New technologies frequently challenge existing legal frameworks, and few innovations have sparked more legal debate than those related to blockchain and non-fungible tokens (NFTs). Two of the most common legal and commercial questions are: What are NFTs? and Are NFTs considered goods under trademark law?
In its landmark decision in Yuga Labs, Inc. v. Ripps, No. 24-879 (9th Cir. July 23, 2025), the U.S. Ninth Circuit directly addressed both questions. The Court provided a comprehensive explanation of what NFTs are and held that NFTs can be considered “goods” under the U.S. Lanham Act, which governs U.S. federal trademark law. This blog highlights key aspects of the Court’s decision, particularly for those seeking to understand the legal classification of NFTs in intellectual property law.
What Are NFTs?
To answer the question “what are NFTs?”, the Ninth Circuit adopted this detailed definition of NFTs and related definitions of minting, and blockchains:
“Simply stated, even if not simply understood, an NFT is an intangible, fully virtual, authenticating software code that is associated with separate digital or physical content. See Hannah Bobek, Note, To Mint or Not to Mint: Non-Fungible Tokens and the Right of Publicity, 92 Fordham L. Rev. 639, 651 (2023). Like other non-fungible assets, each NFT is unique. And the association of an NFT with otherwise fungible digital content transforms that content into a unique asset. Id. This is called “tokenizing.” Id.
By way of analogy, consider an autographed baseball. If the ball was mass-produced, many people could have the exact same ball. But when one of the balls is signed by a Major League player, the signature transforms it into a unique good with greater value than the other identical-but-unsigned balls. NFTs work this way in cyberspace. The autograph on the ball is like the authenticating software code on the digital art file. The digital file may be replicable, allowing many people to access the same piece of art. But attaching the software code to the digital file makes something that is otherwise commonplace, unique. And that uniqueness can confer value.
NFTs can tokenize anything, such as digital art, avatars, video game wearables, digital fashion accessories, and music.” Id. (footnotes omitted). But they are primarily used for selling digital art because they “provide a way to create artificial scarcity in the digital art market.” Andrew C. Michaels, Confusion in Trademarked NFTs, 7 Stan. J. Blockchain L. & Pol’y 1, 2 (2024). To be clear, the underlying digital artwork or other content tokenized by an NFT may or may not, by itself, be exclusive, copyrightable, or subject to any ownership interest at all. But the pairing of authenticating software code with digital content can create a unique asset with proprietary value. See Bobek, supra, at 652 (“At its essence, NFTs bring unique assets into the digital space and make ownership of that asset verifiable.” (quoting An P. Doan, Mark W. Rasmussen, Joshua B. Sterling & Harriet Territt, NFTs: Key U.S. Legal Considerations for an Emerging Asset Class, Fintech L. Rep. (2021))); see also Hermès Int’l v. Rothschild, 654 F. Supp. 3d 268, 278 (S.D.N.Y. 2023) (“Individuals do not purchase NFTs to own a `digital deed’ divorced from any other asset: they buy them precisely so that they can exclusively own the content associated with the NFT.”).
The process by which NFT creators tokenize content is called “minting.” Bobek, supra, at 651-52. When an NFT is minted, it is stored on a “blockchain.” Id. at 652. A blockchain is a public digital leger “that keeps track of who owns what.” Michaels, supra, at 5. “The block is a list of recorded transactions; the chain is transactions recorded with a hash that chains[,] or links, preceding blocks with new blocks.” Non-Fungible Tokens (NFTs) Briefing Paper, Nat’l Archives & Recs. Admin. 4 (Apr. 2024). Think of real property deed records maintained by county recorders’ offices. Just like with recorded land transactions, a blockchain records the creation and initial conveyance of the NFT and all subsequent conveyances of that NFT.
Blockchains allow “ownership of the NFT to be transferred and authenticated electronically without the need for a physical item or a trusted third party, such as a bank.” Michaels, supra, at 5. So long as the computers have “the appropriate software,” id. at 5-6, the blockchain “ledger is maintained across the computers of all blockchain users through a peer-to-peer network,” Dr. Thibault Schrepel, Collusion by Blockchain and Smart Contracts, 33 Harv. J.L. & Tech. 117, 119 (2019). For example, when one person transfers an NFT to another, a record of the transaction becomes permanently stored on the blockchain. See Joseph B. Fazio, 1 Internet L. & Practice § 1:28 (Oct. 2024). In this way, a blockchain is a transparent cyberspace ledger between transacting parties.
The minting, storage, and transfer of NFTs on a blockchain are accomplished through a “smart contract.” Edward Lee, NFTs As Decentralized Intellectual Property, 2023 U. Ill. L. Rev. 1049, 1076 (2023); see also Risley v. Universal Navigation Inc., 690 F. Supp. 3d 195, 202 (S.D.N.Y. 2023) (describing smart contracts as “programs that write the terms of the agreement between the buyer and seller of tokens directly into the program’s code”), aff’d in part, vacated in part No. 23-1340-cv, 2025 WL 615185 (2d Cir. Feb. 26, 2025). A smart contract is not a contract in the legal sense; it is an “automatically executing computer code.” Jean Bacon et. al., Blockchain Demystified: A Technical and Legal Introduction to Distributed and Centralised Ledgers, 25 Rich. J.L. & Tech. 2, 93 (2018). In other words, a smart contract is essentially a computer program “that automatically brings about some specified action, such as carrying out transfers of, or executing other actions relating to, digital assets according to a set of pre-specified rules.” Id. at 86. As a result, smart contracts can be used to automate agreements between parties according to the instructions written into their code.”
Are NFTs Goods Under the Lanham Act?
The critical legal question “are NFTs goods?” was the central issue in Yuga Labs. The defendants had argued that NFTs are not “goods” under the Lanham Act. The Court firmly rejected this:
“This argument is not persuasive… the Lanham Act protects marks used with ‘any goods or services’…
The court held that the U.S. Patent and Trademark Office (PTO) also supported the classification of NFTs as goods. In its 2024 report to Congress, the PTO stated:
“Trademarks perform the same functions in NFT markets as they do in other markets: They identify the source of goods and services…”
The Ninth Circuit concluded that:
“NFTs exist only in the digital world… NFTs are marketed and actively traded in commerce… consumers purchase NFTs as commercial goods in online marketplaces… Thus, we conclude that Yuga’s NFTs are ‘goods’ under the Lanham Act.”
Conclusion
The decision in Yuga Labs v. Ripps settles two important legal questions: What are NFTs? and Are NFTs goods under trademark law? According to the Ninth Circuit, NFTs are unique digital assets tied to content through verifiable software code and blockchain technology—and they qualify as “goods” under the Lanham Act.
For more on NFTs, see Barry Sookman Non-fungible tokens (NFTs) and intellectual property rights
