US appeals court reversed $9 million fine judgment awarded to NFT firm Yuga Labs

The US Court of Appeals for the Ninth Circuit reversed a $9 million fine judgment awarded to NFT firm Yuga Labs, according to a court filing published on Wednesday. It dismissed a federal court ruling issued in the company’s infringement lawsuit against artist Ryder Ripps and entrepreneur Jeremy Cahen. 

The creators of the Bored Ape Yacht Club NFT collection had sued Ripps and Cahen in 2022 for allegedly launching a collection similar to BAYC titled “Ryder Ripps Bored Ape Yacht Club, ”alleging trademark infringement and cybersquatting. 

Yuga Labs argued that the defendants’ RRBAYC NFT series deliberately attempted to confuse buyers and make sales off the back of the Bored Ape brand’s popularity.

Ninth Circuit says proof of consumer confusion was insufficient

According to the court judgment filing, the three-judge Ninth Circuit panel determined that Yuga Labs had failed to prove that the Ryder Ripps Bored Ape Yacht Club NFTs were “likely to cause consumer confusion.” 

The court said that Ryder Ripps and Jeremy Cahen had enough evidence to warrant a trial that could fully resolve this issue, and remanded the case back to a California federal court.

The three-judge panel wrote that although the NFTs in question were “goods” under the Lanham Act and that Yuga Labs held trademark priority due to its earlier use of the Bored Ape marks in commerce, the evidence on consumer confusion was unresolved. This uncertainty made summary judgment in favor of Yuga inappropriate.

“Because Yuga has not yet proved its claim of likely consumer confusion, we remand for trial,” the ruling read.

A federal district court in California had ruled in favor of Yuga Labs in 2023, finding Ripps and Cahen liable for trademark infringement. US District Judge John Walter granted Yuga $1.6 million in damages, which was increased to $9 million later on after the defendants failed to win the dismissal of the case by their DMCA-based arguments.

Yuga accused the defendants of using a nearly identical name and visuals of the BAYC collection to promote their NFT series. The company propounded that the defendants’ project capitalized on Yuga’s reputation and misled buyers into thinking the collection was affiliated with the original.

While the Ninth Circuit reversed the damages award and trademark finding, it affirmed the district court’s dismissal of Ripps and Cahen’s counterclaims. These included a request for declaratory relief asserting that Yuga Labs held no copyright protection over its Bored Ape artwork and a claim under the Digital Millennium Copyright Act (DMCA).

The panel ruled that the district court acted appropriately in rejecting those counterclaims. It found no factual dispute in the DMCA allegations and upheld the dismissal of the “declaratory relief claims with prejudice.”

Trademark priority ruling upheld

Despite overturning the summary judgment on infringement, the appeals court reiterated that Yuga Labs was the first to use the Bored Ape Yacht Club trademarks in commerce. The panel also rejected arguments that the company had forfeited its rights by engaging in securities violations or by transferring NFTs without trademark control.

This supports Yuga’s legal position heading into trial, preserving its claims of brand ownership even as other elements of its case are in question.

Ripps defended his collection as a form of artistic protest and satire, and insists that his NFTs were created to fight what he termed “racist undertones” in Yuga’s original imagery. 

Still, Yuga has rejected these claims, asserting that RRBAYC is a commercial endeavor to deceive consumers and profit off their product’s success.

The case is now remanded, and the central trademark questions will proceed to trial in a California federal court. Yuga Labs co-founder Greg Solano responded to the ruling in a brief statement on X Wednesday.

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