U.S. Appeals Court Overturns Yuga Labs' NFT Trademark Verdict, Sets Precedent for NFTs as Goods

A U.S. appeals court has reversed a $9 million verdict awarded to Yuga Labs in its trademark dispute with artist Ryder Ripps and his business partner Jeremy Cahen, reshaping the legal framework for non-fungible tokens (NFTs). The Ninth Circuit Court of Appeals ruled that Yuga Labs failed to conclusively demonstrate that Ripps’ NFT collection—entitled “Ryder Ripps Bored Ape Yacht Club”—caused consumer confusion, a critical threshold for trademark infringement claims. The case has been sent back to a California federal court for a trial on allegations of trademark infringement and cybersquatting [1].

The lawsuit, initiated in 2022, centered on whether Ripps’ NFTs constituted a direct copy of Yuga’s flagship Bored Ape Yacht Club collection. Yuga argued that the similarity in naming and design would mislead consumers, while Ripps defended his work as a satirical critique of “racist imagery” allegedly present in Yuga’s NFTs. The appeals court emphasized that the original trial court had assumed consumer confusion without sufficient evidence, a standard the panel deemed unmet [2].

Despite overturning the monetary award, the ruling established a landmark precedent: NFTs are recognized as “goods” under U.S. trademark law. The court affirmed that Yuga’s first commercial use of the Bored Ape Yacht Club marks granted it trademark priority, a decision Yuga co-founder Greg Solano described as a victory for NFT holders seeking intellectual property protection. This classification could enable NFT collections to pursue legal action against similar projects for trademark violations [3].

The panel rejected Ripps’ argument that his work qualified as protected “expressive work” under the First Amendment. However, it clarified that the use of Yuga’s marks did not constitute “nominative fair use,” underscoring the tension between artistic expression and trademark rights in digital art. This distinction highlights the complexity of applying traditional intellectual property laws to digital assets, particularly in a rapidly evolving market [4].

The case now returns to the district court, where a trial will determine whether Ripps’ NFTs infringe on Yuga’s trademarks. Yuga has pledged to continue its legal pursuit, while Ripps views the decision as a win for artists navigating creative boundaries. The outcome underscores the nascent state of NFT-related litigation, where courts must reconcile traditional legal frameworks with the unique challenges of digital assets.

The ruling has broader implications for the NFT industry. By classifying NFTs as “goods,” the court has opened the door for similar trademark disputes among NFT collections. At the same time, the emphasis on consumer confusion as a legal standard may encourage clearer differentiation in naming and design practices within the sector. As the trial proceeds, stakeholders will closely monitor how the court balances trademark protection with artistic freedom in this emerging market.

Source:

[1] [Cointelegraph] [https://cointelegraph.com/news/appeals-court-overturns-yuga-labs-win-ryder-ripps]

[2] [Cointelegraph] [https://cointelegraph.com/news/appeals-court-overturns-yuga-labs-win-ryder-ripps]

[3] [Cointelegraph] [https://cointelegraph.com/news/appeals-court-overturns-yuga-labs-win-ryder-ripps]

[4] [Cointelegraph] [https://cointelegraph.com/news/appeals-court-overturns-yuga-labs-win-ryder-ripps]