UCL claim could be based on lost opportunity to register trademark

Zamfir v. CasperLabs, LLC, 2023 WL 2415262, No. 21-CV-474 TWR (AHG) (S.D. Cal. Mar. 8, 2023)

Previous ruling. Zamfir, a blockchain researcher, alleged that he was known for his proof-of-stake (PoS) protocol; he adopted the name “Casper” for the research and development of this protocol, and is often credited as being the “face of Casper.” CasperLabs had a failed partnership with him. Zamfir alleged that CasperLab’s officers and agents told him that they would register the Casper trademark on his behalf, so he didn’t register the Casper trademark himself. Instead, CasperLab filed two trademark applications to register the Casper mark in its own name.

Over Zamfir’s objections, CasperLabs released a series of new blockchain products using the Casper name, including a Casper public network, Casper token, and Casper highway protocol. The highway protocol allegedly suffered from performance issues and never met the design requirements that Zamfir had previously advertised when working with CasperLabs on the product, thus allegedly harming his reputation. The continued use of the Casper name allegedly made it more difficult for Zamfir to secure independent research funding and product promotion.

CasperLabs moved to dismiss two of Zamfir’s remaining claims: fraud by intentional misrepresentation and unfair business practices.

Fraud: This requires “actual monetary loss” or “pecuniary damage or injury by reason of having been put in a position worse than he would have occupied had there been no fraud.” The court previously dismissed the claim for failure to sufficiently plead commercial injury. He now alleged that he was deprived “of his exclusive property and presumed nationwide rights in the CASPER Mark,” the benefits and advantages of federal registration, and the value of his unregistered mark.

A trademark is a “limited property right,” and, by alleging a depreciation in the value of his unprotected Casper mark and a deprivation of the Casper trademark, Zamfir sufficiently stated a claim for monetary loss. Although the PTO hasn’t finally resolved the ownership issues, Zamfir allegedly “forfeited a viable opportunity to establish a valuable property right when he gave up the ability to apply for a trademark registration. The viability of such an opportunity is underscored by Defendant’s own successful registration of the trademark, which demonstrates that Plaintiff likely would have secured at least one trademark had he retained the ability to apply.”

UCL:  “With respect to the UCL specifically, section 17200 does not support claims by non-California residents where none of the alleged misconduct or injuries occurred in California.” The complaint alleged that, “[o]n information and belief, CasperLabs’ conduct and false statements ... occurred in California, and CasperLabs’ officers and agents residing within California ratified and participated in CasperLabs’ conduct ....” It was thus plausible that the alleged fraudulent misrepresentation occurred, at least in part, in California. But the UCL claim didn’t allege fraudulent misrepresentation; it alleged Lanham Act unfair competition. Zamfir needed to allege that the acts constituting federal trademark infringement occurred at least in part in California, and he didn’t.

In addition, a UCL claim requires that a plaintiff must have “suffered injury in fact and ha[ve] lost money or property as a result of the unfair competition.” “This injury requirement is more restrictive than the federal injury in fact requirement because it encompasses fewer types of injuries, but it is not intended to be quantitatively more difficult to satisfy.” In prior versions of the complaint, the general allegation that his name, reputation, and goodwill were harmed did not, without more, support the assumption that Zamfir lost money or property. But what about the new allegations that he was deprived of the benefit of a registered trademark/his unregistered trademark’s value was harmed? Those injuries didn’t come from the alleged infringement. However, if the claim had been premised on fraudulent misrepresentation, that would have been enough to plead economic injury. As Kwikset held,

There are innumerable ways in which economic injury from unfair competition may be shown. A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary.