The emergence of non-fungible tokens (NFTs) has redefined how digital assets are perceived and valued within the marketplace. As companies increasingly incorporate NFTs into their operations, it is crucial to apply the same brand protection strategies used for traditional goods and services. A recent decision by the Ninth Circuit in Yuga Labs v. Ripps reinforces that NFTs are not merely digital collectibles - they are commercial goods under the Lanham Act, and their branding is subject to the same trademark protections as physical products.
At the center of the case was the Bored Ape Yacht Club (BAYC), a digital artwork collection that gained widespread cultural recognition. Each NFT token represented a unique, verifiable entry in a blockchain ledger, establishing the token as the source of value. Unlike the underlying artwork, which could be replicated, the token’s authenticity was safeguarded by its immutable blockchain history. This distinction was pivotal in the court's interpretation of NFTs as commercial goods.
Ripps and Cahen created a satirical copycat collection named Ryder Ripps Bored Ape Yacht Club (RR/BAYC), featuring nearly identical names, logos, and characters. Yuga Labs filed a lawsuit, alleging trademark infringement and consumer confusion. The district court ruled that the RR/BAYC collection could mislead buyers, but Ripps appealed, arguing that NFTs are not "goods" under the Lanham Act because they are intangible.
The Ninth Circuit dismissed this claim. While past rulings had determined that intangible content - such as music on a CD - was not separately protectable, NFTs are not embedded in physical products. Instead, they are the product itself, existing entirely in the digital realm. The court noted that NFTs are actively marketed, traded, and provide real-world benefits, such as access to exclusive communities. These characteristics align NFTs with traditional branded goods, making their trademarks eligible for legal protection.
The court did not confirm the district court’s infringement determination, but it sent the issue of mark similarity back for further review. However, it upheld the rejection of Ripps’ First Amendment and fair use defenses, stating that the use of Yuga’s marks was not commentary but an attempt to mislead consumers into believing competing NFTs were genuine.
This ruling marks a significant shift in trademark law. Trademarks serve to distinguish the source of goods and services, and NFTs are no exception. As digital assets become more embedded in commerce, businesses must integrate NFT-related branding into their overall trademark strategy. This includes vigilance in monitoring for similar marks, maintaining consistent branding, and taking prompt action against potential infringers.
Services such as IP Defender provide tools to track filings across national trademark databases, helping to identify conflicts early. IP Defender monitors trademark databases in over 50 countries, including the entire EU, the United States, Australia, and many others, as well as the EUTM and WIPO databases.
The case also illustrates the evolving role of trademark law in the digital economy. The USPTO has already revised its guidelines to acknowledge NFTs as eligible for trademark protection, indicating that the legal framework is adapting to new commercial realities.
For companies in the digital asset space, the takeaway is clear: apply the same level of rigor to NFT branding as you would to any other brand. Monitor for potential conflicts, register trademarks, and enforce rights to safeguard both the brand and the commercial value of NFTs. The principles of branding remain relevant, whether in the metaverse or the physical world.