Part 4 of a series
Lawyers have an alacrity for hyperbole, so please indulge me for a moment while I describe to you what could well turn into the Trial of the Century for the practice of law and those who engage in it.
The paramount issue: Did LegalZoom, the online titan that has disrupted and intimidated the legal profession by offering legal “help” to millions of people online, build a $200 million-a-year business based on a crime? To wit: the brazen, illegal, unlicensed practice of law. Promoted and perpetuated, moreover, by false and deceptive advertising that led clients to believe bona fide lawyers were handling work that actually was done by unlicensed, junior non-lawyer staffers paid $33,000 a year.
The answer is yes, emphatically and almost unavoidably so, and the implications are rather startling: that LegalZoom’s business model, which was sexy enough to lure $300 million in venture capital investment, has been a sham of sorts, with profits elusive unless it breaks many of the rules that govern, safeguard and restrict the practice of law. If clients get run over as LegalZoom rampages onward, hey, it happens.
That is what I intend to prove, beyond a reasonable doubt, in the lawsuit my law firm filed against LegalZoom on December 19, 2017 in U.S. District Court in San Jose, Calif. Late yesterday we filed a Second Amended Complaint (translation: a fresher, more detailed and much tougher declaration of war), laying out newly detailed charges that accuse LegalZoom of false and deceptive advertising, unfair competition and the unlicensed practice of law. See Case No. 3:17-cv-07194 (You can view the complaint here: https://www.scribd.com/document/374586901/Second-Amended-Complaint-LegalForce-v-LegalZoom-USPTO).
LegalZoom has the aura of a champion of the middle-class, striving to uplift the masses with cheap access to the law. Its ubiquitous celebrity spokesman has been Robert Shapiro, one of the famed O.J. Simpson defense lawyers in the Trial of the Last Century. Never mind that LegalZoom isn’t a law firm and isn’t licensed to practice law in any state. It is celebrated for charging a few hundred bucks to provide services that would cost thousands of dollars if handled by lawyers.
Yet the picture is grittier when you take a harder look at LegalZoom, as we have done at my law firm, LegalForce of Mountain View, Calif., and my trademark-registration website, Trademarkia.com. LegalZoom was founded on March 12, 2001 by three California lawyers: Brian P.Y. Liu of Sherman Oaks, now chairman; now-suspended attorney Brian S. Lee of Playa Vista; and a lawyer who never attended law school (Edward Richard Hartman of Menlo Park, the chief strategy officer).
From the start, LegalZoom wanted to have things both ways: to provide legal advice to clients and earn fees from it, just as a law firm does, yet without having to endure any of the hassles that preoccupy law firms—bar regulations, client protection rules, setting up separate trust accounts, bureaucratic processes, investigative oversight, enforcement and stiff punishment for those who run afoul any of the above.
This is especially true in the market for trademark registration, in which my law firm files 8,000+ trademarks a year, with higher-priced lawyers overseeing most every task. LegalZoom files 250,000 trademarks a year, with no lawyers involved at all. This exposes thousands of entrepreneurs to the risks of bad, unauthorized legal advice that can damage their trademark rights and reduce the value of their intellectual property.
“LegalForce contends that LegalZoom’s entire trademark business is built upon the foundation of the unauthorized practice of law,” as our new legal complaint puts it. “LegalZoom’s non-attorney trademark filing services regularly require its non-attorney representatives to provide unauthorized and faulty legal advice that harms its clients’ trademark interests.”
In the meantime, I built a law firm in Silicon Valley that filed more successful trademarks with the U.S. patent office than any other law firm in the U.S. In 2009 we created Trademarkia, the GoDaddy.com of trademark registration, letting small businesses reserve their trademarks with the U.S. Patent and Trademark Office for $199 plus federal filing fees. Some 60,000 people have registered their trademarks on Trademarkia, which gets more than 23 million page views and close to ten million visitors every year. It logs more than 8,000 new trademark applications in more than 80 countries, annually.
We strive to provide the best possible legal advice, at the lowest costs we can manage, to help businesses secure protection and registration for their trademarks. We have accomplished this mission by innovating within the bounds of the regulations governing the legal profession. This, even as we bowed to nettlesome rules for client trust accounts, trademark conflict searches, lawyer oversight of every step of the process, attorney-client confidentiality and other requirements ad infinitum-till-it-kills-me.
All of these things are said to be good for clients—and none of these things is required of LegalZoom. This disparity is unfair, unwise and, until now, it largely has gone unaddressed.
“(W) hile LegalForce has innovated within the existing regulatory framework that protects consumers from bad legal advice and unscrupulous practices, LegalZoom has attempted to operate outside of it,” the new complaint declares. “LegalZoom’s advertisements deceive consumers into believing that all they need is LegalZoom’s non-attorney ‘legal help,’ not services of a licensed U.S. trademark attorney. In the fine print, LegalZoom disclaims any notion that it is providing legal advice or that it has any of the duties that would otherwise protect its customers.”
Thus, our newly filed Second Amended Complaint seeks to put LegalZoom into a pincer movement of its own making, calling on the court first to rule on whether LegalZoom is engaged in the unauthorized practice of law in trademark filings. If the court rules yes, then LegalZoom’s “advertisements and promotions that suggest it can assist with customer trademark filings without following the ethical requirements of lawyers . . . are literally false,” our lawsuit argues.
And if the court rules LegalZoom isn’t practicing law without a license, “then its advertisements . . . are misleading. They give the impression that (clients) are receiving qualified advice and representation that affects their legal rights when, in fact, they are not. Either way, LegalForce has lost significant business as a result of LegalZoom’s false and misleading promotional statements.”
My law firm’s sliver of the trademark-registration market has declined in the face of LegalZoom’s unfair tactics, falling from 3% of the market in 2011 to 1.8% last year (compared with LegalZoom’s market-leading 8% share). The main reason for our lawsuit, however, is to force legal reforms that will benefit clients and the small businesses that employ most of the jobs in our economy. As our new filing proclaims:
“This case will definitively answer the question of the legality of LegalZoom’s trademark business model.” LegalZoom investors had best be wary.
Part 1: When Lawyers Sue Lawyers
Part 2: A Sneaky Shell Game
Part 3: Taking On LegalZoom
Part 4: Trial of the Century
Part 5: Patently Offensive
RAJ ABHYANKER, is the founding partner of LegalForce RAPC Worldwide. Raj is a winner of the American Bar Association Legal Rebel award, and the Fastcase 50 Legal Innovation Award. In addition, Raj was an economic policy adviser to the Chief Technology Officer of the United States White House for the America Invents Act, and invited speaker at the Association of California Bar Associations conference, and an invited speaker at the U.S. District Court (9th district) Judge Aiken conference on Innovations in Law, Science, & Technology. He has been quoted in the ABA Journal, New York Times, Bloomberg, Fox News, and Fast Company magazine.