Months after a US court handed Yuga Labs a hefty trademark-based legal victory that thrilled NFT holders, questions are once again surrounding the precedent it set — and what it means for current holders and creators of top crypto assets. collectibles.
Another example of Yuga Labs, the Miami-based Web3 company that owns blue-chip NFT collections CryptoPunks and Bored Ape Yacht Club (BAYC), seeking to enforce its intellectual property rights, has caught the attention of the industry.
Tom Lehman, the creator of the Ethscriptions Protocol, which provides a mechanism to attach image files on-chain, tweeted last week that he had removed Ethereum Punk images from the protocol’s website and was outright “deleting” the Ethereum Punks website .
Lehman, who goes by MiddleMarch on Twitter and has not responded to a request for comment, said he did so “at the request of Yuga Labs.”
Brian Frye, a professor at the University of Kentucky College of Law who has closely followed the issue, said it is “very important to distinguish between specific copyright and trademark when it comes to the copyright issues in the space.”
The latter issues, in particular, seem to show little sign of stopping.
A series of tweets on July 15 from the Ethereum Punks Collection said that Yuga Labs had taken “recent DMCA actions,” which the collection said were “arguably indicative of a corporate mindset and directly challenged the fundamental ideals of the PUNK community.”
PUNK’s spirit is primarily rooted in values such as non-conformity, anti-authoritarianism, anti-corporatism, a do-it-yourself ethic, resistance to consumerism and corporate greed, direct action, and an unwavering commitment to never “sell out” to be.
— Ethereum Punks (@ethscribedpunks) July 15, 2023
The tweets did not specify the DMCA enforcement actions in question, instead framing Yuga Labs’ actions as “corporate greed.” A spokesperson for the company did not respond to a request for comment.
On the copyright front, “nothing about owning an NFT makes you any sort of copyright owner,” Frye said. “Trademark is a value associated with NFT projects… the real value is ownership of the token.”
Ethscriptions, which was hacked last week, billed itself as a decentralized protocol (not its own blockchain or layer-2) based on the Ethereum ecosystem. About 123 wallet addresses are said to have lost 202 ethscriptions in the hack.
Jessica Neer McDonald, an attorney specializing in intellectual property issues, told Blockworks that discretion can generally vary widely when it comes to terms of use, depending on the publisher of the NFT collection.
“It’s so specific to the collection,” McDonald told Blockworks. “Each collection has the ability – traditionally at least – to provide licenses and permissions to use certain artwork associated with a particular NFT, and that permission can really vary from just giving you the right to personal use instead of expanding it to use it for commercial reasons.”
Yuga Labs NFT case against Ripps is still pending
Much of the current uncertainty stems from a lawsuit filed by Yuga Labs against Ryder Ripps and Jeremy Cahen, the creators of “Ryder Ripps Bored Ape Yacht Club,” a satirical NFT collection that challenges Bored Ape Yacht Club.
A judge overseeing the US lawsuit, which revolves around the nearly mirror-image NFTs, has issued an injunction against the collection, ruling in favor of Yuga Labs and ordering the defendants to pay monetary damages.
It wasn’t so much about copyrights then, which would be linked to individual artworks from each NFT, but about trademarks.
“I think it was smart for Yuga’s strategy to focus on the trademarks and not get caught up in the copyright side,” McDonald said. “There are still many unanswered questions related to copyright: what does it mean to get an NFT? What do you get when you buy an NFT?”
While copyrights, in an example from Bored Ape Yacht Club, would refer to rights to the image depicted in a particular NFT, trademarks protect the likeness and defining characteristics of the collection more broadly – which experts say is what Yuga Labs really has. tried to lock down.
BAYC holders have extensive commercialization rights, including merchandise and side media projects. It’s unclear what would happen to those efforts if an NFT is sold.
“If you think about it – insofar as you think copyright can protect the individual images in the first place – it’s not really clear to me how owning the copyright to one of 1,000 images, well, I don’t know how valuable that is .” said Frye.
‘Copyright does not protect URLs’
Bored Ape Yacht Club holders have extensive rights to launch commercialized efforts around their NFTs – as long as they still own them. Previous interpretations have pointed out that owners have a right to monetize their monkeys, including by rolling out their own merchandising.
And initially there were no monetization limits, meaning owners should have an unrestricted runway with their side-hustle projects. Yuga Labs has taken a stand against what the company viewed as a rip-off or competing projects — not so much how the NFT owners use their own digital properties.
From a copyright perspective, according to Frye of the University of Kentucky, exchanging an enrolled NFT onchain, or even simply storing one in a wallet, “doesn’t really raise” any issues, which is one of the reasons why violations of copyright have not been a major legal focus in these types of disputes.
That’s because “copyright doesn’t protect the URL,” and while it might be “infringing to some degree to host the image on a file server,” what is “written on the blockchain is not and cannot be infringing.”
The sentiment, according to Frye, applies to most such digital collectibles, such as Ordinals, which use three to four megabytes of data to add inscriptions. NFTs that go significantly above those limits or make substantial changes to the original file can shift that calculation.
CryptoPunks’ terms of service point out that NFT buyers own the NFT themselves as long as it’s in their wallets, but Yuga Labs retains ownership of the intellectual property in play, which the company says is “licensed” to buyers is provided.
The terms of service hint at the possibility of “derivative” works, which users can create (and own the new intellectual property), but there are restrictions around ownership and other thorny legalities at work.