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)

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

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.

from Blogger http://tushnet.blogspot.com/2023/03/ucl-claim-could-be-based-on-lost.html

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