The UGG trademark has been the subject of dispute in several countries. The trademark for "Ugh-Boots" has been removed from the trademark registry in Australia for non-use. Outside Australia and New Zealand, UGG (written in capital letters) is a registered trademark of Deckers Outdoor Corporation.

In 1971, an Australian surfer, Shane Steadman, registered the name "UGH-BOOTS" as a trademark in Australia and began selling sheepskin boots under that name. In 1982 he registered the name "UGH" and a logo containing a stylised Sun with the words "UGG AUSTRALIA". In 1979, Brian Smith, another Australian surfer, brought several pairs of Australian-made boots to the US and began selling them in New York and to surfers in California.[26] He set up Ugg Holdings Inc. and in 1996 purchased the trademarks from Steadman. In 1996 he sold his interest to Deckers and in 1999 Deckers registered the trademarks for "UGG" in the US.

In 1999, Deckers began asserting its new trademark and sent out cease and desist letters to Australian manufacturers but did not press the issue beyond that. In the early 2000s, demand for ugg boots was soaring, partly as a result of US$8 million spent on marketing by Deckers, but also due to several celebrity endorsements. Australian and USA based manufacturers began selling uggs over the Internet, and Deckers' law firm Middletons of Melbourne began a serious effort to halt the Australian companies' sales. In 2004, Deckers sent cease and desist letters to a number of Australian and USA based manufacturers, including Mortels Sheepskin Factory, preventing them from selling uggs on eBay or from using the word in domain names.

In response to these actions by Deckers, some Australian manufacturers formed the Australian Sheepskin Association to fight the corporation's claim, arguing that "ugg" is a generic term referring to flat-heeled, pull-on sheepskin boots. They further argued that Australian manufacturers had been making and trading this style of boot for decades, including exporting them to the US. One of these manufacturers, Perth's Uggs-N-Rugs, appealed to Australian trademark regulators. The officer who heard the case stated that the "evidence overwhelmingly supports the proposition that the terms (ugg, ugh and ug boots) are interchangeably used to describe a specific style of sheepskin boot and are the first and most natural way in which to describe these goods." In 2006 Uggs-N-Rugs won the right to use the term UGG BOOT/S and variations such as UGH UGG BOOT/S, the court also ruled that the trademark "Ugh-boots" should be removed from the trademark register for non-use as Deckers had only been using the UGG logo, not the UGH marks. Deckers retained the rights to their UGG logo as trade mark protection only applies for the way the mark appears in its entirety and not for the words it contains. To date Deckers have declined to pay Uggs-N-Rugs legal costs as required by the ruling. The 2006 ruling only applies in Australia and Deckers still owns the trademarks in all other jurisdictions, including the US, China, Japan and the European Union.

In 2005, the validity of the UGG trademark was challenged in federal court in California; the court ruled for Deckers, stating that consumers in the US consider UGG to be a brand name. In his final order, the judge stated that the defendants had provided anecdotal evidence of the term's generic usage, but Deckers countered through submitting declarations from four professionals in the footwear industry who stated that "UGG" is widely recognized in the industry as a brand name, not a generic term. Deckers also petitioned the Oxford English Dictionary to change the definition of "ugg" from "a kind of soft sheepskin boot" to a definition that included UGG's trademark.

The origins of the ugg boot style are disputed, with both Australia and New Zealand claiming to have been the origin of the footwear.Sheepskin boots were known in rural Australia during the 1920s.While it is not clear when manufacturing started, by 1933 sheepskin boots were being manufactured by Blue Mountains Ugg Boots,and Mortels Sheepskin Factory was making the boots from the late 1950s.
In regard to naming, it appears that ugg boots, ugh boots and ug boots have been used as generic terms for sheepskin boots in Australia and New Zealand since at least the 1960s,although individual accounts have suggested that the terms (or variations thereof) were employed earlier – for example, "fug boots" were worn by pilots during World War I.The 1970s saw the emergence of advertising using the names,but Brian Smith has stated that the boots were referred to as "uggs" long before the word was trademarked.Frank Mortel of Mortels Sheepskin Factory claims he named them "ugg boots" in 1958, when Mortels started production, after his wife commented that the first pair he made were "ugly."
In the 1960s, ugg boots became a popular option for competitive surfers,who used the boots to keep their feet warm after exiting from the surf.Surfing helped popularise the boots outside Australia and New Zealand, when Brian Smith started selling the boots in the United States through the company Ugg Holdings, Inc. in 1979.Ugg Holdings was sold to Deckers Outdoor Corporation in 1995. Generally worn for warmth and comfort, ugg boots had never been considered fashionable,but in the late 1990s and early 2000s sheepskin boots emerged as a fashion trend in the US through Deckers' promotions of the UGG brand, with celebrities such as Kate Hudson, Sarah Jessica Parker, Cameron Diaz, Leonardo DiCaprio and Jennifer Lopez wearing the boots,and with Oprah Winfrey featured UGG brand boots as one of her "Favorite Things" on her TV talk show. Deckers' actions to promote their product "led to an exponential growth in the brand's popularity and recognizability."The company reported US$689 million in UGG sales in 2008,almost a 50-fold increase from 1995.