Some Lanham Act/UCL claims against TM filing entities can proceed despite potential difficulties of proof

LegalForce RAPC Worldwide P.C. v. Swyers, No.
17-cv-07318-MMC, 2018 WL 4961660 (N.D. Cal. Oct. 12, 2018)
RAPC alleges that Swyers, an attorney, owns TTC and
Trademark LLC, which provide “trademark related services,” and also owns
Trademark PLLC, a law firm that provides “legal services in trademark related
matters.” TTC allegedly made false statements on its website, and the
defendants’ business is allegedly “built upon the foundation of the
unauthorized practice of law” and involves “submitting or aiding and abetting
their customers in submitting fraudulent specimens to the USPTO” in violation
of the Lanham Act and California’s UCL.
The court partially granted defendants’ motion to dismiss,
with limited leave to amend. In terms of standing, direct competition means
that “a misrepresentation will give rise to a presumed commercial injury that
is sufficient to establish standing,” and RAPC alleged it “compete[s]” with TTC
to provide “small businesses” with “services that allow them to protect their
marks through filings with the [USPTO].” As for proximate cause, RAPC alleged
lost customers, supported by the allegation that, from the year TTC was formed
until the lawsuit was filed, its market share declined from “nearly 2.4%” to
“approximately 1.8%,” or “approximately 2670 trademark[ ] filings per year.” RAPC
alleged that it had to reduce its prices from “$499 to $199 and lower to match
the unfair competition of TTC.” Though proof might be difficult, these
allegations were sufficient at the pleading stage.
As for specific challenged statements, most of them were actionable.
“Created by USPTO Attorneys” and similar statements were allegedly false because
TTC was created by just one former USPTO Attorney – Swyers, and statements that
didn’t include “former” were also allegedly false because Sywers “was excluded
from practice by the USPTO in January 2017” and cannot apply for reinstatement
for “at least five years.” The court found Rule 9(b) satisfied given the
specificity of the allegations.  “We’ve
Prepared and Filed Over 20,000 Office Action Responses” was allegedly false
because TTC hadn’t done this in the time since 2015, when it was formed. The defendants
argued that its statement “may refer to TTC’s successor entities, or to other
lawyers.” But the complaint made no reference to any such successors or
predecessors, and defendants didn’t identify any mentions of such on its
website. Thus, the court couldn’t find as a matter of law that a customer would
reasonably understand “we” to refer more broadly to successors or predecessors
in interest, or to “other lawyers” from TTC’s “Network of Independent Attorneys.”
Indeed, the webpage the defendants cited “distinguishes between ‘we’ and ‘your
attorney’” by stating “Depending on the package you select we, or your attorney
you select through our Network of Independent Attorneys (NIA) will work with
you to assemble your office action response ….” For similar reasons, “Trusted
by over 100,000 Businesses Since 2003” was sufficiently alleged to be false,
since TTC was only formed in 2015 and allegedly hadn’t had over 100,000
customers.
“Created by the Top Trademark Law Firm in the United States”
was allegedly false because TTC was created by Swyers personally as a sole
member, and that if Trademark PLLC, a law firm, created TTC, the reference to a
“top” firm is false because Trademark PLLC’s owner Swyers was disbarred by the
USPTO.  However, this statement was nonactionable.
First, the pages on which the statement was found couldn’t reasonably be read
to say that TTC was created by a law firm. Instead, TTC stated that one of its “packages”
was “created” by the unnamed “Top Trademark Firm” and that the other two
packages include “software” the unnamed law firm “created,” neither of which
were alleged to be false.  Also, the use
of “top” to describe the firm was puffery.
TTC’s website allegedly contained the false claim “As
featured in,” under which were displayed “rotating banners showing logos” of a
number of businesses, specifically, “Yahoo Finance, CNNMoney.com, CNBC, Compare
LegalForms, Bank of America Small Business Community, Time, NBCNews.com, the
Wall Street Journal, and INC500.” But the allegation that “upon information and
belief, TTC has never been featured on these websites” was not accompanied by a
statement of the facts upon which the belief was founded, so it was dismissed.  
State law claims: RAPC alleged that TTC has violated § 17200
of the UCL by submitting to the USPTO “fraudulent specimens” and by engaging in
the “unauthorized practice of law.” 
However, RAPC lacked standing to bring the first claim; it failed to
allege any facts to support a finding that its injuries occurred as the result
of the submission of fraudulent specimens. 
Plus, the allegations of fraud weren’t specific enough to satisfy Rule
9(b).  By contrast, RAPC had standing for
the unauthorized practice of law allegations because it alleged that it “suffered
losses in revenue and asset value and was required to pay increased advertising
costs specifically because of the [alleged unauthorized practice of law],” even
though the general purpose of the law is to protect the public and not to
protect lawyers from competition.  Rule
9(b) didn’t apply because this part of the claim didn’t sound in fraud; rather
than being based on advertising that defendants could engage in the practice of
law, it was based on the unauthorized practice of law itself, which was
sufficiently alleged in the complaint. Nor did primary jurisdiction bar the claim:
“although the USPTO, as set forth above, has identified on its website conduct
that, in its view, constitutes the unauthorized practice of law, the USPTO has
made clear its position that ‘Congress has not authorized [it] to regulate
entities such as TTC.’” However, RAPC was limited to seeking injunctive relief,
not restitution because it failed to allege that TTC obtained any property from
RAPC in which RAPC had an ownership interest.
§ 17200 claims against the Trademark defendants were
dismissed because there were no allegations that the claims arose out of or
resulted from California-related activities (e.g., submission of a fraudulent
specimen or unlawful practice of law on behalf of a California customer).

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