Friday, April 13, 2018

can investigating claims bind you to arbitration?

LegalForce RAPC Worldwide, P.C. v., Inc., 2018 WL 1738135, No. 17-cv-07194-MMC (N.D. Cal. Apr. 10, 2018)

LegalZoom, which advertises its ability to help people register trademarks, allegedly makes “false comparisons to attorney led services” and engages in the unauthorized practice of law. The court dismissed Lanham Act false advertising claims because LegalForce (which offers “law firm automation and free trademark search services through its website”) failed to allege any injury proximately caused by the allegedly false advertising.  LegalForce even alleged that it “makes no revenue from [the] preparation and filing [of] U.S. trademark applications.” The same problem doomed the California state claims, there under the heading of “lost money or property.”

LegalForce RAPC Worldwide, P.C. v., Inc., 2018 WL 1730333, No. 17-cv-07194-MMC (N.D. Cal. Apr. 10, 2018)

The court enforced LegalZoom’s arbitration clause against LegalForce RAPC and an individual owner, though not against plaintiff/related company LegalForce (see above), on various false advertising-type claims because in the course of investigating LegalZoom’s conduct LegalForce RAPC assented to its website TOS, which has a broad arbitration clause. 

LegalForce RAPC is a law firm that “practices patent and trademark law before the USPTO [United States Patent and Trademark Office]” and is the “sole provider of legal services through the website with respect to trademark filings before the USPTO.”

LegalZoom allegedly “surreptitiously practices law,” as demonstrated when plaintiffs filed two applications through its site and “LegalZoom provided legal advice to [p]laintiffs by selecting [a trademark] classification and modifying the goods and services description from [a] template thereby applying specific fact to law.”  Further, with one application, “LegalZoom provided legal advice as to which trademarks found in [a] search report may conflict with [plaintiffs’ mark].” Plaintiffs also alleged that LegalZoom bought law-related search terms such as “trademark attorney” and “trademark lawyer,” and that the “advertising copy in the resulting advertisements is highly misleading, causing a consumer to believe that he or she will be represented by an attorney.”

Plaintiffs didn’t dispute that, in order for a customer to use LegalZoom’s services on its website, the customer must agree to LegalZoom’s TOS, whose arbitration agreement states:

LegalZoom and you agree to arbitrate all disputes and claims between us before a single arbitrator. The types of disputes and claims we agree to arbitrate are intended to be broadly interpreted. It applies, without limitation, to:
· claims arising out of or relating to any aspect of the relationship between us, whether based in contract, tort, statute, fraud, misrepresentation, or any other legal theory;
· claims that arose before these or any prior Terms (including, but not limited to, claims relating to advertising); · claims that are currently the subject of purported class action litigation in which you are not a member of a certified class; and
· claims that may arise after the termination of these Terms.

It was undisputed that plaintiff Raj Abhyanker and LegalForce RAPC employee Ryan Bethell assented to the terms, thus binding them both, even if Ryan Bethell didn’t intend to bind LegalForce RAPC when he acted on its behalf.  However, there was no showing that LegalForce was an agent of Abhyanker or LegalForce RAPC as to the transactions with LegalZoom, and thus LegalForce wasn’t bound.

The validity of the TOS was for the arbitrator; all the claims were within the scope of the contract, including claims for declaratory relief and the Lanham Act false advertising claim given the coverage of “claims relating to advertising.”

So, it seems that doing online investigation of an alleged infringement might send you to binding arbitration if the alleged infringer’s site is set up properly.  Can this be avoided by using an outside investigator?  Courts will hold such investigators’ solicitation of copies to be “unauthorized” when they’re sent by a copyright owner, but that doesn’t really answer the question about agency; an independent contractor plausibly wouldn’t bind the IP owner, but I wonder.

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