The US Court of Appeals for the Ninth Circuit affirmed a district court’s decision that, in terms of trademark use in commerce, corporate equity is not a “good” or “service” under the Lanham Act. LegalForce RAPC Worldwide, PC v. LegalForce, Inc., Case No. 23-2855 (9th Cir. Dec. 27, 2024) (Thomas, Wardlaw, Collins, JJ.) (Collins, J., concurring).

LegalForce RAPC Worldwide is a California corporation that operates legal services websites and owns the US mark LEGALFORCE. LegalForce, Inc., is a Japanese corporation that provides legal software services and owns the Japanese mark LEGALFORCE.

Both parties had discussions with the same group of investors. After those meetings, LegalForce Japan secured $130 million in funding, while LegalForce USA received nothing. Thereafter, LegalForce USA brought several claims against LegalForce Japan, including a trademark infringement claim. To support its case, LegalForce USA cited LegalForce Japan’s expansion plan, a trademark application for the mark LF, website ownership, and the use of LEGALFORCE to sell and advertise equity shares to investors in California.

The district court dismissed claims related to the website for lack of personal jurisdiction and dismissed claims related to the US expansion plan, trademark application, and alleged software sales in the United States as unripe. The district court dismissed the trademark infringement claims related to the efforts to sell equity shares for failure to state a claim. The court found that advertising and selling equity cannot constitute trademark infringement because it is not connected to the sale of goods or services, and the case did not present justification for extraterritorial application of the Lanham Act. LegalForce USA appealed.

To state a claim for trademark infringement under the Lanham Act, plaintiffs must show that:

• They have a protectible ownership interest in the mark, or for some claims, a registered mark
• The defendant used the mark “in connection with” goods or services
• That use is likely to cause confusion. 15 U.S.C. § 1114(1)(a), § 1125(a).

The Ninth Circuit agreed with the district court that LegalForce Japan had not used LegalForce USA’s mark “in connection with” goods or services, and thus LegalForce USA failed to state a claim for which relief could be granted.

The Ninth Circuit concluded that using LEGALFORCE to advertise and sell equity failed to satisfy the requirement that a defendant used the mark in connection with goods or services. Referring to the U.C.C., the Court explained that corporate equity is “not a good for purposes of the Lanham Act, because it is not a movable or tangible thing.” Equity is also not a service because it is not a performance of labor for the benefit of another. There is no “another” involved because those who buy LegalForce Japan equity are owners and so they are not legally separate “others.”

The Ninth Circuit also agreed with the district court that LegalForce Japan’s services in Japan did not satisfy the “in connection with” goods or services requirement under the Lanham Act. To determine when a statute applies extraterritorially, courts invoke the 2023 Supreme Court Abitron Austria two-step test:

• “[W]hether Congress has affirmatively and unmistakably instructed that the provision at issue should apply to foreign conduct”
• “[W]hether the suit seeks a (permissible) domestic or (impermissible) foreign application of the provision, based on the statute’s focus and whether the conduct relevant to that focus occurred in the [US] territory.”

For the first step, the Supreme Court has held that the Lanham Act does not provide a “clear, affirmative indication” that it applies extraterritorially. As for the second step, the conduct relevant to trademark infringement would be the defendant’s “use [of the mark] in commerce.” The Lanham Act’s “use in commerce” requirement is equivalent to the “in connection with goods and services” requirement. Explaining that the Lanham Act does not apply if the mark is only used in connection with goods and services outside the US, the Ninth Circuit determined that the Lanham Act was inapplicable here because all LegalForce Japan services are outside the US.

In a concurrence, Judge Collins agreed that a company’s own equity or stock shares do not count as goods or services offered to customers in the market under the Lanham Act. At oral argument, LegalForce USA confirmed that the only good or service underlying its Lanham Act claims was LegalForce Japan’s equity. Although the Lanham Act does not define “goods” or “services,” how a company is internally structured under corporate law is distinct from goods and services that the corporation offers in commerce to its customers. However, Judge Collins thought it unnecessary to reach any additional issues to resolve this case or to import specific definitions of goods. Because securities may qualify as movable or tangible, he explained in a footnote that he did not agree with the majority’s limitation as to goods that are “movable” or “tangible” or its explanation as to why securities fail this test.