Ninth Circuit Recognizes NFTs as “Goods” Under Lanham Act but Reverses Trademark Ruling in Yuga Labs Case
On July 23, 2025, the U.S. Court of Appeals for the Ninth Circuit ruled that non-fungible tokens (NFTs) qualify as “goods” under the Lanham Act, but reversed a district court’s grant of summary judgment in favor of Yuga Labs, Inc. on trademark infringement claims. The appellate court found that Yuga had not proven “as a matter of law” that the defendants’ use of its marks was likely to cause confusion. The court also upheld the district court’s dismissal of a counterclaim by defendants Ryder Ripps and Jeremy Cahen regarding copyright ownership. (Yuga Labs, Inc. v. Ryder Ripps and Jeremy Cahen, Case No. 24-879 (9th Cir. July 23, 2025)).
Background: Competing NFT Collections
Yuga Labs is known for creating the Bored Ape Yacht Club (BAYC), an NFT collection based on smart contracts on the Ethereum blockchain. Each BAYC NFT contains a cartoon image of a bored ape and a unique “ape ID.” Under BAYC’s terms, purchasers receive both commercial and personal usage rights without royalty fees.
Ripps and Cahen launched a competing project—Ryder Ripps Bored Ape Yacht Club (RR/BAYC)—that used identical ape images and ape IDs. They criticized Yuga, accusing it of “using neo-Nazi symbolism, alt-right dog whistles, and racist imagery,” and claimed their collection was intended as satire and criticism. They titled their smart contracts “Bored Ape Yacht Club” and used the symbol “BAYC.” On Ripps’ website, an artist statement described the work as a “new mint of BAYC imagery.” NFT marketplaces prominently featured “Bored Ape Yacht Club” with smaller attribution to “@ryder_ripps.”
District Court Ruling and Appeal
Yuga sued for trademark infringement under a false designation of origin theory, along with claims of false advertising and cybersquatting. Ripps and Cahen countered by asserting First Amendment protections and denying Yuga’s trademark rights. They also brought counterclaims under the DMCA and sought declaratory judgment on copyright issues.
The district court granted summary judgment for Yuga on its false designation and cybersquatting claims. It found that BAYC’s marks were enforceable as unregistered trademarks and awarded Yuga profits, maximum statutory damages, and attorney fees, citing “willful infringement,” “bad faith intent to profit,” and improper “litigation conduct.” The defendants were also permanently enjoined.
Ninth Circuit: NFTs Are “Goods,” but No Clear Likelihood of Confusion
On appeal, the Ninth Circuit first addressed whether NFTs qualify as “goods” under the Lanham Act. Citing a U.S. Patent and Trademark Office report, the Court concluded that they do. It distinguished NFTs from intangible content embedded in a tangible good, noting that NFTs are standalone commercial items traded on marketplaces. Additionally, BAYC purchasers often receive exclusive perks such as merchandise, event access, and membership benefits.
Ripps and Cahen argued that Yuga forfeited trademark rights by selling unregistered securities. The Court rejected this, stating there was an “insufficient nexus between Yuga’s use of the BAYC Marks and purported securities violation.” The alleged securities issue did “not impact the source-indicating or goods-describing functions of the trademarks.”
The Court also rejected arguments that Yuga had transferred ownership of the marks. It found Yuga’s terms did not create trademark licenses or constitute a valid assignment of goodwill. While buyers received “an unlimited royalty-free right to use [the NFT’s] associated artwork,” this was separate from the BAYC marks themselves. The Court found no evidence of abandonment or implied licensing and emphasized that Yuga had policed its marks by issuing takedown notices. A few copycat projects, the Court held, were “insufficient evidence to create a question of fact regarding whether the marks ceased to function as a symbol of quality and a controlled source.”
Trademark Infringement & Fair Use Defense
Turning to the core infringement claim, the Court considered whether Ripps and Cahen’s use of the BAYC marks constituted nominative fair use or was protected by the First Amendment.
The Court found neither defense applied. Under the test established in New Kids on the Block v. New. Am. Publ’g (1992), it concluded that the defendants were not merely referencing Yuga’s products—they were marketing their own. The Court stressed that using BAYC marks “to create, promote, and sell their own NFTs” disqualified them from fair use protection. It rejected the argument that describing their own project entitled them to use the marks.
Regarding the First Amendment, the Court explained that the exception “does not apply when the mark is used to indicate origin of goods,” and the defendants’ intent to criticize Yuga was irrelevant. Whether a mark is a source identifier “does not depend on the subjective intent of the user.”
Cybersquatting Claim Also Reversed
Yuga’s cybersquatting victory was also overturned. The Court found the domain names in question—rrbayc.com and apemarket.com—were not confusingly similar to BAYC marks “as a matter of law.” The addition of “rr” created “a visual and auditory difference and a difference in meaning,” and Yuga had previously abandoned the “Ape” mark, undermining the claim that apemarket.com infringed.
Counterclaims on DMCA and Copyright
Finally, the Court upheld the district court’s rulings on defendants’ counterclaims. It affirmed summary judgment for Yuga on DMCA misrepresentation, finding no evidence of bad faith or material misstatements—only that the DMCA references were “sloppy and immaterial.” It also affirmed dismissal of the declaratory judgment claim over copyright ownership “with prejudice,” noting the claim lacked subject matter jurisdiction. Our Maryland IP attorneys are here to help with these changing decisions.