A US appeals court on Wednesday overturned a $9 million judgment awarded to NFT conglomerate Yuga Labs in its lawsuit against artist Ryder Ripps and business partner Jeremy Cahen.
The Ninth Circuit Court of Appeals found Yuga Labs had failed to prove its claim that Ripps and Cahen’s NFT collection was “likely to cause consumer confusion,” a necessary threshold for trademark infringement.
The three-judge panel directed the case back to a California federal court for a trial to determine Yuga’s claims of trademark infringement and cybersquatting.
Ninth Circuit Ruling
In its decision, the court stated that Yuga Labs had yet to demonstrate the necessary likelihood of consumer confusion regarding founder Greg Solano’s “protectable trademarks, which is an important win for every NFT holder.”
Citing a similar 2023 ruling by the lower court that had invalidated part of the earlier $1.6 million award, Ninth Circuit Judge Diarmuid F. Scally further wrote the dispute is set to go before a jury.
Background
The legal conflict arose in 2022 when Yuga Labs sued Ripps and Cahen. Yuga alleged that the defendants’ “Ryder Ripps Bored Ape Yacht Club” NFT collection was an unauthorized copy of Yuga’s Bored Ape Yacht Club collection.
Ripps countered that his collection was a satirical commentary on racist imagery, positioning the alleged copy as “copyright free work,” not protected under trademark law.
Legal Precedent
The panel’s ruling also established a key legal point, affirming that Yuga’s NFTs qualify as “goods” under US trademark law. This potentially sets a precedent, suggesting NFT collections could sue directly for trademark infringement.
“Ethereum NFTs dominate 7-day sales rankings as ETH nears $4K“
The judges explicitly recognized that Ripps and Cahen’s use of the marks did not qualify as nominative fair use or expressive work protected by the First Amendment.
Artist Response
Responding to the ruling, Ripps called it a “‘huge victory for artists who seek to make expressive meaningful work.”
Cryptotwitter, an official Twitter avatar, announced plans to continue the litigation in the district court.
Original Verdict
Previously, a federal court had ordered the defendants to pay $1.6 million, a sum later increased by a jury trial involving a counterclaim brought against Yuga Labs by Ripps and Cahen, resulting in the $9 million judgment being overturned.
Ruling Reasoning
The Court of Appeals stated its decision was founded on the principle established in district court: “defendant’s creation of a secondary market mark did not constitute nominative fair use and was not ‘expressive work’ protected by the First Amendment.” The appeals court reversed the jury finding by concluding that Yuga’s claims failed to cross the “likelihood of confusion” bar.
NFT Creator: Jack Butcher’s no fan of NFT royalties: ‘You’re getting paid on churn’
