark infringement claim in relation to an expressive work, such as a movie, book, or song. The test requires that the allegedly infringing use be related to the artistic expression at issue and be an integral part of the expressive work.

The US District Court for the Central District of California made a decision regarding the motion to dismiss by determining that the defendants did not meet the standards set forth in the Rogers test. The Ninth Circuit, which the court operates under, requires that for a case to proceed under the Rogers test, there must be a clear connection between the allegedly infringing use and the “artistic expression” that is the subject of the lawsuit. In other words, the use must be an integral part of the expressive work. The court found that the defendants failed to demonstrate this connection and therefore did not meet the necessary threshold to avoid dismissal.

In disagreeing with Ripps’ motion to dismiss the case using the Rogers test, the court said that the main issue set to be solved at trial was the defendants’ NFT sale and that whether or not an NFT is an expressive work of art meriting First Amendment protection versus a solely commercial activity will now likely be up for a jury trial to determine.

Other important NFT trials to look out for in 2023

It’s important to note that the California federal court’s decision in Yuga Labs contrasts with another important case playing out in the wild world of NFTs. That being the Hermes v. Rothschild case, where last month, a New York court declined to resolve a motion to dismiss the matter of whether the “MetaBirkin” NFTs created by Mason Rothschild satisfy the standards of the Rogers test.

In that case, Rothschild is arguing that his NFTs — based on images of the luxury goods maker Hermes famous Birkin Bag — should be considered original artworks, not unlike Andy Warhol’s silkscreens of Campbell’s soup cans, which fall under the First Amendment protection.

The Southern District of New York (SDNY) court ruled that Rothschild’s use of the name “MetaBirkin” was misleading to the public and, therefore, still considered actionable under the Lanham Act.

According to Brian Frye, a law professor at the University of Kentucky, “many judges aren’t very sophisticated about the internet and especially about new phenomena like web3 and NFTs,” adding, “it’s unsurprising that the court was reluctant to make a bold move and instead punted to trial.”

While in another case, Nike v. StockX, which started on Jan. 30,  the sneaker reselling platform StockX is being sued by Nike for integrating NFTs linked to the physical shoes it resells. StockX argues that it uses the NFTs solely as a way to vet authenticity and provide buyers with a surety that the product they’re getting is real.

All three trials, Nike v. StockX, Hermes v. MetaBirkin and Yuga Labs v. Ryder Ripps are scheduled for the docket in 2023.

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