/>iThe US Court of Appeals for the Ninth Circuit concluded that a non-fungible token (NFT) is a “good” under the Lanham Act but reversed the district court’s grant of summary judgment for trademark infringement because the owner did not prove as a matter of law that the defendants’ use was likely to cause confusion. The Ninth Circuit also affirmed the district court’s dismissal of the defendants’ counterclaim for declaratory relief regarding copyright ownership. Yuga Labs, Inc. v. Ryder Ripps and Jeremy Cahen, Case No. 24-879 (9th Cir. July 23, 2025) (Bade, Forrest, Curiel, JJ.)
Yuga Labs is the creator of the Bored Ape Yacht Club (BAYC) NFT collection. Yuga created this collection through a smart contract recorded on the blockchain Ethereum. Each BAYC NFT has a cartoon of a bored ape and a sequential unique identifier called an ape ID. Per its terms and conditions, BAYC NFT consumers receive commercial and personal rights free of royalty fees.
Ryder Ripps and Jermey Cahen created the Ryder Ripps Bored Ape Yacht Club (RR/BAYC) using the same ape images and ape IDs. The collection was also hosted on an Ethereum blockchain smart contract. They criticized Yuga for “using neo-Nazi symbolism, alt-right dog whistles, and racist imagery” and alleged that they created RR/BAYC as satire and criticism. Ripps made the RR/BAYC smart contracts’ names “Bored Ape Yacht Club” and made the smart contract symbol “BAYC.” Ripps’ website includes an artist statement that the artwork is a “new mint of BAYC imagery.” NFT marketplace websites for RR/BAYC displayed a large header “Bored Ape Yacht Club” and in a smaller text “@ryder_ripps.”
Yuga sued Ripps and Cahen for several claims, including trademark infringement based on a false designation of origin theory, false advertising, and cybersquatting. In response, the defendants asserted that Yuga did not have enforceable trademark rights, and even if it did, the defendants’ use was protected by fair use and the First Amendment. The defendants asserted several counterclaims, including knowing misrepresentation of infringing activity under the Digital Millenium Copyright Act (DMCA), and sought declaratory judgment of no copyright ownership.
The district court granted Yuga’s motion for summary judgment on its false designation of origin and cybersquatting claims. Yuga withdrew its remaining claims, so the trial proceeded only for equitable remedies on the false designation of origin and cybersquatting. At trial, the district court found that Yuga’s BAYC marks were unregistered trademarks. The district court awarded Yuga disgorgement of the defendants’ profits, maximum statutory damages, and attorneys’ fees after finding that the case was exceptional due to the defendants’ willful infringement, bad faith intent to profit, and litigation conduct. The defendants were also permanently enjoined. The defendants appealed the grant of summary judgment and sought vacatur of the remedies.
The Ninth Circuit first addressed the defendants’ argument that NFTs are not goods protected by the Lanham Act. The Court concluded that NFTs are goods under the Lanham Act based on a US Patent & Trademark Office report that determined them as such. The Court also distinguished NFTs from intangible content in a tangible good, which is not afforded separate trademark protection from a tangible good. The Court explained that NFTs are not associated with tangible goods and are purchased as commercial goods in online marketplaces. Customers of the BAYC NFTs also receive membership passes to social clubs, Yuga’s merchandise, and celebrity events.
The defendants next argued that any trademark claims were unenforceable because Yuga did not have trademark priority. They asserted that Yuga engaged in unlawful conduct by using the BAYC marks to sell unregistered securities and therefore relinquished its trademark rights through the sale of its NFTs. The Ninth Circuit found that Yuga’s trademark claims were enforceable. On the issue of whether Yuga sold the NFTs as unregistered securities, the Court determined there was “insufficient nexus between Yuga’s use of the BAYC Marks and purported securities violation.” It reasoned that Yuga’s failure to register the NFTs as securities “does not impact the source-indicating or goods-describing functions of the trademarks.”
As for the claim that Yuga transferred its ownership interest by selling BAYC NFTs, the Ninth Circuit concluded Yuga retained ownership interest. Relying on contract law, the Court first noted that Yuga’s terms and conditions did not grant any trademark licenses and were not a valid assignment that transferred Yuga’s goodwill. The Court determined that buyers were given “an unlimited royalty-free right to use [the NFT’s] associated artwork,” and that was distinct from the BAYC marks that Yuga used to market BAYC. Building on this, the Court determined that Yuga did not abandon its trademarks by granting a naked license and determined that the defendants also failed to show an implied license. Finally, the Court rejected the defendants’ argument that Yuga failed to adequately police the mark. The Court found that the few examples of copycats 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.” The Court also noted that the defendants failed to address the fact that Yuga sends takedown notices.
Having established that Yuga’s NFTs were enforceable trademarks, the Ninth Circuit addressed Yuga’s trademark infringement claim based on “forward confusion.” The Court began by analyzing whether the defendants’ use was protected as nominative fair use and/or protected by the First Amendment.
The Ninth Circuit found that the defendants’ use did not meet the criteria for nominative fair use under the factors set forth in the Ninth Circuit’s 1992 New Kids on the Block v. New. Am. Publ’g decision. The Court emphasized that the defendants used the BAYC marks to create, promote, and sell their own NFTs, rather than just describing or referencing Yuga’s NFTs. The Court disagreed with the defendants’ argument that nominative fair use applied because the defendants’ goal was to describe their own product. The Court distinguished the defendants’ use from situations where marks were used to reference the owner’s products without causing confusion as to the origin of products. The Court was likewise unpersuaded by the defendants’ argument regarding the First Amendment exception to trademark enforcement. The Court explained that the First Amendment exception does not apply when the mark is used to indicate origin of goods. Further, whether the marks are source identifiers does not depend on the subjective intent of the user. Thus, the defendants’ claim that they were protesting or criticizing Yuga’s goodwill was irrelevant.
Turning to the merits of Yuga’s infringement claim, the Ninth Circuit concluded that the district court erred by easily concluding that the defendants’ use was likely to cause confusion and granting summary judgment. The Court found that the district court failed to consider all of the relevant variables to determine whether there was a likelihood of confusion. In light of the eight factors pronounced in the Ninth Circuit’s 1979 AMF v. Sleekcraft decision, and viewing the facts in the light most favorable to the defendants, the Court could not “conclude as a matter of law that a reasonably prudent consumer in the marketplace is likely to be confused as to the origin of the good or service bearing one of Yuga’s marks.”
The Ninth Circuit next addressed Yuga’s cybersquatting claim and reversed the district court’s grant of summary judgment for Yuga. The Court found that Yuga did not establish as a matter of law that the defendants used a domain name that was identical or confusingly similar to the BAYC marks in bad faith with the intent to profit from the mark. The Court reasoned that the defendant’s first domain, rrbayc.com, added “rr,” which created a visual and auditory difference and a difference in meaning. The Court also found that the defendants’ second domain, apemarket.com, was not confusingly similar to “Bored Ape,” and Yuga conceded abandoning the Ape mark. Therefore, neither domains were confusingly similar as a matter of law.
After resolving Yuga’s claims, the Ninth Circuit addressed the defendants’ counterclaims. The Court affirmed the district court’s grant of summary judgment in favor of Yuga on the DMCA violations and upheld the dismissal of the defendants’ declaratory judgment claims with prejudice for lack of subject matter jurisdiction. The Ninth Circuit agreed with the district court that the defendants failed to show that Yuga’s DMCA notices contained a material misrepresentation or that Yuga acted in bad faith. At most, the references to the DMCA were sloppy and immaterial to the takedowns. Lastly, “the district court did not abuse its discretion in dismissing Defendants’ declaratory-judgment counterclaims with prejudice.” The defendants asserted that the dismissal should have been without prejudice. The Court disagreed, reasoning that the general rule for dismissal without prejudice did not apply. Because Yuga did not have a registered copyright, there was no other court in which Yuga could reassert its copyright claims. The Court noted that if Yuga registered a copyright, the defendants would not be precluded from reasserting their declaratory judgment claims.
