A California IP law firm today filed a lawsuit in federal court seeking to stop LegalZoom for what it alleges are the on-line company’s pervasive and unabated unauthorized practice of trademark law (UPL), in violation of the Rules of Professional Conduct, antitrust law, and state and federal unfair competition law, among other causes of action.
LegalForce RAPC Worldwide, P.C. (“LegalForce”), a Silicon Valley-based law firm, and its owner, Raj V. Abhyanker, a California patent attorney who developed the popular Trademarkia.com search engine and website, filed an 81-page complaint in the Northern District of California against LegalZoom, three of its attorney-owners, the State Bars of California, Texas, and Arizona, and the United States Patent and Trademark Office. See LegalForce RAPC Worldwide, P.C. et al. v. LegalZoom.Com, Inc., et al., 5:17-cv-07194-NC (N.D. Cal. Dec. 19, 2017). See Complaint-LegalForce-RAPC-v-LegalZoom The exhibits to the LegalForce complaint are linked here: Exhibits to LegalForce Complaint v LegalZoom
The complaint alleges that LegalForce has been the largest law firm filer of trademarks before the USPTO in each of the last five years. The firm employs over ten (10) attorneys who specialize in the practice of trademark law before the USPTO, operates a “robust” conflicts of interest checking system, and maintains a Lawyer Trust Account (IOLTA) for the protection of client funds. Moreover, LegalForce’s client communications are protected by the attorney-client privilege. Furthermore, because it is a law firm, LegalForce is prohibited by the Rules of Professional Conduct in every jurisdiction except the District of Columbia from co-ownership with non-attorneys; that prevents the Firm from raising venture capital and makes it more difficult for the firm to compete.
Then along comes LegalZoom, which insists it is not a law firm and does not provide legal services–including trademark-related legal services.
Nonsense, alleges the complaint. LegalForce alleges that while LegalZoom is not a law firm and it employs non-attorneys, it is very much engaging in the practice of trademark law. The lawsuit contends that LegalZoom “eschews” the long-standing client protections provided by lawyers and law firms, and alleges that LegalZoom is not authorized to practice law in any state and is not a registered or bonded legal document assistant under California law. Furthermore, for its trademark legal services, no client trust fund exists, lawyers are not supervising non-lawyers, and conflicts of interest are not checked.
The lawsuit also alleges that LegalZoom, unlike LegalForce (which incurs tremendous expenses to comply with its ethical responsibilities), has been able to escape regulatory scrutiny, at least with respect to its trademark preparation and related USPTO services. The complaint wants this to stop and wants LegalZoom to be required to abide by the same rules that LegalForce has abided by for years.
In fact, the complaint alleges:
LegalZoom has recently boasted that it has filed more than two-hundred fifty thousand (250,000) trademarks before the United States Patent and Trademark Office on behalf of customers. In addition, LegalZoom’s co-founder Brian P.Y. Liu admitted that he created LegalZoom with his co-founder to provide legal services.
The complaint further alleges that LegalZoom’s website’s disclaimer, in which it asserts that it is not a law firm and does not practice law, is “false and misleading” because LegalZoom is in fact providing such legal services and the entity has hired individual non-lawyers who are practicing law without a license. According to the complaint, LegalZoom engages in the unauthorized practice of trademark law by, among other things, employing non-lawyers who:
- Consult with and advise applicants or registrants in contemplation of filing TM applications or application-related documents;
- Prepare and prosecute trademark applications;
- Conduct pre-filing searches for potentially conflicting marks; and
- Advise applicants on substantive trademark examination issues, such as the acceptability of specimens and the appropriate classification of trademark goods and services.
According to the complaint, further proof that LegalZoom engages in trademark UPL is its non-lawyer “peace of mind” service. The complaint alleges the “peace of mind” service “deceptively geo-targets” LegalZoom ads for audiences searching through browsers using Google AdWord tools for the term “trademark attorney.” The browser result then intentionally misdirects members of the public to non-lawyers, who provide trademark-related legal advice and services.
Furthermore, since LegalZoom does not have to pay the overhead associated with a real law firm, the complaint alleges, LegalZoom can afford to put more money into marketing–which seems to be paying off since it ranks at or near the top of any Google search for terms such as “trademark application.”
The complaint alleges that LegalZoom and its attorney owners have caused monetary and non-monetary harm to LegalForce by engaging in unfair business practices, operating with a non-attorney owned corporate structure, and violating laws proscribing false advertising, professional negligence, breach of fiduciary duty, and the unauthorized practice of law.
LegalForce alleges that it considered adopting the LegalZoom no-lawyer business model. That model would be economically advantageous since LegalForce could then put more money into marketing and advertising, and it would not have to worry about the overhead and regulatory issues associated with employing and supervising attorneys and operating in accordance with the relevant ethics rules. LegalForce, however, refused to follow the LegalZoom “model” out of respect for, and concern of being accused of violating, the pertinent Rules of Professional Conduct (in the interest of full disclosure, the undersigned and other ethics attorneys have counseled LegalForce–a fact alleged in the complaint).
With respect to its antitrust claim, the complaint alleges:
Plaintiffs have been compelled to file this lawsuit because Defendants are illegally and unreasonably restraining trade in the market for federal trademark application legal services . . . . Specifically, LegalZoom is illegally and unreasonably excluding Plaintiffs from offering similar services by its own public statements on YouTube [those statements include representations] by LegalZoom’s CEO that “I can destroy innovation and disruption if i take two elements away #1 capital, and #2 a team . . . . [without such elements] . . . it will be impossible . . . for lawyers to compete with LegalZoom.”
The complaint seeks monetary damages, attorneys’ fees, and declaratory and injunctive relief prohibiting LegalZoom and its owners from engaging in the practice before the USPTO in trademark matters.