Trader Joe's Trademark Lawsuit Over Pirate Joe's in Canada Can Proceed

A trademark lawsuit brought by the popular grocery chain Trader Joe's can move forward, according to a decision by the 9th U.S. Circuit Court of Appeals.

At issue is whether the defendant, Mike Hallatt, caused damage to the commerce practices of the grocery store by buying the company's products in Washington state and then selling them in Canada at a store designed to mimic Trader Joe's. The store is called Pirate Joe's.

The appellate court's decision reversed in part a 2013 ruling that dismissed the company's trademark infringement claims. In granting a motion to dismiss the trademark lawsuit, a district court in Washington noted "the facts of this case do not show an effect on U.S. foreign commerce sufficient to present a cognizable Lanham Act claim."

As the Wall Street Journal explains, "it’s not enough to show that the accused encroached on trademark rights. Such cases hinge on showing a harm to the plaintiff’s American commerce."

On Friday, the 9th U.S. Circuit Court of Appeals ruled that Trader Joe’s alleges a nexus between Hallatt’s conduct and American commerce sufficient to warrant extraterritorial application of the Lanham Act. The court affirmed the decision of the district court's state law claims because "Trader Joe’s does not allege trademark dilution in Washington or harm to a Washington resident or business."

"According to Trader Joe’s, Hallatt’s poor quality control practices could impact American commerce if consumers who purchase Trader Joe’s-brand products that have been transported to Canada become ill, and news of such illness travels across the border," Ninth Circuit Judge Morgan Christen wrote. "Trader Joe’s alleges this may harm its reputation, reduce the value of its trademarks, and cause lost sales. Trader Joe’s argues its risk of harm is particularly high because Pirate Joe’s displays Trader Joe’s trademarks, which leads consumers to believe that it is an authorized Trader Joe’s retailer. There is nothing implausible about the concern that Trader Joe’s will suffer a tarnished reputation and resultant monetary harm in the United States from contaminated goods sold in Canada. Incidents of food-borne illness regularly make international news and Trader Joe’s alleges that it is aware of at least one customer who became sick after consuming food sold by Pirate Joe’s."

Hallatt's attorney, Nathan Alexander, told The Associated Press he and Hallatt are evaluating their options.

The case has been sent back to the district court.

Photo Credit: Mike Mozart via Flickr