By: Sharon Urias, Esq.
Are Trader Joe’s products so sought-after that you are willing to pay a 30% – 40% mark-up for those goods? Well, if you live in Vancouver, Canada, that is exactly what you are doing when you purchase Trader Joe’s products from Pirate Joe’s.
Pirate Joe’s is a Canadian-based company that purchases Trader Joe’s products in the United States and then brings them into Canada, re-selling the goods at a significant mark-up in Vancouver. Not only does the Vancouver-based retailer, which Mike Hallatt opened in 2012, sell actual Trader Joe’s branded products, but its name and concept is a knock-off of the Trader Joe’s United States based-chain. Not surprisingly, Trader Joe’s sued Hallatt for trademark infringement (among other claims) in 2013.
This case is far more complicated than what would seem to be a straightforward trademark dispute. This is because of issues concerning the jurisdictional reach of the Lanham Act. Initially in 2013, Trader Joe’s lawsuit was tossed out of United States Federal Court because the court ruled that it did not have subject-matter jurisdiction to hear the case. Furthermore, the court concluded that while the Lanham Act can be applied outside the United States, it had never been used to stop infringement in this sort of circumstance where infringing products were being sold solely in another country to foreign consumers.
For the owner of a mark to successfully pursue extraterritorial trademark enforcement, the owner not only has to show that the infringing party encroached its trademark rights and harm to its business within the United States, but that it is possible to enforce a judgement against the infringing party. In June 2016, Trader Joe’s argued its case before the Ninth Circuit, claiming that while Pirate Joe’s activity occurs partly in Canada, the “infringing conduct directly threatens the reputation and goodwill of Trader Joe’s trademarks in the United States” because Canadian consumers could become ill from goods improperly transported from the United States and because Pirate Joe’s displays and sells Trader Joe’s products that consumers may be mislead into believing it is an authorized Trader Joe’s retailer. Additionally, Trader Joe’s argued that Hallatt had assets in the United States, thereby making the enforcement of damages possible.
Last week, the Ninth Circuit dealt a blow to Pirate Joe’s when it reversed the 2013 decision and found that Trader Joe’s had, in fact, met the threshold required to pursue the accused infringing Canadian party. The Court held, in part, Trader Joe’s had a legitimate concern that it could suffer a tarnished reputation and monetary harm in the United States from contaminated goods sold in Canada, and Pirate Joe’s inferior customer service could reflect poorly on Trader Joe’s brand. The Court also found nothing to suggest there would be difficulty in enforcing a damages award against Hallatt.
Now that Trader Joe’s can proceed with its extraterritorial trademark dispute against Pirate Joe’s without jurisdictional constraints, the case is being sent back to the district court in the Western District of Washington for additional proceedings. Not only will Trader Joe’s be able to fight for its trademark on the merits, but this case may very well have lasting implications for similar disputes between trademark owners and infringing parties outside the borders of the United States.