Non-fungible tokens (NFTs) have revolutionized digital ownership and created entirely new categories of intellectual property disputes. As these blockchain-based assets continue to evolve, they present unique technical and legal challenges that traditional IP frameworks are still adapting to address. The recent Ninth Circuit decision in Yuga Labs, Inc. v. Ripps1 illustrates the I.P. issues, and specifically how trademark law applies to NFTs, while highlighting the ongoing complexities in this space.
What Are the Technical Aspects of NFTs?
NFTs are cryptographic tokens on blockchain networks that represent ownership of unique digital assets. Unlike cryptocurrencies, each NFT contains distinct metadata that makes it non-interchangeable. Technically, an NFT consists of:
1. Smart contract code: defines ownership rules and transfer mechanisms;
2. Token Identification: uniquely identifies the specific NFT;
3. Metadata: includes links to digital content, attributes, and ownership history;
4. Blockchain record: provides immutable proof of ownership and transaction history.
What Does I.P. “Ownership” Actually Mean?
The fundamental technical challenge lies in understanding what an NFT purchaser actually owns. Contrary to popular belief, buying an NFT typically does not transfer copyright ownership of the underlying digital asset. Instead, the NFT often represents:
1. Ownership of the token itself – the unique blockchain entry;
2. A license to display the associated digital content;
3. Potential commercial rights (depending on the specific terms);
4. Provenance and authenticity verification through blockchain records.
This technical distinction creates significant IP complications because the digital artwork, music, or other content associated with an NFT usually remains under separate copyright protection.
Specific IP Issues
Copyright
1. Unauthorized Minting: the most common IP violation occurs when individuals mint NFTs using copyrighted content without permission. Since anyone can create an NFT pointing to any digital content, copyright holders face rampant unauthorized use of their works.
2. License Scope Confusion: even legitimate NFT projects often create ambiguity about what rights purchasers receive. Some collections grant broad commercial licenses, while others provide only personal use rights.
3. Fair Use Boundaries: NFT creators frequently claim fair use when incorporating copyrighted elements, but the commercial nature of most NFT sales complicates traditional fair use analysis.
Trademark
1. Brand Confusion: unauthorized NFT collections using established trademarks create consumer confusion about official endorsement or sponsorship.
2. Virtual Goods Classification: a critical question has been whether NFTs qualify as “goods” under trademark law, affecting the scope of protection available.
3. Digital Brand Extensions: established brands entering the NFT space must navigate how their trademarks translate to virtual environments.
Yuga Labs Decision
The dispute began in 2022 when Yuga Labs, creator of the highly successful Bored Ape Yacht Club (BAYC) NFT collection, sued digital artist Ryder Ripps and business partner Jeremy Cahen. The defendants had created a competing collection called “Ryder Ripps Bored Ape Yacht Club” that closely mimicked the original BAYC NFTs. Yuga Labs alleged trademark infringement and cybersquatting under the Lanham Act, claiming the defendants’ use of BAYC trademarks created consumer confusion and diluted their brand. The district court initially granted summary judgment to Yuga Labs, awarding nearly $9 million in damages and penalties.
On July 23, 2025, the Ninth Circuit Court of Appeals issued a decision that fundamentally clarifies NFT trademark protection while overturning the lower court’s summary judgment. The ruling established several crucial precedents:
The panel held that NFTs qualify as “goods” under the Lanham Act, entitling them to trademark protection. This resolves a significant uncertainty that had plagued the NFT industry and provides brand owners with clearer legal recourse against infringement.
The panel also ruled that critical questions about consumer confusion in trademark infringement and cybersquatting claims must be decided by a jury rather than through summary judgment. This suggests that NFT trademark cases require more nuanced factual analysis than can be determined by a singular reading of the case law.
Third, the panel rejected Ripps’ argument that Yuga abandoned its trademark rights by granting NFT purchasers broad usage rights – or in other words, engaging in naked licensing. This clarifies that NFT creators can grant extensive licenses to purchasers without losing trademark protection.
### Implications for the Industry
The Ninth Circuit’s decision sends several important signals:
First, the ruling reinforces the idea that traditional trademark protections extend to virtual assets – a key development for luxury brands experimenting with NFTs, digital fashion, and metaverse activations.
Second, it also sends a warning to creators who seek to “remix” or parody digital products, indicating that courts will scrutinize such uses under not only traditional trademark analysis, but also First Amendment inquiries.
Third, by requiring jury trials for consumer confusion analysis, the court acknowledges that NFT trademark disputes involve complex factual questions that cannot be resolved through summary judgment.
Best Practices for NFT Creators and Brands
NFT Creators
1. Secure Proper Rights: creators must ensure they own or have licensed all I.P. elements before minting;
2. Clear Licensing Terms: creators need to specify exactly what rights purchasers receive;
3. Trademark Protection: creators should consider registering trademarks for NFT collection names and distinctive elements;
4. Technical Implementation: creators must embed licensing terms in smart contract code and metadata.
Brands
1. Strategic Planning: brands should develop comprehensive NFT strategies that align within existing I.P. portfolios, or expand those areas of I.P. that are deficient in protecting their NFT assets;
2. Monitoring Systems: Implement blockchain monitoring to detect unauthorized use of trademarks;
3. Platform Relationships: Establish relationships with major NFT marketplaces for rapid takedown procedures.
NFT Purchasers
1. Due Diligence: purchasers and investors should verify the legitimacy of NFT projects before purchasing; remember: Caveat Emptor, or “buyer beware”;
2. Understand License Terms: purchasers should review what rights they actually receive with the purchase;
3. Respect I.P. Rights: purchasers should avoid infringing uses even if the NFT grants broad rights,
Conclusion
For industry participants, the key takeaway is that NFTs are not exempt from traditional I.P. law – they are subject to the same fundamental principles of copyright and trademark protection, albeit with new technical and enforcement challenges. Success in this space requires careful attention to IP rights, clear licensing terms, and proactive monitoring and enforcement strategies.
The NFT industry’s maturation will depend largely on how successfully it integrates robust IP protections with technological innovation. Yuga Labs represents an step in that direction, but the journey toward a comprehensive legal framework for NFT intellectual property is far from complete.
For more questions, please contact Yonaxis I.P. Law Group.
- ___Fed. 4th____, Case No. 24-879 (9th Cir. July 23, 2025), affirming-in-part and reversing-in-part Yuga Labs, Inc. v. Ripps, ___F. Supp. 2d___, Case No. 2:22-cv-04355-JFW-JEMx (C.D. Cal. 2024). ↩︎