Thursday, November 08, 2018

Quite a specimen: trademark-filing firms' legal battle continues, in part

LegalForce RAPC Worldwide P.C. v. Trademark Engine LLC, 2018 WL 5734621, No. 17-cv-07303-MMC (N.D. Cal. Oct. 31, 2018)

RAPC, a law firm, alleged that its competitor TME “operates website to advertise, promote and provide trademark related services” and used false or misleading statements in Google ads and on its website, as well as engaging in the unauthorized practice of law, in violation of the Lanham Act and Cal. Bus. & Prof. Code § 17200 et seq.

Two TME ads allegedly contained the word “professional,” which allegedly was a misrepresentation that TME’s services were “lawful”; TME allegedly violated customers’ privacy rights, submitted fraudulent specimens to the PTO, and engaged in the unauthorized practice of law.  One ad, displayed in response to a search for “trademark filing,” said “Let the Professionals File Your Trademark Today!” while the website touted “Professional Preparation of your federal trademark application.” The court found that this was puffery, without specific actionable representations.

RAPC also alleged that TME misdescribed its “Identity Protection Program.” TME’s website stated that when a trademark applicant submits an application directly to the USPTO, the applicant’s “email and phone number will be available for all to see,” including “[s]pammers, solicitors and anyone else,” but that, for a monthly fee of $5, TME would provide its email and phone number to the USPTO. TME argued that RAPC hadn’t shown injury from these statements, but where there’s direct competition, “a misrepresentation will give rise to a presumed commercial injury that is sufficient to establish standing.” RAPC also pled falsity by alleging that, “regardless of whether a customer purchased the $5/month privacy protection program or not, [TME] always lists each of its customer’s contact information, including emails and phone numbers, on [the] USPTO’s trademark application forms” and that such customer information is “publically [sic] available on [the] USPTO’s website.” RAPC also sufficiently pled proximate cause by alleging it “lost customers” to TME and that its “market share” has “decline[d]” from “nearly 2.4%” to “approximately 1.8%,” and that it had to reduce its prices from “$499 to $199 and sometimes lower to match the unfair competition of [TME].” This was enough at the pleading stage.

§ 17200 prohibits any “unlawful, unfair or fraudulent business act or practice.” RAPC alleged four kinds of practices. First, violation of the right to privacy set forth in the California Constitution by “(1) waiving clients’ rights to cancel the filing or refund the government fee; (2) waiving clients’ rights to privacy by allowing their names, phone numbers, emails and street addresses to be published publicly; and (3) permitting [the] USPTO to make clients’ information available for public search on [the] USPTO’s online databases and other databases.”  But RAPC failed to allege facts to support the requisite finding that it lost money or property as a result of any of TME’s clients having been deprived of their right of privacy. Nor did RAPC allege a legally protected privacy interest in a client’s “right to cancel the filing or refund the government fee” or “an egregious breach of social norms” in disseminating information to the PTO.

Submission of fraudulent specimens to the PTO: Though “knowingly and willfully” submitting a fraudulent specimen violates the law, RAPC didn’t allege facts sufficient to support a finding of such intent.  

Unauthorized practice of law: A law firm plaintiff has standing to contest this conduct if the firm “suffered losses in revenue and asset value and was required to pay increased advertising costs specifically because of the [allegedly unauthorized practice].” RAPC properly alleged these losses and their causation, and the facts alleged, if proven, were sufficient to support a finding that TME engaged in unauthorized practice of law under California and Texas law.

Violation of PTO regulations for “practitioners”: RAPC alleged violations of various PTO rules, but the complaint didn’t allege facts to support a finding that the individual defendant, Crabtree, did so.

RAPC also alleged “unfair” and “unlawful” business practices from the submission of fraudulent specimens and the unauthorized practice of law. For competitor-plaintiffs, “unfair” means “conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” The allegedly unlawful acts here didn’t qualify.

RAPC was entitled to seek injunctive relief for its remaining § 17200 claims, but not restitution—it never had an ownership interest in defendants’ allegedly wrongfully acquired money.

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