In a sudden turn of events, non-fungible token giant Yuga Labs has lost a $9 million judgment after a U.S. appeals court ordered a trial in its lawsuit against the creators of a contested NFT collection accused of copying Bored Ape Yacht Club.
Summary
- U.S. appeals court has overturned a $9 million judgment against the defendants.
- Court said jury must decide if rival NFT collection infringed on Bored Ape Yacht Club brand.
- A ruling affirmed that NFTs qualify as “goods” under U.S. trademark law, setting key legal precedent.
Yuga Labs was yet to prove that the rival NFT project was likely to cause consumer confusion, the Ninth Circuit Court of Appeals said in a ruling issued Wednesday. The decision reverses a prior federal court order and returns the case to a lower court for trial.
Yuga Labs Vs Ripps & Cahen
Yuga Labs filed its original lawsuit in 2022, accusing Ryder Ripps and Jeremy Cahen of launching an NFT collection called “Ryder Ripps Bored Ape Yacht Club” that allegedly mimicked its Bored Ape Yacht Club brand.
Yuga claimed the project not only copied its name and imagery but also intended to mislead buyers and profit off its reputation.
The creators of the rival project defended their actions as a form of protest art. One of them argued that the collection was a commentary on what he described as racist imagery in Yuga’s original artwork. They denied any commercial intent to confuse or deceive buyers.
Another participant, Thomas Lehman, who was sued for his technical involvement in developing RR/BAYC project, settled separately with Yuga Labs outside of court at the time.
In 2023, a California federal court sided with Yuga Labs and awarded the company $1.6 million in damages. That figure later rose to $9 million after the defendants lost a counterclaim.
However, Wednesday’s decision by the Ninth Circuit wiped out that award, stating the case required a full trial.
Why did the court overturn the $9 million judgment?
The appeals panel concluded that the central question—whether the contested NFT collection violated Yuga’s trademark rights—must be resolved through trial.
The court said Yuga’s claims of trademark infringement and cybersquatting could not be resolved as a matter of law, citing unresolved questions about the likelihood of consumer confusion.
The ruling found that although the rival NFTs used similar names and imagery, Yuga Labs had not sufficiently demonstrated that the average consumer would mistake the copycat project for its own.
The Ninth Circuit also stated that determining intent and consumer perception required factual findings that only a jury could make.
While overturning the monetary judgment, the court did uphold one of Yuga’s key legal positions: that NFTs can qualify as “goods” under U.S. trademark law.
This is a very important ruling as this basically sets a legal precedent that may strengthen future claims brought by NFT creators against copycat projects.
However, while the court ruled that the case must proceed to trial, it rejected the defense’s argument that the copycat NFTs were protected expressive works under the First Amendment.
The panel also dismissed claims of nominative fair use, saying the rival project’s use of Yuga’s trademarks did not meet the legal threshold for such protection.
What happens next in the case?
The case will now return to the district court in California, where a jury will consider whether the rival NFT collection infringed on Yuga Labs’ trademarks. The trial is expected to address issues such as brand confusion, artistic intent, and the commercial nature of the project.
Yuga Labs co-founder Greg Solano posted on X that the company would “finish the fight” in the lower court.
“The Ninth Circuit confirmed: BAYC NFTs are protectable trademarks, which is an important win for every NFT holder.
We’ll now finish the fight in the district court, where the judge already fined the RR BAYC founders $9m+ in damages,” Solano wrote.
