Welcome to our monthly NFT litigation roundup.
Non-Fungible Tokens (NFTs) are the topic of much debate and interest and the questions, legal issues and disputes around them continue to soar.
When faced with such a high growth phenomenon, the law can take time to catch up. Boodle Hatfield is closely monitoring the developments and each month will bring you a roundup of the key NFT disputes to be aware of.
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Lavinia Deborah Osbourne v (1) Persons Unknown (2) Ozone Networks Inc trading as OpenSea
The background details of this case are covered by our April roundup and can be found here.
By way of reminder, this case concerns two NFTs (artworks from the Boss Beauties series), which were removed from Ms Osbourne's digital wallet in January 2022. In Court orders made in March 2022, a proprietary freezing injunction was granted in respect of the NFTs until the end of the Court proceedings, and a disclosure order was made against OpenSea to assist with identifying the defendant.
The Judgment has now been handed down. Key takeaways include the following:
- NFTs as property: Whilst the Judge did state that there will likely be issues in terms of NFTs constituting actual property in terms of the law, it was confirmed that "there is at least a realistically arguable case that such tokens are to be treated as property as a matter of English law".
- Where are crypto assets 'located': The Judge decided that the applicant was to be treated as having had the NFTs in her possession in England. This follows previous case law which treats crypto assets as located at the place where the person who owns them is domiciled.
- Damages not an adequate remedy: The Judge noted that the Boss Beauties "are assets which have a particular, personal and unique value to the applicant which extends beyond their mere Fiat currency value. The Court will readily grant injunctions to protect assets in such circumstances." It was also noted that since there was no information about 'persons unknown', there was no confidence they would have the means to meet a damages claim.
- Service out of the jurisdiction: Previous case law was cited which established the principle that property obtained by fraud (in a manner similar to the one at hand) is impressed with a constructive trust once it comes into the hands of those responsible for removing the assets. The Judge was therefore satisfied that 'Gateway 15' (which concerns claims relating to trusts) was satisfied. "The applicant may serve a claim form out of the jurisdiction with the permission of the Court under rule 6.36 where…a claim is made against the defendant as a constructive trustee, or trustee of a resulting trust where the claim arises out of acts committed or events occurring within this jurisdiction or relates to assets within the jurisdiction…As far as that is concerned, as I have already explained earlier in this judgment, there is at least a realistically arguable case for saying that the assets removed from the applicant’s account in the way I have described are to be treated as located in England, because England is where the applicant is domiciled"
Yuga Labs, Inc. v. Ryder Ripps, et al
- The Bored Ape creators (Yuga Labs) have sued the artist Ryder Ripps, who has been minting "replica" Bored Ape NFTs "as a protest against and parody of Bored Ape Yacht Club". Ripps is said to have made more than $5m from the project, and Yuga allege he has de-valued the Bored Ape brand.
- Ripps is being sued for false advertising, cybersquatting, trademark infringement and unfair competition (among other claims). Yuga claim that Ripps' actions amount to "elementary level trademark infringement: [the defendants] are selling the same or related products, in the same place, under the same marks.”
- Ripps has responded on Twitter stating " “The lawsuit grossly mischaracterizes the RR/BAYC project—people who reserved an RR/BAYC NFT (Non Fungible Token) understood that their NFT was being minted as a protest against and parody of BAYC,” he wrote, “and no one was under the impression that the RR/BAYC NFTs were substitutes for BAYC NFTs or would grant them access to Yuga’s club. They explicitly acknowledged a disclaimer when they were purchased.”
Jay-Z / Roc-A-Fella Records v Damon Dash
The background details of this case are covered by our March and May roundups and can be found here.
- The parties have now settled the Reasonable Doubt NFT lawsuit.
- In papers filed on 13 June, it was stated that Dash could sell his one third share in Roc-A-Fella Records but could not "in any way dispose of any property interest in Reasonable Doubt". The agreement reasserts that Roc-A-Fella Records "owns all the rights" to Reasonable Doubt, including copyright, and adds that "no shareholder or member of Roc-A-Fella Records holds a direct ownership interest in Reasonable Doubt".
- The agreement comes almost one year after Jay-Z / Roc-A-Fella Records sued Dash, one of the label's co-founders, for allegedly trying to mint and sell the copyright of Reasonable Doubt as an NFT. Dash disputed the claim and insisted that he wasn’t trying to sell an NFT of Reasonable Doubt, but rather his stake in Roc-A-Fella Records.
- The lawyer for Dash commented that the "meritless lawsuit" has ended as it began with "each party in the same position as they were prior to the commencement of this litigation".
MFT (Music Fungible Token) company seeks to defeat Lil Yachty 's claim on jurisdiction grounds
- Earlier this year, Lil Yachty, an American rapper, filed a lawsuit against 'MFT' seller Opulous, for "maliciously" using his likeness and name without his consent.
- The dispute arose once Opulous announced that it was launching a line of music NFTs and delivering "unmissable NFT drops… led by world-famous artists including Lil Yachty". The NFT collection would give buyers access to new music from the rapper and prominently featured images of him and press interviews of his about the project. Lil Yachty claims that he spoke to the company numerous times in 2021 but that "no agreement or deal terms" were reached.
- He argued that the advertisements were "likely to cause confusion, and have caused actual confusion, in the minds of the consuming public as to an association [between himself and the defendants]". He accused Opulous of trademark infringement, unfair competition and right of publicity violations. He claimed that this had caused and will continue to cause "great and irreparable injury and damage to [his] business and goodwill".
- In response, Opulous filed a statement that "uses of Lil Yachty's name and likeness were all authorised by Lil Yachty and his representatives". The formal response has been filed by Ditto Music, the sister company of Opulous, and Lee Parsons, the founder. Both were also defendants on the basis that they had also posted about the NFT launch on their social media channels. The two defendants have requested that the Court dismiss the complaint on the basis of jurisdiction.
- However, in response, the legal representatives of Lil Yachty have commented that "the motion filed by the defendants in this case fails to address the real issue" - "we look forward to addressing these claims in court and have no further comment at this time".
NFT platform's dispute with art museum over NFTs based on "fake works"
- A Chinese NFT trading platform, Huanhe, is in a copyright dispute with The Peon Art Museum, a memoria art museum built at the former home of Xu Beihong, a Chinese painter also known as Ju Péon.
- Huanhe published a series of digital ink horse collections based on artworks by the Chinese painter. However, the museum claims that it has not authorised Huanhe to distribute the digital collections, stating "Some digital platforms sell related digital collections in the name of Mr. Xu Beihong. These digital collections, however, are based on fake works or cannot provide evidence to originality. Some even have nothing to do with Mr. Xu at all. These mixed collections seriously damage the rights and interests of consumers, and infringe on Mr. Xu’s right of reputation and identity and various intellectual property rights obtained by his descendants according to law.”
We continue to monitor this evolving market and the legal issues that arise.
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