LegalForce RAPC Worldwide, P.C., a California S corporation operating legal services websites, sued LegalForce, Inc., a Japanese corporation providing legal software services, for trademark infringement. LegalForce USA alleged that LegalForce Japan infringed its "LEGALFORCE" mark through its United States expansion plan, website ownership, and the advertising and selling of equity shares to investors in California. The district court dismissed the website claims for lack of personal jurisdiction and the expansion plan claims as unripe. However, the court retained jurisdiction over the equity claims but dismissed them for failure to state a claim, reasoning that selling equity is not connected to a sale of goods or services and that the Lanham Act could not apply extraterritorially to LegalForce Japan's services in Japan.
The Ninth Circuit analyzed whether using a trademark in connection with the sale of equity constitutes using the mark "in connection with" goods or services under the Lanham Act. The court concluded that it does not. First, the court determined that equity is not a "good" because it is not a movable or tangible thing, citing the Uniform Commercial Code and Black's Law Dictionary. Second, the court held that equity is not a "service" because a service requires the performance of labor for the benefit of another, whereas investors who buy equity become owners of the company, not separate "others" for whom labor is performed. The court rejected the plaintiff's reliance on cases involving fundraising or investment management, noting those cases involved defendants conducting activity on behalf of clients, not selling equity in themselves. Additionally, the court affirmed that the Lanham Act does not apply extraterritorially to LegalForce Japan's services in Japan. Applying the two-step test from Abitron Austria GmbH v. Hetronic International, Inc., the court found that the Lanham Act lacks a clear affirmative indication of extraterritorial application and that the relevant conduct—use of the mark in connection with goods or services—occurred outside United States territory.
The district court's judgment dismissing the Lanham Act claims is affirmed. LegalForce USA's complaint fails to state a claim upon which relief can be granted because the sale of equity does not trigger Lanham Act protections. The decision clarifies that corporate equity is distinct from the goods and services a company offers to customers in the market, limiting the scope of trademark infringement claims in fundraising contexts. No other issues were reached by the court.
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