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Are NFTs “goods” for trademark purposes?
The U.S. Court of Appeals for the Ninth Circuit recently ruled in a case of critical importance to creators of nonfungible tokens (NFTs) and other digital offerings. The ruling extends to them potentially valuable trademark rights in NFT names, logos and other protectible elements.
Gorilla tactics
Yuga Labs Inc., created one of the most widely known NFTs — the Bored Ape Yacht Club (BAYC). An NFT is an intangible, fully virtual, authenticating software code that’s associated with separate digital or physical content.
Each NFT in the BAYC collection was associated with a unique cartoon “Bored Ape.” Buyers obtained rights to the ape art, along with membership in an online and offline social club. The membership gave them access to benefits including interactive digital spaces, branded merchandise and events.
Ryder Ripps and Jeremy Cahen subsequently created a nearly identical collection called Ryder Ripps Bored Ape Yacht Club (RR/BAYC), allegedly for purposes of satire. The collection was associated with the exact same Bored Ape cartoons as Yuga’s NFTs.
Yuga sued Ripps and Cahen for trademark infringement, and the trial court ruled in its favor on summary judgment, meaning without a trial. The defendants appealed to the Ninth Circuit.
Good enough
The defendants argued that Yuga didn’t have an enforceable trademark because an NFT isn’t a “good” protected by the Lanham Act. As the Ninth Circuit noted, the law doesn’t define the term “good.”
Instead, the court cited the U.S. Patent and Trademark Office’s (PTO) conclusion in a 2024 report to Congress that NFTs are indeed goods covered by the Lanham Act. In the PTO’s view, trademarks perform the same functions in NFT markets as in other markets.
The court distinguished NFTs from tangible goods that contain intangible, expressive content, such as video cassettes or compact discs with music. Only the tangible component operates as a protectible source-identifier for the overall product.
Unlike the intangible content in those products, NFTs aren’t contained in or associated with tangible goods sold in the traditional marketplace. They exist only in the digital world and are associated with digital files. And they’re purchased as commercial goods in online marketplaces specifically curated for NFTs. The appellate court therefore concluded that NFTs are goods eligible for trademark protection.
Confusion question
To succeed with its trademark infringement claim, though, Yuga needed to show a likelihood of consumer confusion between the defendants’ marks and its marks. The lower court had “easily” found that the defendants’ use of the marks was likely to cause confusion, but the appeals court disagreed.
To evaluate the likelihood of confusion, the court considered the eight so-called Sleekcraft factors (named for the court case that first identified them). In the context of “internet commerce,” the court said the most important are the:
- Similarity of the marks,
- Relatedness of the goods or services, and
- Simultaneous use of the internet as a marketing channel.
The court ultimately found that some of the Sleekcraft factors indicated a likelihood of confusion, others didn’t and some were neutral. This was true even of the three factors especially significant for internet commerce cases. As result, a trial on the issue was necessary.
Don’t go bananas
The finding that NFTs constitute goods for trademark purposes was welcome news for Yuga and similar creators. Yuga, however, still must convince a factfinder at trial that the defendants’ use of its marks is likely to cause confusion in the marketplace.
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