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Seth Green’s Stolen ‘Bored Ape’ Muddles NFT Legal Ownership

June 8, 2022, 9:30 AM

The theft of actor and producer Seth Green’s “Bored Ape” non-fungible token has prompted debate around copyright and ownership of the popular digital assets and their unusual licensing structure.

Bored Ape Yacht Club takes a novel approach to NFT sales, giving the purchaser of each Bored Ape NFT licenses to use the digital primate art in various capacities, including developing and exploiting the properties commercially, according to the online collection’s terms and conditions. Green had planned to showcase his Bored Ape #8398, named Fred Simian, on an upcoming television show.

“That’s what was kind of amazing about the Bored Ape Yacht Club is they gave these very valuable assets. They gave the community the rights to go and make stuff and to license it for various purposes, wherever they wanted,” said Jeremy Goldman, an attorney at Frankfurt Kurnit Klein & Selz PC.

Tying the licensing rights to the NFT itself raises a number of new questions when an NFT is stolen, adding to the growing list of to-be-answered legal concerns around NFTs and other crypto assets and leaving attorneys wondering what will happen to Green’s show and whether he still has the rights to create it after losing possession of his Bored Ape. The different treatment of stolen and subsequently purchased goods from state to state further complicates things.

According to Green, Fred Simian’s theft halted production of “White Horse Tavern,” a television show set to star characters from the actor’s NFT collection. “I bought that ape in July 2021 and have spent the last several months developing and exploiting the IP to make it into the star of this show,” Green said on stage at the VeeCon NFT conference. “And then days before he’s set to make his world debut, he’s literally kidnapped.”

NFT TV Rights

Last month, Green took to Twitter to confirm the kidnapping of Fred Simian after a phishing attack by an anonymous scammer. The ape was subsequently purchased, presumably in good faith, by “DarkWing84.”

The Bored Ape Yacht Club terms of service grant a commercial license to exploit the copyright of each Bored Ape to the owner of the relevant NFT, and appear to connect ownership with possession. The terms point to the Ethereum Network’s blockchain, a ledger recording every transaction involving the NFTs and other assets, as dictating ownership, though Yuga Labs Inc.—the creators of the Bored Apes—states only that it can’t “seize, freeze, or otherwise modify” who owns any Ape. That ambiguity has pushed Green to pause production on “White Horse Tavern.”

“If there is an encumbrance on the intellectual property, or the threat of an encumbrance or the threat of litigation around it, production companies will pull back,” said Julie MacDonell, the CEO of Haloo, a startup that builds tools for protecting IP online.

Whether any sublicensing contracts Green entered into regarding his pilfered Ape could still be valid is an open question, with attorneys coming down on both sides.

“Let’s say it’s not even stolen, Seth sells the ape to somebody else,” said Goldman, posing a hypothetical. “What happens to that sublicense? The Yuga Labs license is silent as to what happens in that situation.”

“There’s kind of no way to say that when Seth sells that or it gets stolen from him, does the next person take it subject to whatever licenses had been entered before,” Goldman said.

The show’s producers are likely nervous to continue given the unsettled licensing questions, attorneys said.

“I think they’re going to be very reluctant to go forward until they have some clarity about who has the ability to license these things,” said Mark McKenna, an intellectual property and privacy professor at the UCLA School of Law.

Legal Recourse

On May 30, Green tweeted that he and DarkWing84 connected and will be “working together to prosecute the original thieves & hopefully make this space safer.”

If Green can’t reacquire Fred Simian or the unambiguous commercial rights amicably, however, he may have recourse in the courts, almost none of which have weighed in on ownership of blockchain assets.

Akiva Cohen, a partner at Kamerman, Uncyk, Soniker & Klein PC, believes that Green may be able to prove his ownership of the NFT under New York law.

OpenSea—the digital marketplace where the stolen Bored Ape was later sold—makes all transactions on its platform subject to New York law, Cohen said. In that state, a thief never obtains ownership, “and because the thief didn’t get good title, you can’t sell more rights than you actually have,” he said.

According to Cohen, what exists now is a blockchain transaction record which accurately shows who has possession of the NFT—but no longer accurately reflects who owns it.

“If somebody walked into my house and stole a painting off the wall, and took it back to their house, they would have possession of it, but I would own it. And if they sold it to a friend who had no idea it was stolen, that friend would have possession of it. But I would still own it. Because ownership and possession aren’t necessarily coextensive,” he said.

“When things happen in the Crypto world or in the NFT world, you know, people think, oh, it’s new, it’s different. The rules don’t apply,” Cohen said. “But you’re working within the same fundamental framework as everything else.

“The baseline rules still apply, unless and until there’s a contract that says we’re opting out of that.”

MacDonell views trademark law as best positioned within the current legal system to protect NFT owners from similar attacks going forward.

“We really strongly believe in trademark as the legacy or the existing legal framework that appears to us to best apply to managing fraud, counterfeit, and these kind of phishing attacks in the NFT space,” she said, though it would require Yuga Labs to act.

MacDonell said that clone sites use domain names almost indistinguishable from the real sites, which constitutes trademark infringement under the law. Yuga Labs, which has over 30 trademarks for its brand, could pursue a legal avenue against fraudulent sites.

Yuga Labs didn’t immediately respond to a request for comment.

MacDonell said that though it is unclear how Green will proceed, she hopes that he will take legal action.

“I think that he should go all the way and that there’s an opportunity for meaningful precedent here.”

To contact the reporter on this story: Riddhi Setty in Washington at rsetty@bloombergindustry.com

To contact the editors responsible for this story: Adam M. Taylor at ataylor@bloombergindustry.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com