NFTs Get Trademark Shield: Ninth Circuit Rules in Yuga Labs Case, Orders New Trial

Ninth Circuit Rules NFTs Can Be Trademarked, Sends Yuga Labs Case Back for Trial

The Ninth Circuit Court of Appeals has delivered a significant ruling, stating that Non-Fungible Tokens (NFTs) are eligible for trademark protection. This decision came in the ongoing legal battle between Yuga Labs, the creator of the popular Bored Ape Yacht Club (BAYC) collection, and artist Ryder Ripps. While affirming that NFTs can be protected under trademark law, the court vacated a previous $8 million judgment against Ripps and remanded the case for a new trial to determine consumer confusion.

Key Takeaways

• NFTs are now recognized as "goods" eligible for trademark protection under the Lanham Act.

• The Ninth Circuit rejected many of Ryder Ripps' legal defenses, including claims of fair use and First Amendment protection for his "expressive appropriation art.

• The $9 million penalty and injunction against Ripps were vacated.

• The case is remanded to a lower court to determine if consumers were likely to be confused by Ripps' similar NFT collection.

The Legal Battle Unfolds

Yuga Labs initially sued Ryder Ripps in June 2022, alleging that his "Ryder Ripps Bored Ape Yacht Club" (RR/BAYC) project, which featured identical images to the original BAYC collection, devalued their brand. Ripps, a conceptual artist, argued his work was a form of protest and commentary on Yuga Labs' branding and the NFT market's speculative nature. He claimed the original BAYC images contained racist and alt-right symbolism.

A lower court had previously granted Yuga Labs summary judgment, finding that Ripps' NFTs infringed on their trademarks and that consumers were likely to be confused. However, the Ninth Circuit panel disagreed with this broad conclusion.

Ninth Circuit's Reasoning

The appellate court acknowledged that NFTs can be trademarked, comparing them to physical goods like counterfeit sneakers or handbags. This aspect of the ruling is seen as a major win for the NFT industry, establishing a precedent for brand owners to protect their digital assets.

However, the panel found that the question of consumer confusion was a complex, fact-specific inquiry that could not be definitively settled at the summary judgment stage. They noted that the RR/BAYC NFTs were marketed with distinct branding (RR/BAYC) and that evidence regarding actual consumer confusion was conflicting. Furthermore, the significant price difference between Yuga Labs' high-value NFTs and Ripps' much cheaper offerings could have alerted consumers to a distinction.

Reactions and Future Implications

Both parties claimed victory following the ruling. Yuga Labs stated, "This is a win for the industry: NFTs are protectable by trademark law." They also emphasized that the court rejected Ripps' arguments that fair use and the First Amendment shielded his actions.

Ripps, however, called the decision a "resounding legal victory," asserting that his work was protected commentary and that the core issue of consumer confusion was not proven. He also suggested he might appeal parts of the ruling that rejected some of his legal arguments.

The case's return to a lower court means a trial will be necessary to determine whether a reasonable consumer would be confused by the RR/BAYC NFTs. This outcome highlights the evolving legal landscape surrounding digital assets and intellectual property in the burgeoning Web3 space.

Sources

• NFTs qualify for trademark protection, Ninth Circuit rules, sending Yuga Labs case back for trial, The Block.

• Ninth Circuit not persuaded satirical NFTs infringe creator’s trademarks, Courthouse News Service.