Moonbirds Copyright Controversy Exposes Flaws in Crypto’s IP Obsession

It’s not much of a secret: When NFTs broke out as a coherent asset class in 2021, their value proposition was, chiefly, rampant speculation. Since then, NFT projects have spent untold millions attempting to pivot their brands towards more serious-sounding, sustainable futures; most opted to go all-in on the ephemeral, provocative concept of intellectual property, or IP.

It has never been resolved, however, what exactly IP means in such a context, nor to what extent NFT projects can bestow IP rights onto their holders. Those unanswered questions bubbled back to the surface this week, when Yuga Labs—the multi-billion dollar company behind Bored Ape Yacht Club—announced that it planned to bestow exclusive commercial rights onto holders of Moonbirds, an Ethereum NFT collection it acquired in February.

There was just one snag with the plan: In 2022, Moonbirds’ original creators filed the collection under Creative Commons 0 (CC0), an extremely firm legal tool that relinquished any copyright claims to Moonbirds NFT artwork, and released the pixelated owl characters into the public domain.

Moonbirds’ official statement on the matter, posted Monday, came across like an attempt to sidestep this reality. “If you’ve made stuff during the CC0 era—cool,” the company wrote. “But from now on, you’ll need to own a Moonbird to keep doing so.”

Twitter users immediately pushed back. Several, including copyright attorney Alfred Steiner, argued the company’s position was legally invalid—Moonbirds were in the public domain now, and nothing could put that toothpaste back in the tube.

It wasn’t long before Yuga appeared to adjust its position. Within hours of the initial announcement, the company’s co-founder and CEO, Greg “Garga” Solano, wrote that Moonbirds-related commercial rights would only be attached to new, 3D versions of the Moonbirds artwork, which would be given exclusively to current NFT holders.

Those commercial rights, Solano said, would be akin to those enjoyed by Bored Ape Yacht Club NFT holders. For years, Yuga has allowed BAYC holders to create and sell Bored Ape-themed endeavors like burger restaurants and canned water companies. The implication was that Moonbirds-themed chocolate bars and plush animals might be around the corner—but only current NFT holders would be allowed to create them.

So what’s the truth? Can anyone freely riff on the Moonbirds copyright until the end of time? Or does Yuga have the power to control who creates Moonbirds-themed goods?

According to Brian Frye, a law professor at the University of Kentucky specializing in NFTs and intellectual property, both statements can be true at the same time—a fact that exposes key issues with how IP is currently understood and discussed within crypto.

For Frye, it all comes down to the crucial difference between copyright and trademark. When Yuga says that Bored Ape or Moonbirds NFT holders have special commercial rights, the company is implying that those source from an individual NFT’s copyright.

Copyrights protect the content of a work, like the plot of a book or the unique characteristics of a painting. Yuga would therefore maintain that each individual Bored Ape or Moonbird possesses its own copyright, which a holder can wield to their own benefit.

But Frye—and other legal scholars including Alfred Steiner—do not believe that commercial experiments like a Bored Ape burger joint actually rely on copyright. Instead, Frye maintains, they’re leveraging the generalized Bored Ape brand, which falls under trademark law. To put it simply: People line up to eat a Bored Ape burger because its affiliated with the Bored Ape Yacht Club brand, not because it happens to depict Bored Ape #6184 specifically.

That distinction is a double-edged sword. In the case of the Moonbirds controversy, it means that Yuga likely can police who commercially leverages the Moonbirds brand. But it also means that the entire notion of individualized, copyright-based commercial rights controlled by NFT holders is somewhat fanciful.

In practice, Yuga is just saying that it will selectively choose not to sue current NFT holders for trademark infringement. But little would protect said holders if the company changed its mind.

The original Moonbirds filed under CC0, meanwhile, will remain in the public domain. But that CC0 distinction does not bestow any rights to the Moonbirds trademark. Any member of the public who tries to open up a Moonbirds ice cream shop in the near future will likely be in for a legal ride, should they get a stern call from Yuga’s attorneys.

Decrypt reached out to Yuga Labs multiple times regarding this story, but never received a response.

To Frye, the Moonbirds episode reveals how much of a buzzword—and supposed value-add—that IP has become for NFT brands, despite the lack of legal clarity surrounding the topic.

“There’s a certain subset of [Yuga’s] customers who are really fixated on the idea that IP is important,” Frye told Decrypt. “They don’t really even know what it means, but it’s talismanic: ‘IP! I want to own the IP, whatever that is.’”

Indeed, in the hours following Yuga’s announcement about Moonbirds this week, the collection jumped almost 30% in floor price—or the cost of the cheapest-listed NFT on a marketplace—according to NFT Price Floor.

But that short-term victory could be a pyrrhic one. Ever since the 2022 crypto winter cratered NFT prices, Yuga has struggled to find a way back to the cultural dominance it once enjoyed. It once cost nearly $430,000 to join the BAYC at the project’s April 2022 peak; now it takes just $42,000.

Last week, while announcing that Yuga had just undergone a wave of layoffs, CEO Greg Solano said the company had “lost its way.”

Getting more aggressive about policing the Moonbirds trademark—which it appears this week’s announcement really boils down to—could temporarily boost holders’ perception of Yuga’s value. It may have already. But in the long run, Frye says, that sort of self-imposed limiting of who can engage with the Moonbirds brand might backfire in crypto—where what’s cool is everything.

“The one thing they have going for them is some form of goodwill with their customers,” Frye said. “And to now come back and be like, ‘We’re going to try to claw back intellectual property rights that are largely illusory anyway,’ just seems like an incredible ‘L’ for them.”

Edited by Andrew Hayward