In a major legal twist, the U.S. Ninth Circuit Court of Appeals has reversed a $9 million judgment that had been in favor of Yuga Labs in its lawsuit against artist Ryder Ripps.
Yuga Labs, the creator of the flagship Bored Ape Yacht Club (BAYC) NFT collection, had won the lawsuit in 2023, claiming that Ripps and Cahen were guilty of trademark infringement and cybersquatting.
The appeals court ruled that Yuga failed to show, as a matter of law, that the NFT collection by Ripps and Cahen was “likely to cause consumer confusion,” a necessary element in a claim for trademark infringement.
The case has now been returned to a federal district court in California for a full trial.
Dispute Over NFT Similarity and Creative Expression
The dispute began in 2022, when Ripps and Cahen started the “Ryder Ripps Bored Ape Yacht Club,” a collection that Yuga Labs alleged was an outright copy of its own original BAYC NFTs.
Yuga maintained that the collection ripped off its brand elements, confusing purchasers and diminishing the value of the original NFTs.
Ripps, on the other hand, stated that his version was a satirical critique, accusing Yuga’s artwork of featuring racist imagery.
In a statement provided, Ripps described the appeals court ruling as a “huge victory for artists who seek to make expressive meaningful work,” framing his actions within the scope of artistic freedom.
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Key Holding: NFTs Are Trademark-Protected “Goods”
While the court reversed the damages and sent the case to trial, it also made a landmark ruling in favor of Yuga Labs.
The appeals court held that NFTs, like Yuga’s BAYC tokens, are “goods” within U.S. trademark law.
The differentiation paves the way for NFT creators to sue when third parties copy or mimic their digital asset, establishing precedent for intellectual property protection in the burgeoning Web3 landscape.
Yuga Labs co-founder Greg Solano responded on X (formerly Twitter), noting the importance of NFTs being acknowledged as protectable trademarks, a move he described as a “win for every NFT holder.”
Legal Fight Far From Over
Although Yuga initially won a $1.6 million award that later grew to $9 million after additional legal action, the appeals court’s reversal dramatically alters the legal landscape.
The judges ruled that a trial is needed to decide whether Ripps and Cahen’s NFT collection misled consumers.
They also denied Ripps’ argument that his work was shielded by the First Amendment as “expressive work.”
They made it clear that the defendants’ use of Yuga’s trademarks did not constitute nominative fair use.
The legal doctrine permits mentioning a trademark under certain circumstances for the purpose of commentary or criticism.
Wider Ramifications for Crypto Regulatory Environment
The decision echoes another high-profile court reversal earlier this year, when a U.S. court overturned sanctions on Tornado Cash, a cryptocurrency mixer that had been accused of facilitating over $455 million in money laundering for North Korea.
The decision sent the $TORN token surging 118%, reflecting the high stakes and volatility of regulatory enforcement in crypto.
Similarly, the ongoing case of Yuga-Ripps will now proceed to trial, where the court will establish the boundaries between artistic expression and trademark infringement.
Potentially setting further precedents that define how intellectual property law applies to blockchain-based assets and NFT ecosystems.
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