LegalForce, Inc. v. LegalZoom.com, Inc., No. 3:2018cv07274 - Document 68 (N.D. Cal. 2019)
Court Description: ORDER DENYING DEFENDANT'S MOTION TO DISMISS FIRST AMENDED COMPLAINT. Signed by Judge Maxine M. Chesney on May 13, 2019. (mmclc1, COURT STAFF) (Filed on 5/13/2019)
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1 2 3 4 IN THE UNITED STATES DISTRICT COURT 5 FOR THE NORTHERN DISTRICT OF CALIFORNIA 6 7 LEGALFORCE, INC., Plaintiff, 8 v. 9 10 LEGALZOOM.COM, INC., ORDER DENYING DEFENDANT'S MOTION TO DISMISS FIRST AMENDED COMPLAINT Re: Dkt. No. 59 Defendant. 11 United States District Court Northern District of California Case No. 18-cv-07274-MMC 12 13 Before the Court is defendant LegalZoom.com, Inc.'s ("LegalZoom") Motion, filed 14 April 4, 2019, "to Dismiss the First Amended Complaint." Plaintiff LegalForce, Inc. 15 ("Trademarkia")1 has filed opposition, to which LegalZoom has replied.2 Having read and 16 considered the parties' respective written submission, the Court rules as follows.3 17 In the First Amended Complaint ("FAC"), Trademarkia alleges it operates 18 Trademarkia.com, a website providing "trademark watch and monitoring services," and 19 that it has registered the marks "Trademarkia" and "LegalForceTrademarkia" (see FAC 20 ¶¶ 3-4, 9, 16); Trademarkia alleges that LegalZoom, a "competitor[ ]," operates 21 22 23 24 25 26 27 28 1 Plaintiff, both in its First Amended Complaint and its opposition to the instant motion, refers to itself as "Trademarkia," a mark it states it uses to conduct business. 2 Trademarkia's request for leave to file a surreply is hereby DENIED, as, contrary to Trademarkia's assertion, LegalZoom did not raise a new argument in its reply, and, in any event, Trademarkia's proposed surreply is wholly based on factual assertions not set forth in the FAC. See Monzon v. Southern Wine & Spirits, 834 F. Supp. 2d 934, 941 (N.D. Cal. 2011) (holding court may not consider "new facts alleged in a plaintiff's opposition to a defendant's motion to dismiss," where motion challenges complaint on its face). 3 By order filed May 7, 2019, the Court took the matter under submission. 1 LegalZoom.com, a website on which LegalZoom likewise provides "trademark watch and 2 monitoring services" (see FAC ¶ 4). According to Trademarkia, LegalZoom purchased 3 the domain name "LegalZoomTrademarkia.com" in 2012 (see FAC ¶ 47) and, from April 4 2014 through April 2018, "divert[ed] traffic from LegalZoomTrademarkia.com to its 5 website LegalZoom.com" (see FAC ¶¶ 47-48). Based on the above allegations, 6 Trademarkia asserts four Claims for Relief, the First, Second, and Fourth based on 7 trademark infringement, and the Third based on cyberpiracy. 8 United States District Court Northern District of California 9 Trademarkia's initial complaint, which asserted the same four claims as those asserted in the FAC, was dismissed for lack of standing. Specifically, the Court found 10 Trademarkia failed to plead facts to support a finding that it had suffered some 11 threatened or actual injury as a result of LegalZoom's use of the domain name 12 LegalZoomTrademarkia.com. (See Order, filed March 13, 2019.) 13 By the instant motion, LegalZoom argues Trademarkia has not cured the 14 deficiency identified in the Court's prior order, and, alternatively, that Trademarkia's 15 trademark infringement claims are subject to dismissal for failure to state a claim upon 16 which relief can be granted. The Court considers LegalZoom's arguments in turn. 17 A. Standing 18 A plaintiff has standing "when the plaintiff himself has suffered some threatened or 19 actual injury resulting from the putatively illegal action." See Warth v. Seldin, 422 U.S. 20 490, 499 (1975) (internal quotation and citation omitted). 21 As noted, Trademarkia, in its initial complaint, did not allege facts to support 22 standing. In its response to the instant motion, Trademarkia argues it has cured the 23 above-noted deficiency by adding factual allegations pertaining to the parties' "trademark 24 licensing negotiations over the Trademarkia Marks." (See FAC ¶ 35.) In particular, 25 Trademarkia now alleges it offered LegalZoom, in return for $120,000 per month, a 26 license to use the mark Trademarkia on a website to be called "LegalZoom Trademarkia" 27 (see FAC ¶¶ 42-44), that LegalZoom, "[t]hinking that Trademarkia's licensing 28 requirements at $120,000 were too high," ended the licensing negotiations in December 2 1 2011 (see FAC ¶ 46), that six months later LegalZoom purchased the domain name 2 LegalZoomTrademarkia.com without payment to Trademarkia (see FAC ¶¶ 46-47), and 3 that LegalZoom thereafter used said domain (see FAC ¶ 47). Damages in a trademark infringement action can be based on a "hypothetical United States District Court Northern District of California 4 5 royalty rate." See Sands, Taylor & Wood v. Quaker Oats Co., 34 F.3d 1340, 1344-45 6 (7th Cir. 1994); see also Boston Professional Hockey Ass'n v. Dallas Cap & Emblem 7 Mfg., Inc., 597 F.2d 71, 76 (5th Cir. 1979) (holding damage award in trademark 8 infringement case properly based on amount defendant would have paid to obtain license 9 to use plaintiff's marks). Although LegalZoom argues the FAC does not include "well- 10 pled facts" to support a finding that Trademarkia is entitled to a licensing fee of $120,000 11 a month (see Def.'s Mot. at 7:17-19; see also id. at 12:21-22 (arguing $120,000 licensing 12 fee is "only a hypothetical pipe dream")), the issue at this stage is whether Trademarkia 13 has sufficiently pleaded it incurred an "injury-in-fact," see Maya v. Centex Corp., 658 F.3d 14 1060, 1069 (9th Cir. 2011), not whether it in fact incurred such harm or whether it is in 15 fact entitled to an award in the amount it seeks, see id. at 1068 (holding "threshold 16 question of whether [a] plaintiff has standing . . . is distinct from the merits of his claim"). 17 In light of the allegations set forth above, the Court finds Trademarkia has 18 sufficiently alleged its standing to pursue its claims. See, e.g., J & J Sports Productions, 19 Inc., 2013 WL 5347547, at *4 (E.D. Cal. September 23, 2013) (holding plaintiff sufficiently 20 alleged its standing to assert conversion claim, based on allegation defendant used 21 plaintiff's property without payment of "commercial licensing fee"). Accordingly, the FAC is not subject to dismissal for failure to sufficiently allege 22 23 standing. 24 B. Failure to State a Claim 25 LegalZoom argues the First, Second, and Fourth Claims for Relief, all of which are 26 based on the allegation that LegalZoom engaged in trademark infringement when it used 27 // 28 // 3 1 2 1. Likelihood of Confusion 3 LegalZoom argues the FAC does not include factual allegations sufficient to 4 support a finding that LegalZoom's asserted use of LegalZoomTrademarkia.com has 5 created any likelihood of confusion. 6 United States District Court Northern District of California LegalZoomTrademarkia.com, are subject to dismissal for failure to state a claim.4 "The core element of trademark infringement is whether the defendant's conduct is 7 likely to confuse customers about the source of the products." Multi Time Machine, Inc. 8 v. Amazon.com, Inc., 804 F.3d 930, 933 (9th Cir. 2015) (internal quotation and citation 9 omitted). Here, Trademarkia relies on a theory of "initial interest confusion," see id. at 10 936, specifically, "confusion that creates initial interest in a competitor's product," but is 11 "dispelled before an actual sale occurs," see id. at 936 n.2 (noting "initial interest 12 confusion impermissibly capitalizes on the goodwill associated with a mark and is 13 therefore actionable trademark infringement") (internal quotations and citations omitted).5 14 LegalZoom argues the likelihood of any such confusion has not been shown, as 15 there is no allegation that any potential customer ever was exposed to the challenged 16 domain name. In particular, LegalZoom argues, there are no factual allegations to 17 support a finding that LegalZoom promoted LegalZoomTrademarkia.com or that any 18 customer visited such domain. As set forth below, the Court disagrees. 19 Trademarkia now alleges that LegalZoom utilized an "Affiliate program" through 20 which LegalZoom advertised the services provided at LegalZoomTrademarkia.com. (See 21 FAC ¶¶ 19, 25). In particular, Trademarkia alleges, LegalZoom has a number of 22 "affiliates," namely, entities and individuals who have "blogs," "community newsletters," or 23 other types of websites (see FAC ¶ 19), who "promote" on those sites "LegalZoom 24 25 26 27 28 4 LegalZoom does not contend the Third Claim for Relief, by which Trademarkia alleges a claim for cyberpiracy, is subject to dismissal for failure to state a claim. 5 In this instance, it would appear unlikely that the allegedly "divert[ed]" customers (see FAC ¶ 47) would, after viewing LegalZoom's website, believe LegalZoom.com is sponsored by or otherwise associated with Trademarkia. The FAC does not allege, for example, that LegalZoom's website makes any reference to Trademarkia or its products. 4 1 products using banner ads or text links" directly connecting to LegalZoom.com (see FAC 2 ¶¶ 19, 25), and who receive a "commission" from LegalZoom "[e]ach time a visitor clicks 3 on a LegalZoom link on [an affiliate's] website and completes a purchase" (see FAC Ex. 4 H). 5 6 that displayed such advertisements (see FAC ¶ 25), and that "[m]any of [the affiliates] 7 have visitors who know of the Trademarkia brand" (see FAC ¶ 23), in that "Trademarkia 8 Marks" have been "widely recognized by the general public . . . as a trusted leading news 9 source for any new trademarks filed by celebrities, sports teams, musicians, politicians, 10 11 United States District Court Northern District of California Trademarkia further alleges that "millions of visitors" have viewed affiliate websites or big corporations" (see FAC ¶ 54). Given the above allegations, a reasonable inference can be drawn that a visitor to 12 an affiliate's website, upon viewing an advertisement for LegalZoomTrademarkia.com, 13 would likely believe such advertisement was for services associated with Trademarkia. 14 See, e.g., San Diego Comic Convention v. Dan Farr Productions, 336 F. Supp. 2d 1191, 15 1201 (S.D. Cal. 2018) (holding, where plaintiff and defendant operated competing events, 16 defendant created "consumer confusion" when it included plaintiff's trademark in domain 17 name defendant used to "direct[ ], steer[ ], and point[ ]" customers to defendant's event). 18 19 Accordingly, Trademarkia's infringement claims are not subject to dismissal for failure to sufficiently allege a likelihood of confusion. 20 2. Award Based on Unjust Enrichment 21 LegalZoom next argues Trademarkia has failed to plead facts to support a finding 22 that, if LegalZoom is found liable for trademark infringement, Trademarkia would be 23 entitled to an award based on a theory of unjust enrichment. 24 Upon a showing of trademark infringement, a plaintiff, "subject to equitable 25 principles," may seek an award of damages as a remedy. See Lindy Pen Co. v. Bic Pen 26 Corp., 982 F.2d 1400, 1407 (9th Cir. 1993). "Because proof of actual damage is often 27 difficult, a court may award damages based on [a] defendant's profits on the theory of 28 unjust enrichment." Id. Where a plaintiff seeks such a remedy, "[t]he plaintiff has only 5 1 the burden of establishing the defendant's gross profits from the infringing activity with 2 reasonable certainty," and, if it meets such burden, the defendant "bears the burden of 3 showing which, if any, of its total sales are not attributable to the infringing activity, and, 4 additionally, any permissible deductions for overhead." Id. at 1408. United States District Court Northern District of California 5 Here, Trademarkia alleges it is entitled to "all profits derived by LegalZoom from its 6 illegal acts complained of [in the FAC]" (see FAC, Req. for Relief ¶ H), a claim 7 LegalZoom challenges. In particular, LegalZoom contends Trademarkia has failed to 8 allege any facts to support a finding that LegalZoom received any benefit from its use of 9 LegalZoomTrademarkia.com or that any benefit it may have received caused harm to 10 Trademarkia, and, consequently, Trademarkia is not entitled to seek an award based on 11 a theory of unjust enrichment.6 The Court, however, finds the factual allegations set forth 12 above are sufficient to support a finding that LegalZoom's affiliates, at LegalZoom's 13 request, published advertisements for LegalZoomTrademarkia.com, that some viewers of 14 those advertisements were familiar with Trademarkia and clicked on them believing 15 LegalZoomTrademarkia.com was associated with Trademarkia, that those viewers were 16 then redirected to LegalZoom.com, and that some number of them then completed 17 purchases from LegalZoom.com. 18 19 Accordingly, Trademarkia's request for an award in the form of LegalZoom's profits, based on a theory of unjust enrichment, is not subject to dismissal. 20 C. Rule 9(b) 21 LegalZoom argues that the Second Claim for Relief, which alleges trademark 22 infringement in violation of 15 U.S.C. § 1125(a), is subject to the heightened pleading 23 24 25 26 27 28 6 Although two of Trademarkia's trademark infringement claims are brought under federal statutes (see FAC at 21:10-11, 26:26-27), LegalZoom, in support of the above argument, relies solely on district court cases analyzing unjust enrichment claims brought under California law. See, e.g., Pirozzi v. Apple Inc., 913 F. Supp. 2d 840, 852 (N.D. Cal. 2012) (holding, "[t]o state a claim for unjust enrichment," plaintiff must allege "receipt of a benefit and unjust retention of the benefit at the expense of another"). For purposes of the instant motion, the Court assumes, as does Trademarkia, such authority sets forth the requisite showing for all three of Trademarkia's infringement claims. 6 1 requirements of Rule 9(b) of the Federal Rules of Civil Procedure, and that such 2 requirements have not been met. See Fed. R. Civ. P. 9(b) (providing plaintiff "alleging 3 fraud" must "state with particularity the circumstances constituting fraud"). 4 5 in which Trademarkia alleges, respectively, that LegalZoom's act of "register[ing] 6 LegalZoomTrademarkia.com" was "calculated to deceive consumers" (see FAC ¶ 112) 7 and that "LegalZoom intentionally misleads consumers into thinking that they are going to 8 Trademarkia's website when they enter LegalZoomTrademarkia.com" (see FAC ¶ 113). 9 United States District Court Northern District of California In support of its argument, LegalZoom cites paragraphs 112 and 113 of the FAC, As Trademarkia points out, however, the above-referenced paragraphs are not 10 asserted in support of the Second Claim for Relief, but, rather, in support of the Third 11 Claim for Relief, a claim alleging cyberpiracy, as to which, as noted, LegalZoom has not 12 sought dismissal for failure to state a claim. 13 14 Accordingly, the Second Claim for Relief is not subject to dismissal for failure to comply with Rule 9(b). 15 D. Statutory Standing 16 Lastly, LegalZoom argues the Second Claim for Relief is subject to dismissal for 17 18 failure to sufficiently allege "statutory standing." (See Def.'s Mot. at 24:1.) In Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014), the 19 Supreme Court, noting § 1125(a) creates two "bases of liability," specifically, "false 20 association"7 and "false advertising," see id. at 122, held, "to come within the zone of 21 interests in a suit for false advertising under § 1125(a), a plaintiff must allege an injury to 22 a commercial interest in reputation or sales," see id. at 131-132. Assuming, arguendo, 23 such requirement applies equally in a § 1125(a) suit alleging, as here, false association, 24 see, e.g., Ahmed v. Hosting.com, 28 F. Supp. 3d 82, 90 (D. Mass. 2014) ("assum[ing] 25 without deciding that Lexmark applies in false association claims"), the Court finds such 26 27 28 7 A claim "alleg[ing] the misuse of a trademark" is a "type of false association claim." See Waits v. Frito-Lay, Inc., 978 F.2d 1093, 1110 (9th Cir. 1992) 7 1 requirement has been met. As noted, Trademarkia and LegalZoom are alleged to be 2 competitors that provide "trademark watch and monitoring services" (see FAC ¶¶ 3-4), 3 and, contrary to LegalZoom's argument, the Court finds, based on the allegations 4 discussed in detail earlier herein, Trademarkia has sufficiently alleged an injury to a 5 commercial interest, namely, an interest in sales of its services. 6 7 Accordingly, the Second Claim for Relief is not subject to dismissal for failure to sufficiently allege statutory standing. CONCLUSION 8 9 10 For the reasons stated, LegalZoom's motion to dismiss is hereby DENIED. IT IS SO ORDERED. United States District Court Northern District of California 11 12 Dated: May 13, 2019 MAXINE M. CHESNEY United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8
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