Yuga Labs loses 9 million USD ruling, NFT trademark case needs to be retried.

In a sudden event, NFT giant Yuga Labs suffered a judgment loss of $9 million in a lawsuit, after a U.S. appeals court ordered a trial regarding its lawsuit against a controversial NFT series creator, which was accused of plagiarizing the Bored Ape Yacht Club. The Ninth Circuit Court of Appeals stated in a ruling released on Wednesday that Yuga Labs had not demonstrated that the competitor's NFT project could cause consumer confusion. The ruling overturned a previous federal court order and remanded the case for trial in a lower court.

Yuga Labs filed an initial lawsuit in 2022, accusing Ryder Ripps and Jeremy Cahen of launching an NFT series called "Ryder Ripps Bored Ape Yacht Club," which allegedly mimicked its Bored Ape Yacht Club brand. Yuga claimed that the project not only copied its name and images but also aimed to mislead buyers and profit from its reputation. The creators of the competing project argued that their actions were a form of protest art. One of them argued that the series was a commentary on what he described as racist imagery in Yuga's original artworks. They denied any commercial intent to confuse or deceive buyers. Another participant, Thomas Lehman, was sued for his technical involvement in the development of the RR/BAYC project, for which he settled separately with Yuga Labs out of court.

In 2023, a federal court in California sided with Yuga Labs, awarding the company $1.6 million in damages. After the defendant lost their counterclaim, that figure later rose to $9 million. However, the Ninth Circuit Court's ruling on Wednesday overturned that award, stating that the case requires a full trial. The appellate panel concluded that the core issue—whether the disputed NFT series infringes on Yuga's trademark rights—must be resolved through trial. The court indicated that Yuga's claims of trademark infringement and domain name squatting cannot be resolved as legal issues, as there are unresolved questions regarding the likelihood of consumer confusion.

The ruling found that although competitors' NFTs used similar names and images, Yuga Labs did not sufficiently prove that ordinary consumers would confuse the imitation projects with its own. The Ninth Circuit Court also stated that determining intent and consumer perception requires factual investigations that only a jury can perform. While overturning the monetary judgment, the court did uphold a key legal position of Yuga: NFTs can be classified as "goods" under U.S. trademark law. This is a very important ruling as it essentially establishes a legal precedent that could strengthen claims by NFT creators against imitation projects in the future.

However, although the court ruled that the case must proceed to trial, it rejected the defense's argument that mimicking NFTs is protected expressive work under the First Amendment. The expert panel also dismissed the claim of descriptive fair use, stating that the competitor's use of the Yuga trademark did not meet the legal threshold for such protection.

The case will now return to the California district court, where the jury will consider whether the competitor's NFT series infringes on Yuga Labs' trademark. 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 social media that the company will "end the fight" in the lower court.

"The Ninth Circuit Court confirmed: BAYC NFTs are protected trademarks, which is an important victory for every NFT holder. We will now conclude the battle in the local court, where the judge has already ruled that RR BAYC founders owe more than $9 million in damages," wrote Solano.