`
`Case 4:18-cv-02573-YGR Document 1 Filed 05/02/18 Page 1 of 27
`
`RAJ V. ABHYANKER, California SBN 233284
`Email: ​raj@legalforcelaw.com
`WENSHENG MA, California SBN 299961
`Email: ​vincent@legalforcelaw.com
`
`LEGALFORCE RAPC WORLDWIDE, P.C.
`1580 W. El Camino Real, Suite 10
`Mountain View, CA 94040
`Telephone: (650) 965-8731
`Facsimile:
`(650) 989-2131
`
`
`Attorneys for Plaintiffs,
`LegalForce RAPC Worldwide, P.C. and
`LegalForce, Inc.
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN FRANCISCO DIVISION
`
`
`LEGALFORCE RAPC WORLDWIDE,
`P.C.; AND LEGALFORCE, INC.,
`
`
`Plaintiffs,
`
`
`
`v.
`
`
`UPCOUNSEL, INC.;
`ELIZABETH J. OLINER;
`SETH W. WIENER; KANIKA
`RADHAKRISHNAN;
`and DOES 1-1000, INCLUSIVE,
`
`
`Defendants.
`
`Case No. 3:18-cv-2573
`
`Judge: Honorable Maxine M. Chesney
`
`COMPLAINT FOR:
`
`1. DECLARATORY JUDGMENT ACT, 28
`U.S.C. § 2201;
`2. LANHAM ACT, 15 U.S.C. § 1125(a);
`3. CALIFORNIA FALSE & MISLEADING
`ADVERTISING; and
`4. CALIFORNIA UNFAIR
`COMPETITION.
`
`
` JURY TRIAL DEMANDED
`
`
`
`
`
`1
`COMPLAINT
`CASE NO.: 3:18-cv-2573
`
`

`

`
`
`Case 4:18-cv-02573-YGR Document 1 Filed 05/02/18 Page 2 of 27
`
`Inc.
`
`
`LegalForce,
`
`and
`
`
`
`
`1. LegalForce RAPC Worldwide, P.C.
`(“RAPC”)
`
`
`
`(“UpCounsel”) and
`Inc.
`
`
`(“Trademarkia”) allege as follows against UpCounsel,
`
`
`
`
`
`
`
`Elizabeth J. Oliner; Seth W. Wiener; and Kanika Radhakrishnan; and Does 1-1000
`
`
`
`
`
`
`
`
`
`
`
`(“Attorney Defendants”) upon actual knowledge with respect to themselves and their
`
`
`
`
`
`
`
`
`
`
`own acts, and upon information and belief as to all other matters.
`NATURE OF ACTION
`
`
`
`
`2. UpCounsel and Trademarkia compete to provide individuals and small
`
`
`
`
`
`
`
`businesses with affordable access to licensed attorneys who can help them to protect
`
`
`
`
`
`
`
`
`
`
`
`
`their business names, logos, and slogans through trademark filing with the U.S. Patent
`
`
`
`
`
`
`
`
`
`
`
`
`
`and Trademark Office (“USPTO”). Each use technology and innovation to provide
`
`
`
`
`
`
`
`
`
`
`access to licensed attorneys specialized in trademark filing and prosecution.
`
`
`
`
`
`
`3. Attorneys and law firms licensed in each state of the United States must follow
`
`
`
`
`
`
`
`
`
`
`ethical rules that are stricter than those for non-attorneys. One such rule is the
`
`
`
`
`
`
`
`
`
`
`
`
`
`prohibition against attorney fee sharing with non-attorneys. This rule was adopted to
`
`
`
`
`
`
`
`
`
`
`
`
`prevent non-lawyers from aggressively reselling hourly and fixed fee attorney services
`
`
`
`
`
`
`
`
`
`
`
`
`at a mark up causing the public to lose faith in the legal profession. These rules have
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`not been revised in the age of the Internet. Attorney Defendants and UpCounsel have
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`brazenly ignored them in defiance of the law, upon information and belief.
`
`
`
`
`
`
`
`
`
`
`
`
`In contrast,
`
`
`despite Plaintiffs’ belief that fee sharing rules are out of date, in the absence of formal
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`legislative change, Plaintiffs have chosen to lawfully abided by the regulations. As a
`
`
`
`
`
`
`
`
`
`
`
`
`
`result, Plaintiffs have been unable to fairly compete with Attorney Defendants and
`
`
`
`
`
`
`
`
`
`
`
`UpCounsel.
`
`
`
`
`
`fees with non-lawyers are addressed in
`
`
`in California, referral
`
`
`
`
`4. For example,
`California Rules of Professional Conduct (“CRPC”) 1-320 (​Exhibit A​). Rule 1-320
`
`
`
`
`
`
`
`
`
`
`
`
`
`prohibits, with certain limited exceptions,
`
`
`
`
`the sharing of attorney fees between a
`
`
`
`
`
`
`
`
`
`member of the State Bar of California and a non-attorney. The rule also prohibits a
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`member from compensating a person or entity for the purpose of recommending or
`
`
`
`
`
`
`
`
`
`
`
`
`securing employment of the member by a client, or as a reward for having made a
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`2
`COMPLAINT
`CASE NO.: 3:18-cv-2573
`
`

`

`
`
`Case 4:18-cv-02573-YGR Document 1 Filed 05/02/18 Page 3 of 27
`
`recommendation resulting in employment of the member.
`
`
`
`
`
`5. The USPTO has similar prohibitions against fee sharing by trademark attorneys
`
`
`
`
`
`
`
`with non-attorneys. Specifically, 37 C.F.R. § 11.504 makes clear that a practitioner or
`
`
`
`
`
`
`
`
`
`
`
`
`
`law firm shall not share attorney fees (also called “legal fees”) with a non-practitioner
`
`
`
`
`
`
`
`
`
`
`
`
`
`except under limited exceptions (​Exhibit B​). None of these limited exceptions under
`
`
`
`
`
`
`
`
`
`
`
`
`Rule 1-320 or 37 C.F.R. § 11.504 apply to UpCounsel.
`
`
`
`
`
`
`6. Upon information and belief, more than one-hundred and ninety U.S. trademark
`
`
`
`
`
`
`attorneys (“Attorney Defendants”) violate fee sharing rules by allowing UpCounsel to
`
`
`
`
`
`
`
`
`
`
`
`mark up the attorney fee that
`
`
`
`
`
`
`their clients pay them through UpCounsel with a
`
`
`
`
`
`
`
`
`
`“processing fee” - calculated as a percentage of the attorney fee.
`
`
`
`
`
`
`
`
`
`In case of attorneys
`
`
`
`
`
`licensed in California, many California licensed attorneys have been formally warned
`
`
`
`
`
`
`
`
`
`
`
`
`by the State Bar of California that UpCounsel’s “processing fee” may result in a
`
`
`
`
`
`
`
`
`
`
`
`violation of the Rules of Professional Conduct.
`1
`
`
`
`
`
`
`
`7. Similarly, the Pennsylvania Bar Association , the South Carolina Bar Association
`
`
`2
`
`, the New York State Bar Association , the Supreme Court of Ohio , and the USPTO’s
`
`
`
`
`
`
`
`
`
`
`
`
`4
`5
`
`
`
`
`
`3
`
`1 ​The State Bar of California expressly wrote to California attorneys that “allowing
`UpCounsel, Inc., to take a percentage of the attorney's fees paid by the client as a
`‘processing fee’ does not change the fact that UpCounsel, Inc., is receiving a share of
`legal fees which have been earned by the attorney.” ​See ​Exhibit D​ at 2.
` ​The Pennsylvania Bar Association expressly wrote “The manner in which the
`payments are structured is not dispositive of whether the lawyer’s payment to the
`Business constitutes fee sharing” in Formal Opinion 2016-200, ​See ​Exhibit R​ at 3.
` ​The South Carolina Bar Association expressly wrote ”A lawyer cannot do indirectly
`what would be prohibited if done directly. Allowing the service to indirectly take a
`portion of the attorney’s fee by disguising it in two separate transactions does not
`negate the fact that the service is claiming a certain portion of the fee earned by the
`lawyer as its “per service marketing fee.” in Ethics Opinion 17-06, ​See ​Exhibit S​ at 2.
` ​The New York State Bar Association expressly wrote regarding a different but similar
`legal marketplace Avvo.com, “If, however, the marketing fee also includes a
`payment to Avvo for recommending the lawyer, then the payment constitutes giving
`something “of value” for a recommendation, which does violate Rule 7.2(a)”, Ethics
`Opinion 1132, ​See ​Exhibit T​ at 3.
`
`
` 2
`
` 3
`
` 4
`
`3
`COMPLAINT
`CASE NO.: 3:18-cv-2573
`
`

`

`
`
`Case 4:18-cv-02573-YGR Document 1 Filed 05/02/18 Page 4 of 27
`
`
`
`
`fee sharing on legal
`
`
`
`
`
`
`
`
`Office of Enrollment & Discipline itself have stated that
`
`
`6
`
`marketplaces or referral websites may result in a violation of Rules of Professional
`
`
`
`
`
`
`
`
`
`
`
`
`conduct.
`
`
`
`
`
`
`
`
`
`
`8. Abhyanker has been an early pioneer of legal marketplaces. After leading an
`
`
`
`Internet neighborhood social network through two rounds of venture funding in 2007
`
`
`
`
`
`
`
`
`
`
`
`
`
`(which later sold to Google, Inc.), Abhyanker built the very first legal marketplace for
`
`
`
`
`
`
`
`
`
`
`
`
`
`online legal services called LegalForce.com (LegalForce One). Through this website,
`
`
`
`
`
`
`
`
`
`
`users were able to hire, manage and pay lawyers and legal staff for legal projects
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`(​Exhibit E​). Abhyanker found external venture capital for LegalForce One from leading
`
`
`
`
`
`
`
`
`
`
`
`
`Silicon Valley venture capitalists (​Exhibit F​). However, the venture capital term sheet
`
`
`
`
`
`
`
`
`
`
`
`
`
`was never finalized because of the limited traction that could be achieved in the initial
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`$500,000 funding round because of Abhyanker’s refusal to break ethical rules with
`
`
`
`
`
`
`
`
`
`
`
`respect
`
`
`
`to fee sharing to achieve faster revenue growth before the next round of
`
`
`
`
`
`
`
`
`
`
`
`funding (​Exhibit G​, ​Exhibit H​).
`
`
`launched, copying Raj
`
`
`
`
`
`
`9. Then, approximately 4 years later, UpCounsel
`
`
`Abhyanker’s original LegalForce One concept. Not only did UpCounsel copy
`
`
`
`
`
`
`
`
`
`
`Abhyanker’s pioneering concept for online legal marketplaces, but they avoided ethical
`
`
`
`
`
`
`
`
`
`
`rules relating to fee sharing.
`
`to first
`
`
`
`
`
`
`
`
`
`
`
`10.Resolution of Plaintiffs’ claims in this complaint requires this Court
`
`determine whether fee sharing clauses under CRPC Rule 1-320 and 37 C.F.R. §
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`11.504 are applicable to processing fees calculated based on percentage of the
`
`
`
`
`
`
`
`
`
`
`
`
`attorneys fees and added to attorney fees by UpCounsel. If these rules apply to
`
`
`
`
`
`
`
`
`
`
`
`
`
`5 ​The Supreme Court of Ohio expressly wrote “fees tied specifically to the number of
`individual clients represented or the amount of a legal fee is not permissible,” Ethics
`Op. 2016-3, ​See ​Exhibit U​ at 7.
` ​The USPTO expressly wrote “If the entire amount received by the third party for the
`practitioner's compensation is not distributed to the practitioner and any undistributed
`compensation held by the third party is not returned to the inventor, then the
`practitioner has likely impermissibly shared fees with a non-practitioner.” In re
`Mikhailova, Proceeding No. D2017-18, (USPTO June 16, 2017), ​See ​Exhibit V​ at 8.
`
`4
`COMPLAINT
`CASE NO.: 3:18-cv-2573
`
` 6
`
`

`

`
`
`Case 4:18-cv-02573-YGR Document 1 Filed 05/02/18 Page 5 of 27
`
`
`
`
`
`
`
`
`
`
`Attorney Defendants and UpCounsel, then Attorney Defendants and UpCounsel are
`
`
`
`violating the rules with respect to fee sharing and are therefore unfairly competing with
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Plaintiffs.
`If
`
`the rules do not apply,
`
`
`
`
`then Plaintiffs are free to adopt UpCounsel’s
`
`
`
`
`
`
`business model for Trademarkia and are able to fairly compete.
`
`
`
`
`
`
`
`11.In either case, UpCounsel’s manner of disclosing shared fees to its customers is
`
`
`
`
`
`
`
`misleading. They give the impression that the processing fee is not added to the
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`attorney fee, when in fact, it is. Plaintiffs have lost significant business as a result of
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`UpCounsel’s false and misleading promotional statements. Because “processing fees”
`
`
`
`
`
`
`
`
`
`
`are a central tenet of UpCounsel’s business model, this case will definitively answer
`
`
`
`
`
`
`
`
`
`
`
`the question of the legality of UpCounsel’s business model.
`THE PARTIES
`
`The Plaintiffs
`
`
`
`
`
`
`
`
`
`
`
`
`12.Plaintiff LegalForce RAPC Worldwide, P.C. (“RAPC”) is a law firm wholly owned
`
`
`by Raj Abhyanker, a member in good standing of the State Bar of California, and the
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`United States Patent Bar. The firm practices patent and trademark law before the
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`USPTO with a principal place of business at 1580 W. El Camino Real, Suite 10,
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Mountain View, CA 94040, and a law office located at 446 E. Southern Ave., Tempe,
`
`
`
`
`
`
`
`
`
`
`
`
`
`AZ 85282.
`
`
`
`
`
`
`
`
`
`13.Plaintiff LegalForce, Inc. (“Trademarkia”) is a Delaware corporation offering law
`
`
`
`firm automation and free trademark
`
`
`
`
`
`search services
`
`
`
`through its website
`
`
`
`Trademarkia.com with a principal place of business at 1580 W. El Camino Real, Suite
`
`
`
`
`
`
`
`
`
`
`9, Mountain View, CA 94040.
`The Defendants
`
`
`
`
`
`
`
`
`
`14.UpCounsel, Inc. (“UpCounsel”) is a Delaware corporation with a principal place
`
`
`of business at 580 Market Street, 5th Floor, San Francisco, CA 94104. Matthew
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Faustman is a suspended California licensed attorney (Bar # 273,822) with a principal
`
`
`
`
`
`
`
`
`
`
`
`place of business at 2042 Larkin St, San Francisco, CA 94109, and is the CEO of
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`UpCounsel, Inc.
`
`
`
`5
`COMPLAINT
`CASE NO.: 3:18-cv-2573
`
`

`

`
`
`Case 4:18-cv-02573-YGR Document 1 Filed 05/02/18 Page 6 of 27
`
`
`
`
`
`
`
`
`
`
`
`
`15.Elizabeth J. Oliner is a California licensed attorney (Bar # 276,325) with a
`
`
`
`
`principal place of business at 345 Grove St., San Francisco, CA 94102. Oliner is a
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`former attorney at RAPC and a current shareholder of Plaintiff Trademarkia. After
`
`
`
`
`
`
`
`
`
`
`
`leaving RAPC, upon information and belief, Oliner helped pioneer the trademark
`
`
`
`
`
`
`
`
`
`
`
`service at UpCounsel and remains the most prolific trademark attorney hirable through
`
`
`
`
`
`
`
`
`
`
`UpCounsel.
`
`
`
`
`
`
`
`
`
`
`16.Seth W. Wiener is a California licensed attorney (Bar # 203,747) with a principal
`
`
`
`place of business at 609 Karina Ct., San Ramon, CA 94582. Weiner
`
`
`
`is the second
`
`
`most prolific trademark attorney hirable through UpCounsel, upon information and
`
`
`
`
`
`
`
`
`
`belief.
`
`
`
`
`
`
`
`
`
`
`
`17.Kanika Radhakrishnan is a California licensed attorney (Bar # 209,087) with a
`
`
`
`principal place of business at 2570 N. 1st St., 200, San Jose, CA 95131.
`
`
`
`
`
`
`
`
`
`
`
`
`
`Radhakrishnan is the third most prolific trademark attorney hirable through UpCounsel,
`
`
`
`
`
`
`
`
`
`
`upon information and belief.
`
`
`
`
`
`
`is not limited, each and every U.S.
`
`
`
`
`
`18.And DOES 1-1000, which include, but
`
`
`
`licensed attorney who is permitting UpCounsel to their mark up their attorney fees by
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`percentage as processing fees collected directly from their clients, including individuals
`
`
`
`
`
`
`
`
`
`
`shown on ​Exhibit C ​with respect to U.S. trademark preparation and prosecution before
`
`
`
`
`
`
`
`
`
`
`
`
`the USPTO.
`
`
`JURISDICTION AND VENUE
`
`
`
`
`
`
`
`19.This Court has subject-matter jurisdiction over this action under 28 U.S.C. §§
`
`
`
`
`
`
`2201 and 1331 because this action arises under the Lanham Act and because
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Plaintiffs seek a declaration of rights to resolve an actual case or controversy arising
`
`
`
`
`
`
`
`
`
`
`
`
`under federal law. This Court has supplemental jurisdiction over the state law claims
`
`
`
`
`
`
`
`
`
`
`
`
`
`under 28 U.S.C. § 1367 because they arise from the same nucleus of operative facts
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`as the federal claims.
`
`20.This Court has general personal
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`jurisdiction over UpCounsel because
`
`6
`COMPLAINT
`CASE NO.: 3:18-cv-2573
`
`

`

`
`
`Case 4:18-cv-02573-YGR Document 1 Filed 05/02/18 Page 7 of 27
`
`
`
`
`
`
`
`
`
`
`
`
`UpCounsel’s principal place of business is in California. Alternatively, this Court has
`
`
`specific personal
`
`
`jurisdiction over UpCounsel because UpCounsel purposefully
`
`
`
`
`
`
`
`directed its advertisements or promotions at consumers in California and caused harm
`
`
`
`
`
`
`
`
`
`
`
`to Plaintiffs in California. UpCounsel thus has minimum contacts with the State of
`
`
`
`
`
`
`
`
`
`
`
`
`California and those contacts are related to this lawsuit.
`
`
`
`
`21.This Court has general personal jurisdiction over Attorney Defendants because
`
`
`
`
`
`
`
`Attorney Defendants all have principal place of business in California. Alternatively, this
`
`
`
`
`
`
`
`
`
`
`
`
`Court has specific personal
`
`
`
`
`jurisdiction over Attorney Defendants because Attorney
`
`
`
`
`
`
`Defendants purposefully directed their advertisements or promotions at consumers in
`
`
`
`
`
`
`
`
`
`
`
`California and caused harm to Plaintiffs in California. Attorney Defendants thus have
`
`
`
`
`
`
`
`
`
`
`
`minimum contacts with the State of California and those contacts are related to this
`
`
`
`
`
`
`
`
`
`
`
`
`
`lawsuit.
`
`
`
`
`
`
`
`
`
`
`
`22.Venue is proper in the United States District Court for the Northern District of
`
`
`
`
`California under 28 U.S.C. § 1391 because a substantial part of
`
`
`
`
`
`
`
`
`
`
`
`the events or
`
`
`
`omissions giving rise to this action occurred in this district. In addition, upon information
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`and belief, all Defendants have numerous customers in northern California related to
`
`
`
`
`
`
`
`
`
`
`
`
`trademark matters. Therefore, it is convenient for third-party witnesses to testify in this
`
`
`
`
`
`
`
`
`
`
`
`
`
`Court regarding the services they received from Defendants. It is also necessary for
`
`
`
`
`
`
`
`
`
`
`
`
`
`the third-party witnesses and jurors residing in this district to testify what Defendants’
`
`
`
`
`
`
`
`
`
`
`
`
`
`advertisements are false or misleading as to the members of the public of the State of
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`California. In addition, judges in this district are more familiar with California laws than
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`judges in other states. Moreover, California has a general policy interest in protecting
`
`
`
`
`
`
`
`
`
`
`
`residents harmed by violations of California law by in-state actors such as the
`
`
`
`
`
`
`
`
`
`
`
`
`Defendants.
`//
`//
`//
`//
`
`7
`COMPLAINT
`CASE NO.: 3:18-cv-2573
`
`

`

`
`
`Case 4:18-cv-02573-YGR Document 1 Filed 05/02/18 Page 8 of 27
`
`SUBSTANTIVE ALLEGATIONS
`I. Abhyanker’ pioneering efforts in online legal marketplaces
`
`
`
`
`
`
`23.Abhyanker has been an early pioneer of legal marketplaces. After leading an
`
`
`
`
`
`
`
`Internet neighborhood social network through two rounds of venture funding in 2007
`
`
`
`
`
`
`
`
`
`
`
`
`
`(which later sold to Google, Inc.), Abhyanker built the very first legal marketplace for
`
`
`
`
`
`
`
`
`
`
`
`
`
`online legal services called LegalForce.com (LegalForce One). Through this website,
`
`
`
`
`
`
`
`
`
`
`users were able to hire, manage and pay lawyers and legal staff for legal projects
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`(​Exhibit E​).
`
`
`
`
`
`
`
`
`
`
`
`24.On June 12, 2008, Abhyanker received an offer for venture capital funding from
`
`
`
`prominent venture capitalist
`
`
`
`investor Kevin Compton, a partner of Kleiner Perkins
`
`
`
`
`
`
`
`
`
`Caufield & Byers; and Jeff Drazan, Partner of Sierra Ventures and Bertam Capital, for
`
`
`
`
`
`
`
`
`
`
`
`
`$500,000.00 in a Series A financing offer (​Exhibit F​). Abhyanker was willing to work
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`for $1 per year salary as part of this term sheet until the next round of funding with no
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`rent charged the LegalForce One in Abhyanker’s law office (​Exhibit F​).
`
`
`
`
`
`
`
`
`25.Over the next few days, during diligence discussions, requests were made by
`
`
`
`
`
`the venture capitalists that LegalForce One’s business model adapt to permit markup
`
`
`
`
`
`
`
`
`
`
`
`
`of attorney fees secured through the LegalForce One website to scale revenues faster
`
`
`
`
`
`
`
`
`
`
`
`
`
`and achieve an inflection point before a next round of funding. Abhyanker’s believed
`
`
`
`
`
`
`
`
`
`
`
`
`
`that this financial arrangement between a non-lawyer and and lawyer would violate
`
`
`
`
`
`
`
`
`
`
`
`
`
`obligations to the USPTO and the California State Bar with respect to fee sharing.
`
`
`
`
`
`
`
`
`
`
`
`
`
`Abhyanker refused to break USPTO and State Bar rules. Concerns were then raised
`
`
`
`
`
`
`
`
`
`
`
`
`
`how fast law firms would agree to sign up given the regulatory hurdles on fee sharing.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`The investors met with Gordy Davison, leading IP attorney and founder of Fenwick &
`
`
`
`
`
`
`
`
`
`
`
`
`
`West, on or about June 17, 2008, as well as other IP attorneys (​Exhibit G​). Upon
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`information and belief, Gordy Davison and IP attorneys confirmed rules with respect to
`
`
`
`
`
`
`
`
`
`
`
`fee sharing. Hence, term sheets were never finalized (​Exhibit H​).
`//
`//
`
`8
`COMPLAINT
`CASE NO.: 3:18-cv-2573
`
`

`

`
`
`Case 4:18-cv-02573-YGR Document 1 Filed 05/02/18 Page 9 of 27
`
`II. UpCounsel copycat website of Abhyanker’s pioneering efforts.
`
`
`26.About
`
`
`
`four years after Abhyanker, suspended attorney Matthew Faustman
`
`
`
`
`
`
`
`
`
`
`
`
`
`(“Faustman”) launched his copycat website UpCounsel.com in 2012. Like Abhyanker’s
`
`
`pioneering efforts for LegalForce One years earlier in 2008, UpCounsel is an online
`
`
`
`
`
`
`
`
`
`
`
`
`
`marketplace for
`
`
`legal services that enables users (primarily entrepreneurs and
`
`
`
`
`
`
`
`
`
`businesses) to find and hire attorneys via their site. UpCounsel has fully launched its
`
`
`
`
`
`
`
`
`
`
`
`
`service in California, New York, Illinois, Texas, Massachusetts and Colorado.
`
`
`
`
`27.Faustman and UpCounsel have consciously ignored CRPC Rule 1-320 and
`
`
`
`
`
`
`
`
`
`USPTO rule 37 C.F.R. § 11.504 with respect to fee sharing with non-attorneys in order
`
`
`
`
`
`
`
`
`
`
`
`
`
`to achieve success, upon information and belief. Faustman and UpCounsel have also
`
`
`
`
`
`
`
`
`
`
`
`ignored California Rule Rule 1-400 (​Exhibit W​) and USPTO 37 C.F.R. § 11.703
`
`
`
`
`
`
`
`
`
`
`
`
`
`(​Exhibit X​) with respect
`
`
`
`
`
`to phone and in-person solicitation of non-clients, upon
`
`
`
`
`
`
`
`information and belief. Plaintiffs have refused to violate these rules.
`
`
`
`
`
`28.As a result, UpCounsel has steamed ahead of Plaintiffs. UpCounsel has raised
`
`
`
`
`
`
`
`
`approximately fourteen million dollars ($14 million) in venture capital.
`
`
`
`
`
`
`
`
`
`
`
`In its last round,
`
`
`
`
`UpCounsel has stated that the venture capital
`
`
`
`
`
`it has raised will be used to “expand
`
`
`
`
`
`
`
`
`marketing, sales and services.”
`
`
`
`
`Unlike Plaintiffs, UpCounsel
`
`
`
`is able to hire
`
`
`
`7
`
`experienced non-attorney salespeople, and upon information and belief, provides
`
`
`
`
`
`
`
`commission to these salespeople.
`III. Cold calling solicitation by Attorney Defendants and UpCounsel.
`
`
`
`
`29.UpCounsel has been known to co-locate in “co-working” and “startup” incubator
`
`
`
`
`
`
`
`
`
`
`spaces for the specific purpose of in-person solicitation of potential clients with whom
`
`
`
`
`
`
`
`
`
`
`
`the Attorney Defendants have no prior
`
`
`
`
`
`
`relationship. Therefore, UpCounsel and
`
`
`
`
`Attorney Defendants are in violation of the solicitation provisions under CRPC Rule
`
`
`
`
`
`
`
`
`
`
`
`8
`
`
`
`7 ​UpCounsel raises $10M to grow on-demand lawyer platform​, July 28, 2015,
`http://fortune.com/2015/07/28/upcounsel/​, last checked May 2, 2018.
` ​CRPC Rule 1-400(B) defines a solicitation as any communication: (1) Concerning the availability for
`professional employment of a member or a law firm in which a significant motive is pecuniary gain; and
`(2) Which is: (a) delivered in person or by telephone, or (b) directed by any means to a person known to
`the sender to be represented by counsel in a matter which is a subject of the communication.
`9
`COMPLAINT
`CASE NO.: 3:18-cv-2573
`
` 8
`
`

`

`
`
`Case 4:18-cv-02573-YGR Document 1 Filed 05/02/18 Page 10 of 27
`
`
`
`
`
`
`
`
`
`
`
`1-400 , upon information and belief. For example, UpCounsel advertises job posting for
`
`
`9
`
`“Account Executive” whose job description includes to “achieve and consistently
`
`
`
`
`
`
`
`
`
`
`exceed monthly sales goals” who is “obsessed with winning and closing deals.”
`
`
`
`
`
`
`
`
`
`
`
`(​Exhibit I​). UpCounsel also hires a “Business Development Partner” who is a “person
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`who can connect with anyone, with the right mix of persistence and charm” in addition
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`to being a “hunter and a relationship builder” for clients (​Exhibit J​). This position
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`requires the “Business Development Partner” to “Quarterback your own pipeline of
`
`
`
`
`
`
`
`
`
`
`
`inbound and outbound lead development which includes making 40-50 calls per day” to
`
`
`
`
`
`
`
`
`
`
`
`
`solicit prospective clients. Upon information and belief, these positions are commission
`
`
`
`
`
`
`
`
`
`
`
`based. Solicitations made by on behalf of Upcounsel and its Attorney Defendants are
`
`
`
`
`
`
`
`
`
`
`
`
`
`in direct violation of California Rule 1-400 and USPTO Rule 37 C.F.R. § 11.703 with
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`respect to phone and in-person solicitation of non-clients.
`IV. Fee sharing by Attorney Defendants and UpCounsel.
`
`
`
`
`30.UpCounsel openly admits to charging clients retaining third-party attorneys
`
`
`
`
`
`
`through UpCounsel processing fees (also referred to as “success fees”) as a
`
`
`
`
`
`
`
`
`
`
`
`
`percentage proportional to the fees paid by UpCounsel to the third-party attorneys on
`
`
`
`
`
`
`
`
`
`
`
`
`the clients’ behalf. UpCounsel writes on its terms shown in ​Exhibit K ​that :
`b. For Employer Users.
`
`
`
`
`
`
`
`
`
`
`
`
`When a Consultant User accepts your Covered Offer, you agree to pay a
`
`
`success fee to UpCounsel (each, a “Success Fee”) equal to the following
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`percentage of the Consultant User’s base salary set forth in the Covered
`
`
`
`
`
`
`
`
`
`
`
`Offer (the Consultant User’s “Base Salary”), which amount shall be due and
`
`
`
`
`
`
`
`
`
`
`
`payable no later than thirty (30) days after the Start Date and otherwise in
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`accordance with the first sentence of each of Section 13.b. and Section
`
`
`
`
`
`
`
`
`
`
`13.d. hereof:
`
`//
`
`9 ​CRPC Rule 1-400(C) states that ​“a solicitation shall not be made by or on behalf of a member or law
`firm to a prospective client with whom the member or law firm has no family or prior professional
`relationship, unless the solicitation is protected from abridgment by the Constitution of the United States
`or by the Constitution of the State of California.”
`10
`COMPLAINT
`CASE NO.: 3:18-cv-2573
`
`

`

`
`
`Case 4:18-cv-02573-YGR Document 1 Filed 05/02/18 Page 11 of 27
`
`
`
`
`
`
`
`
`
`
`
`
`
`If Start Date occurs on or before the following number of days after the
`
`
`
`
`commencement of
`
`the initial Employer User-User Consultant Job Base
`
`
`
`
`
`
`Salary Percentage
`
`1-182 days 15%
`183-365 days 10%
`366-550 days 5%
`≥ 551 days 0%
`
`
`
`
`
`
`
`
`
`
`
`
`By accepting these Terms of Use, Employer User agrees that UpCounsel is
`
`
`
`authorized to immediately invoice Employer User’s account for all Success
`
`
`
`
`
`
`
`
`
`
`
`Fees due and payable to UpCounsel hereunder and that no additional
`
`
`
`
`
`
`
`
`notice or consent is required.
`
`
`
`
`
`
`
`
`
`
`
`31.In other words, UpCounsel blatantly and openly advertises it not only marks up
`
`
`
`fees up to 15% it collects from clients as a percentage of the attorney’s fees but the
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`client’s heavy burden in this regard carries forward for nearly 2 years, or 550 days.
`
`
`
`
`
`
`
`
`
`
`
`
`It
`
`
`
`
`should be noted that this 15% mark up in its terms is materially inconsistent with its
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`invoices, in which the mark up spikes to 24%.
`
`10
`
`
`
`
`
`
`
`32.In addition to the misrepresentations of the mark up, UpCounsel attempts to
`
`
`
`
`
`
`
`“mask” this “processing fee” from its customers by including it as part of the hourly fee
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`paid to each lawyer. Specifically, the initial hourly rate shown to each potential client
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`after a proposal
`
`
`is provided by an attorney is silent as to whether it includes the
`
`
`
`
`
`
`
`
`
`
`
`
`
`processing fee (​Exhibit L​). Only after a user clicks twice more to affirmatively expand
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`the “Fee details” is the “success fee” unmasked to the user as “insurance and quality
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`fees.” (​Exhibit L​). However, the percentage is not disclosed.
`
`10 ​UpCounsel invoices to customers state “UpCounsel only adds a small processing fee
`to filing fees and expenses. The fees amount to 24% of your total invoice. However, the
`total invoice still represents no additional costs over what you would pay this attorney if
`acquired outside of UpCounsel because of their exclusive discounted rate.”
`
`
`11
`COMPLAINT
`CASE NO.: 3:18-cv-2573
`
`

`

`
`
`Case 4:18-cv-02573-YGR Document 1 Filed 05/02/18 Page 12 of 27
`
`33.Specifically, this second pop up box vaguely says:
`
`
`
`
`This amount includes the lawyer's exclusive UpCounsel discounted rate.
`
`
`
`
`
`
`
`UpCounsel adds fees to this discounted rate to help maintain the platform
`
`
`
`
`
`
`
`
`
`
`
`
`and to cover critical client benefits such as quality, insurance, and our
`
`
`
`
`
`
`
`
`
`
`
`money-back guarantee. UpCounsel only adds a small processing fee to
`
`
`
`
`
`
`
`
`
`
`
`
`filing fees and expenses. The total
`
`
`
`
`invoice still represents no additional
`
`
`
`
`
`costs over what you would pay this attorney if acquired outside of
`
`
`
`
`
`
`
`
`
`
`
`UpCounsel because of their exclusive discounted rate. (​Exhibit L​).
`
`
`
`
`34.The State Bar of California has recognized that the UpCounsel’s fee sharing is
`
`
`
`
`
`
`
`
`
`
`likely against its rules. On or about September 2016, upon information and belief, the
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`State Bar wrote admonishments to some of its members