Trader Joe’s vs. Pirate Joe’s: Canadian Grocer Slips From Trademark Act3 Dec, 2013 By: Arthur Yoon, Jeffrey Richter
Trademark infringement and false advertising claims under the Lanham Act, also commonly referred to as the Trademark Act, are popular causes of action because of their broad applicability and ability to remedy competitive harm. The Act prohibits false representations that are made in commercial advertising, are likely to deceive consumers, and are likely to cause injury to the plaintiff. The remedies available to a plaintiff under the Act include injunctive relief, damages, corrective advertising and attorneys’ fees – although the Act affords a federal court broad discretion to craft an equitable remedy that fairly compensates the plaintiff. Although the Act plainly confers broad powers upon a court to exercise jurisdiction over an advertiser engaging in false advertising within the United States, its application in cases involving a foreign defendant’s actions outside the U.S. is less clear.
In Trader Joe’s v. Pirate Joe’s, U.S. grocery store operator Trader Joe’s filed a trademark infringement and false advertising suit in federal district court located in Seattle against Canadian grocery store Pirate Joe’s, which has been purchasing products at Trader Joe’s locations in the state of Washington, transporting the products to Canada, and re-selling them in its store. Trader Joe’s is a well-known grocery store in the U.S., having its name and “South Pacific” theme since 1967.
The U.S. Patent and Trademark Office granted Trader Joe’s a trademark registration for the “Trader Joe’s” trademark for retail grocery services. Trader Joe’s also obtained numerous U.S. trademark registrations for the same mark in connection with branded goods sold at its retail stores. Trader Joe’s uses the trademark to identify both its retail stores and services and around 80 percent of goods it sells in its retail stores. More than 390 Trader Joe’s grocery stores operate in 30 states, including 14 stores in Washington. Trader Joe’s alleged its trademarks are also well known in Canada and that more than 40 percent of credit card transactions at Trader Joe’s Bellingham, Wash., location are with non-U.S. residents.
Pirate Joe’s owns and operates a grocery store in Vancouver, B.C. Pirate Joe’s admitted that it purchased products at Trader Joe’s, paying full retail prices in Washington, and transported the products across the U.S. border to Canada for purposes of re-sale in its grocery store. Trader Joe’s marks were displayed in notices alerting customers it was not an authorized Trader Joe’s retailer. Pirate Joe’s even used Trader Joe’s grocery bags in the past but had stopped the practice. Due to Pirate Joe’s willful and blatant unauthorized use of Trader Joe’s trademark, Trader Joe’s sought relief under the Act. The court, however, decided that it could not apply the Act extraterritorially in this matter.
The Act, according to the court, may be applied extraterritorially where: (1) the defendant’s action creates some effect on American foreign commerce; (2) the effect is sufficiently great to present a cognizable injury to the plaintiff under the Act; and (3) the interests of and links to American foreign commerce are sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority. The court determined that the facts of this case did not show an effect on U.S. foreign commerce sufficient to present a cognizable claim. The court reviewed prior cases finding extraterritorial jurisdiction appropriate where either the extraterritorial commercial activity took place partly within the United States or the plaintiff conducted business internationally.
In the Trader Joe’s case, all alleged infringement takes place in Canada, and Trader Joe’s could not show economic harm. Even if Canadian consumers were confused and believed they were shopping at Trader Joe’s – or an approved affiliate – when shopping at Pirate Joe’s, there was no economic harm to Trader Joe’s because the products were purchased at Trader Joe’s at retail price. Trader Joe’s argued that the court should apply the Act extraterritorially since it competes directly with Pirate Joe’s for Canadian customers who could purchase goods in the United States, but that argument failed. Trader Joe’s did not cite, and the court did not find, circumstances where the Act was applied to alleged infringement happening entirely abroad on the grounds that foreign customers would buy the infringing product in their home country and not cross into the United States to purchase the legitimate product. Such an application would stretch the jurisdictional reach of the Act too far, the court reasoned. Accordingly, the court held that the facts of this case did not show an effect on U.S. foreign commerce sufficient to present a cognizable Act claim.