When we think of trademark law in the U.S., we typically only think of cases originating in the U.S., involving U.S. marks and U.S. parties. That makes sense – trademark law is a federal law, and therefore it applies to the country. Well, the U.S. Court of Appeals for the Ninth Circuit in Northern California recently decided that, under the right circumstances, the Lanham Act may just extend beyond our borders and into Canada. This decision has made Trader Joe’s, a U.S. company, very happy.
Trader Joe’s is a grocery store beloved by many, as it sells its own brand of foods that some people have come to be addicted to. Where else can you get pumpkin cinnamon rolls, frozen chicken tikka masala as good as any restaurant, and a host of other items exclusive to the store? The answer is: nowhere. Trader Joe’s does not license any other stores to sell their products, so you can only find them at your local Trader Joe’s.
Michael Hallatt, a Canadian with a penchant for Trader Joe’s specialties, this answer was not good enough. For five years, Hallatt would travel across the border from his home in Vancouver to the store in Bellingham, Washington and stock up on his favorite items. Plenty of Canadians do this, as that particular Trader Joe’s receives about 40% of its business from Canadians. Hallatt, however, took it a step further by reselling the goods at his store “Pirate Joe’s” at a higher price. Trader Joe’s discovered this and filed suit, alleging trademark violations and infringement.
The district court who heard the case in Washington ruled that it did not have the proper authority to even hear the case, as the alleged infringement occurred solely in Canada, outside its jurisdiction. Trader Joe’s appealed, claiming that, even though the act of infringement occurred outside the country, they were still be harmed in the traditional ways caused by such infringement. Specifically, because Hallatt was not acting with the same standard of care required by the company, some goods were going bad. This caused harm to the store’s reputation (known in trademark law as tarnishment), as customers associated the bad foods with Trader Joe’s and not Hallatt. Additionally, Trader Joe’s alleged that the sale of the goods in Canada had the potential to mislead its customers loyal to its brand..
Trader Joe’s found success with the Ninth Circuit, who found that Trader Joe’s had alleged enough to state a claim, despite the infringement occurring in Canada. In remanding the case, Judge Christen stated: “We hold that the extraterritorial reach of the Lanham Act is a merits question that does not implicate federal courts’ subject matter jurisdiction.” This decision is one of the first of its kind, and has the potential to make a big difference in similar cases in the future. Trader Joe’s is hoping that this decision will help them put a stop to their fake relative, Pirate Joe’s.
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