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Intangible or Virtual Goods Are Still Goods Under Lanham Act

Posted by James Juo | Apr 26, 2023 | 0 Comments

Non-fungible tokens (“NFTs”) are intangible but are eligible for trademark protection. Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), does not require a different result.

The Central District of California in Yuga Labs Inc. v. Ripps, No. 2:22-cv-04355 (C.D. Cal. Apr. 21, 2023) recently agreed with the Southern District of New York's decision in Hermes International v. Rothschild, 590 F. Supp. 3d 647, 655 (S.D.N.Y. 2022), that “neither Dastar nor its progeny require that a defendant's goods be tangible for Lanham Act liability to attach.” See also Shepard v. Eur. Pressphoto Agency, 291 F. Supp. 3d 465, 469 (S.D.N.Y. 2017) (“Dastar addresses the interplay between copyright — which protects authors' rights in their creations — and unfair competition laws — which protect consumers from, inter alia, confusion as to the origin of goods.”); SlepTone Entertainment Corporation v. Sellis Enterprises, Inc., 87 F. Supp. 3d 897 (N.D. Ill. 2015) (rejecting the bar owner defendant's argument that Dastar prevented a producer of karaoke accompaniment tracks from maintaining a Lanham Act claim because the defendant's “argument ignores a significant portion of [the plaintiff's] complaint – it claims that karaoke operators engage in media and format shifting, creating tracks on both a new hard medium and in a completely new format . . . The media and format shifting operates as an independent creation event, placing a new ‘good' in the marketplace”).

“Individuals do not purchase NFTs to own a ‘digital deed' divorced from any other asset: they buy them precisely so that they can exclusively own the content associated with the NFT.” Hermes Int'l v. Rothschild, 2023 WL 1458126 (S.D.N.Y. Feb. 2, 2023) (“Thus, the title “MetaBirkins” should be understood to refer to both the NFT and the digital image with which it is associated. Indeed, a reasonable inference from the admissible evidence presented on these motions is that the relevant consumers did not distinguish the NFTs offered by Mr. Rothschild from the underlying MetaBirkins images associated with the NFTs and, instead, tended to use the term “MetaBirkins NFTs” to refer to both”).

          In addition, the Court concludes that although NFTs are virtual goods, they are, in fact, goods for purposes of the Lanham Act. See Andrea McCollum, Treating Non-Fungible Tokens as Digital Goods Under the Lanham Act, 63 IDEA: L. Rev. Franklin Pierce Center for Intell. Prop. 415 (2023) (“While virtual goods are intangible items that exist in a digital space, they are also items that have specific uses and values that are dependent on the consumer”).

In Yuga Labs, the Defendants, appropriation artist Ryder Ripps and his business partner Jeremy Cahen, were selling their own version of Yuga Labs's popular NFT collection, Bored Ape Yacht Club or BAYC. Lanham Act Section 43(a) applies to intangible or virtual goods, and the Court concluded that Defendants' NFT collection was likely to cause confusion among consumers based on their identical look and sales in the same market as the original collection.

In discussing the Rodgers test and the First Amendment, the Central District of California also found that Defendants' RR/BAYC NFTs “do not express an idea or point of view, but, instead, merely point to the same online digital images associated with the BAYC collection,” and are “no more artistic than the sale of a counterfeit handbag.”

The Court concluded that the trademark for Yuga's NFTs was infringed and Defendants were not protected by the First Amendment.

The attorneys at Thomas P. Howard, LLC litigate trademark cases nationwide including in Colorado.

About the Author

James Juo

James Juo is an experienced intellectual property attorney. He has successfully litigated various intellectual property disputes involving patents, trademarks, copyrights, and trade secrets. He also has counseled clients on the scope and validity of patent and trademark rights.


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