NFTs Get Trademark Protection Under Lanham Act, But Yuga Labs Must Prove Consumer Confusion

In a landmark decision for the NFT industry, the Ninth Circuit Court of Appeals ruled on July 23 that non-fungible tokens (NFTs) qualify as “goods” under the Lanham Act, making them eligible for trademark protection. The court emphasized that NFTs are sold as commercial products in dedicated marketplaces and are therefore not excluded from trademark coverage. This sets a critical legal precedent affirming that digital assets like NFTs fall within the scope of U.S. trademark law.

The ruling comes amid a long-running legal battle between Yuga Labs, the creators of the Bored Ape Yacht Club (BAYC), and artists Ryder Ripps and Jeremy Cahen, who launched a nearly identical NFT collection called “Ryder Ripps Bored Ape Yacht Club (RR/BAYC).”

The case began in June 2022, when Yuga Labs sued Ripps and Cahen, alleging that their RR/BAYC collection was a copycat project intended to damage the BAYC brand. Ripps, in turn, defended the project as conceptual art. As he put it, "RR/BAYC is an expressive conceptual artwork illuminating truths about YugaLabs and establishing that you can not copy an NFT. Nothing about this ruling can or will change those objective facts." The RR/BAYC NFTs briefly topped OpenSea’s 24-hour trading volume chart in June 2022 before being delisted.

Yuga Labs Must Prove Consumer Confusion in Reopened NFT Trademark Case

While the court affirmed that Yuga Labs holds trademark priority over the BAYC marks, it reversed the district court’s summary judgment on trademark infringement and cybersquatting.

"Yuga did not prove as a matter of law that defendants’ actions were likely to cause consumer confusion," the panel wrote in its decision. The panel found the evidence on consumer confusion to be mixed, where some factors supported Yuga’s claim, others did not. As a result, the case was remanded for trial to determine whether an ordinary NFT buyer is likely to be misled by the RR/BAYC collection.

The Ninth Circuit also overturned a $9 million award and permanent injunction previously granted to Yuga Labs. In February 2024, a district court ordered Ripps and Cahen to pay nearly $9 million in disgorged profits, penalties, attorney fees, and other costs.Ripps and Cahen were also required to relinquish control of the infringing NFTs, domain names, and smart contracts associated with the RR/BAYC collection. That ruling followed an earlier October 2023 judgment, granting $1.6 million in damages.

The case now returns to a lower court for further proceedings, with a central focus on whether the RR/BAYC collection created a likelihood of consumer confusion, a key requirement in trademark infringement claims.