Landmark Ruling Clarifies Trademark Rights for NFTs
In a groundbreaking decision that sets a vital precedent for trademark rights associated with digital assets, the Court of Appeals in Yuga Labs, Inc. v. Ripps, Case No. 24-879, 2025 WL 2056060 (9th Cir. July 23, 2025), has clarified that non-fungible tokens (NFTs) qualify as “goods” under trademark law. However, the court determined that summary judgment on the likelihood of confusion was premature without additional factual investigation. This means that while NFT companies can assert trademark rights to mitigate consumer confusion, securing an early verdict on trademark infringement could still pose challenges.
Plaintiff Yuga Labs, Inc. (Yuga) is famous for creating the Bored Ape Yacht Club (BAYC)—a renowned collection of 10,000 NFTs, each depicting a unique digital cartoon ape with distinct traits, expressions, and clothing. Ownership of a Bored Ape NFT grants membership to an exclusive online community, offering perks like virtual events, parties, and access to special content. Initially sold for around $200, these NFTs have become a cultural sensation, merging art, social status, and blockchain technology. This surge has fueled a booming secondary market, with some resales exceeding $24 million, contributing a 2.5 percent royalty to Yuga.
Controversy and Legal Battle
Despite BAYC’s popularity, it has been embroiled in controversies. Defendant Ryder Ripps, an artist and social activist, accused Yuga of racism on his personal website. Alongside Jeremy Cahen, a social media figure in the crypto space, Ripps launched the “Ryder Ripps Bored Ape Yacht Club” (RR/BAYC) NFT collection, using the same Yuga images and identifiers. Ripps’ NFTs included a disclaimer that they were “a new mint of BAYC imagery, recontextualized for educational purposes, as protest and satirical commentary.”
Yuga sued for infringement of unregistered trademarks and cybersquatting. Ripps countered by arguing that Yuga lacked enforceable trademark rights, and even if such rights existed, his use of BAYC marks was protected under nominative use and the First Amendment. The district court initially awarded summary judgment to Yuga, prompting Ripps to appeal.
NFTs: More Than Just Digital Tokens
The Court recognized NFTs as emerging technology, describing them as authenticating software code uniquely associated with fungible digital content. By tokenizing the authenticating code on unique digital art files, NFTs create market scarcity, adding proprietary value. Each NFT carries a contract name and symbol, embedded permanently in its metadata for tracking.
Ripps used identical identifiers as Yuga (the contract name “Board Ape Yacht Club” and symbol “BAYC”) and linked his NFTs to the same artwork as Yuga’s. Yuga argued this demonstrated Ripps’ attempt to pass off his NFTs as Yuga’s BAYC NFTs.
NFTs Recognized as “Goods” Under Trademark Law
For Yuga to prevail in its trademark infringement claim, it needed a valid and enforceable trademark. The Lanham Act prohibits any use in commerce likely to cause confusion regarding the origin of goods. Ripps contended that NFTs are not “goods” under the Lanham Act, citing case law involving tangible goods with intangible content (e.g., video cassettes, CDs). See Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003) and Slep-Tone Ent. Corp. v. Wired for Sound Karaoke and DJ Servs., LLC, 845 F.3d 1246 (9th Cir. 2017).
These cases determined that the “origin” of a consumer product is the manufacturer of the tangible good, not the creator of the expressive content. Ripps interpreted this to mean intangible goods like NFTs are ineligible for trademark protection. However, the Court clarified that both tangible and intangible aspects could have separate origins and protections in the same good. Unlike content on cassettes or CDs, NFTs exist solely in a digital marketplace. Since the Lanham Act does not exclude intangible goods, the Court ruled NFTs are trademarkable goods.
Ripps’ Defenses Fall Short
Ripps attempted to invalidate Yuga’s trademark rights by arguing BAYC marks were ineligible for protection due to NFTs being sold as unregistered securities, and Yuga abandoned its trademark rights by not controlling third-party use (“naked licensing”). The Court found no connection between the source-identifying function of NFTs and alleged illegal activity, nor any indication of a trademark license granted by Yuga.
Ripps also claimed nominative fair use and First Amendment defenses, which the Court dismissed. Ripps did more than use BAYC marks for commentary; he incorporated them into RR/BAYC NFTs, using them as source identifiers, thus falling outside these defenses.
Further Factual Investigation Required for Likelihood of Confusion
The Court then examined Yuga’s trademark infringement claim, requiring proof that Ripps’ use of the BAYC mark likely causes consumer confusion. Courts typically assess this through a multifactor analysis, such as the eight-factor test in AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979). The Court emphasized caution against resolving likelihood of confusion on summary judgment and, after analyzing the relevant Sleekcraft factors, reversed the district court’s grant of summary judgment. While some factors favored Yuga, others were neutral or slightly favored Ripps, necessitating further review at trial.
Strategic Implications for Trademark Protection
This case establishes a framework for applying trademark law to NFTs, affirming that NFTs are “goods” under the Lanham Act. However, a fact-intensive likelihood of confusion analysis will dominate such disputes. Brand owners and NFT creators should strengthen trademark portfolios, ensure formal registrations, and devise thorough brand enforcement strategies. Agreements related to digital assets should be carefully crafted to uphold trademark ownership while avoiding “naked licensing” pitfalls.
Digital artists should be cautious when incorporating existing trademarks into NFT projects. Even protest or commentary might not protect them from infringement claims if consumers are misled about the source. Creators should explore alternative expression methods that don’t confuse or imply source identification.
For further information on trademark protection or enforcement, please contact Aaron S. Chaloner Ph.D. or Paulluvi Henley.
Source: Baker Donelson
