Make Memes, Not Lawsuits: The Case for Due Diligence and Honoring IP Rights

Internet memes have become a fixture in Web3 culture, and memecoins have emerged as a distinct asset class, thriving on excitement, hype, and community. Animal-inspired memecoins, such as PEPE, SHIB, and DOGE, have captivated the crypto market and the hearts of fans and traders. Driven by online trends and social sentiment, these tokens have soared to billion-dollar market caps. 

Why IP matters: The case of Pepe the Frog

Artist Phillip Banks, who created the “Just a Chill Guy” meme, is enforcing copyright to protect his character in a sea of unauthorized memecoins and merchandise. The case serves as a reminder that ownership of a meme can and often will be asserted. Memecoins may start as jokes, but they have the potential to turn into assets and, eventually, brands. Ownership becomes critical when real money, a community, and media are involved, raising issues such as who created the art, who owns the character, and who has the right to use it. Pepe the Frog, created by Matt Furie (Boy’s Club comics), has been among the highlights of meme mania. The beloved frog became associated with certain political ideologies, attracting attention from extremist groups who appropriated the character for their aims. Furie filed a lawsuit and won a $15,000 settlement against Alex Jones and his website, Infowars, over the use of the frog in far-right imagery.

Furie also killed off the character in Boy’s Club, but it has lived on regardless, most notably in the cryptocurrency Pepe Coin, which launched in April 2023 and reached a market cap of $1.6 billion in less than a month. It achieved this feat without an airdrop, presale, or initial coin offering. Its anonymous creators do not claim any association with Furie or his comics, and he hasn’t asserted any reciprocal claims, either. The lack of IP-related disputes and Pepe’s continued presence among the top 30 cryptocurrencies by market capitalization have led many to consider Pepe, and memecoins in general, as a viable investment.

Memecoins’ speculative nature as an asset class attracts some negativity, but they remain a feasible way to onboard the general public to crypto usage. The technology inspires curiosity, even among those who ultimately lose money. Steering clear of memecoins is not necessary. As long as one is aware of the risks involved, investing in memecoins can be a generally positive experience.

Due diligence is critical 

Choosing assets with clear origins and ownership structure is paramount because the losses ensuing from legal disputes over IP rights can be insurmountable, sometimes causing the whole project to fail and holders to end up with worthless tokens. This is what happened with the GrumpyCat token. Grumpy Cat Limited, which holds the rights to Grumpy Cat images, issued a cease-and-desist letter to an X user ordering them to refrain from promoting the token, as it allegedly violated their intellectual property rights. According to the letter, Grumpy Cat Limited did not consent to the use of its trademarks in relation to the memecoin, which subsequently declined in value and is currently worth $0.00001, according to CoinMarketCap data.

The ZEUS token, which launched on May 21, is a notable and rare example of a legitimate meme project that has carried out due diligence. Its issuers hold full IP rights to Zeus the Dog, a character also created by Matt Furie. The original artist, ND Haus, is actively involved in the project, as is Jon “Jagged” Eyrick, who previously held the IP rights. The creators of ZEUS secured the original NFT to prove ownership. Despite efforts to be legally compliant, a fake X account was impersonating the project. 

Zeus CC8 INC now has trademark protection of the Zeus name and all visuals, and “Jagged” officially transferred all IP rights to the platform. The trademark protection invalidates any future claims, and Zeus is free to expand across markets with toy lines, merchandise, animated content, etc. “Jagged” is followed by Matt Furie, which signals the credibility of the meme narrative.

Making sense of the legal landscape

Meme ownership remains a gray area despite the legal precedents for asserting it, with Milady NFTs being a prime example. The subsequent memecoin project was not associated with the original meme or the NFT artist, creating confusion among holders and supporters and ultimately leading the community to question the project’s validity.

Further complications arise because memes often combine original content with copyrighted material. Pressing questions remain unanswered, such as who to sue if the project is anonymous and how to enforce a trademark against a community-run project. Memecoin artists should get the green light from the original creator unless they don’t mind facing a cease-and-desist order.

Still, it’s a fact that people photoshop copyrighted images to create memes, and no action is taken against them. If they aren’t making these images for commercial purposes, the rightsholder might decide that taking infringement action wouldn’t be cost-effective. It’s a different story when a “creator” moves to commercialize their work and has reproduced a substantial part of the original work in the form of a meme. If someone’s face were lifted from a photo and added to a poster while retaining the figures, layout, and background, this would arguably constitute an infringement of both the poster and the original photograph.

The original creators of a copyrighted work are also likely to object to changes, additions, or deletions, considering them “derogatory” treatment of their work. Sharing a meme on social media has a snowball effect, where the original user loses control over how and where the meme is used if it has been copied and shared from other accounts repeatedly. Infringing content continues to exist even after the user deletes the post. A fraudulent project can damage a memecoin’s value and the project’s reputation.

To enforce a trademark, one must register the meme’s name, phrase, or logo as one and be able to prove someone else tried to use it commercially. The next step is sending cease-and-desist letters to businesses making undue profit from the meme. One proceeds to litigate if high-stakes or repeat infringement occurs.

The future of memes in media and marketing

Younger people gravitate towards meme-relatable, humorous, shareable content, ushering in a new era where entertainment meets branding. Memes have become cultural artifacts that evolve with time. A new wave of projects is emerging that treats memes as IP-rich storytelling assets, and memecoins are transitioning from hype-based phenomena to narrative brands. In the future, brands will increasingly leverage AI-driven tools to analyze trending memes and create variations depending on their marketing goals.

Collaborations between meme creators and influencers are expected to increase. Brands may work directly with popular meme pages to develop genuine and engaging content, further blurring the lines between entertainment, marketing, and advertising. Investors will continue seeking legal clarity in parallel to these processes.

How can meme projects ensure they’re legally sound? It depends on the type of meme. There are two types: the creator (‘memer’) uses images or videos from original content, or they create a meme with images or videos whose underlying copyright they hold. In the first case, the copyright would lie with the original creator. If the image is taken from a comic book, movie, or TV show, the author or producer holds IP rights. If the comic book author or film producer can prove that the meme infringes upon their rights, they can try to stop it from being shared. In the second case, the meme does not infringe on existing IP rights, and sharing or reproducing it without the memer’s prior approval may be considered infringement.  

Successful meme projects combine authenticity, creativity, and IP strategy as the market matures. The cases of Pepe, Milady, and Zeus send a clear message: due diligence is paramount. Few things are as painful as a lucrative meme project tanking due to IP issues.