Ninth Circuit Clarifies That Trademark Use in Corporate Fundraising Does Not Qualify as “Use in Commerce” Under the Lanham Act

LegalForce RAPC Worldwide, P.C. v. LegalForce, Inc., Case No. 23-2855, 2024 U.S. App. LEXIS 32725 (9th Cir. Dec. 27, 2024)

The Ninth Circuit affirmed the dismissal of trademark infringement claims brought under the Lanham Act by LegalForce RAPC Worldwide, P.C. against LegalForce, Inc. The court held that using a trademark in connection with the sale of equity does not constitute use “in connection with goods or services” under the Lanham Act. This decision clarifies the boundaries of trademark law, particularly in distinguishing corporate activities from commercial use tied to goods or services.

Background

LegalForce RAPC Worldwide, P.C. (“LegalForce USA”), a California-based legal services provider, sued LegalForce, Inc. (“LegalForce Japan”), a Japanese corporation offering legal software, for trademark infringement under the Lanham Act. LegalForce USA alleged that LegalForce Japan’s use of the “LEGALFORCE” mark during fundraising activities in the United States confused investors and infringed its trademark.

LegalForce Japan raised funds from U.S. investors, including Goldman Sachs and Sequoia Capital, using the “LEGALFORCE” mark. LegalForce USA claimed that this use diverted potential investments, citing a $130 million fundraising round secured by LegalForce Japan. However, the district court dismissed the claims, holding that advertising and selling equity does not involve goods or services under the Lanham Act. LegalForce USA appealed.

The Ninth Circuit’s Analysis

The court reviewed the requirements for trademark infringement under the Lanham Act, which necessitate the use of a mark “in connection with goods or services” likely to cause confusion.

1. Equity Does Not Constitute Goods or Services
   The Ninth Circuit agreed with the district court that equity sales are neither “goods” nor “services” under the Lanham Act. The court relied on established definitions:
   • Goods: Tangible, movable property, such as products or wares. Equity, as intangible ownership in a corporation, does not meet this definition.
   • Services: Labor performed for the benefit of another. The court found that selling equity does not involve providing a service to others because investors become part-owners, not customers.

This distinction ensures that corporate structuring activities, such as selling shares, do not fall within the Lanham Act’s scope, preserving the law’s focus on protecting trademarks in commercial contexts.

2. Fundraising Is Not “Use in Commerce”
   LegalForce USA argued that LegalForce Japan’s fundraising activities constituted commercial use of the “LEGALFORCE” mark. The court rejected this argument, emphasizing that the Lanham Act’s “use in commerce” requirement applies only to goods or services offered to consumers in the marketplace. Corporate fundraising, by contrast, is an internal business function and not a marketplace activity.
3. Consistency with Lanham Act Purpose
   The court highlighted the importance of maintaining the Lanham Act’s focus on commercial competition, rather than extending its protections to corporate governance or securities law. Expanding the Act’s reach to include fundraising could disrupt the balance between trademark law and other statutory regimes, such as securities regulation.

Key Takeaways

This decision reaffirms the limits of the Lanham Act’s application to goods or services, emphasizing that:

• Corporate activities like selling equity fall outside the scope of trademark protection unless they involve consumer-facing commercial use.
• The “use in commerce” requirement safeguards the Act’s focus on protecting trademarks in competitive markets, rather than corporate fundraising or ownership activities.

Conclusion

The Ninth Circuit’s ruling in LegalForce RAPC Worldwide, P.C. v. LegalForce, Inc. underscores the importance of distinguishing between corporate and commercial uses of trademarks. By clarifying the limits of “goods or services” under the Lanham Act, the decision provides a clear framework for assessing trademark claims in corporate contexts.