By David Baker, Esq.
Late last month, the U.S. Court of Appeals for the Ninth Circuit determined that U.S. courts have jurisdiction over a trademark lawsuit filed by a U.S. grocery store against a Canadian reseller even though the products at issue were only sold in Canada. The implications of such a decision are significant because it may give U.S. companies the ability to enforce trademark rights against foreign infringers even when those infringers don’t sell their wares within the U.S.
Trader Joe’s operates a popular chain of grocery stores in the U.S. and holds numerous trademarks related to those operations, including the registered trademark “TRADER JOE’S” (USPTO TM Reg. No. 1424176) dating back to 1986. It also sells a broad array of products under its own private label and many of its customers are devoted to them. But, Trader Joe’s does not currently operate any stores in Canada. And, to Michael Hallett, this presented an opportunity of sorts.
Mr. Hallett set up his own store north of the border and called it Pirate Joe’s. He also designed the store to resemble familiar elements of the Trader Joe’s chain and even stocked the shelves with products he purchased at Trader Joe’s in Washington State and then transported to the store in Canada. Apparently, Pirate Joe’s was well-received by Canadian, but not by Trader Joe’s itself.
In 2013, Trader Joe’s sued Hallett in the U.S. District Court for the Western District of Washington for trademark infringement and unfair competition under the Lanham Act. Trader Joe’s alleged that Hallett intentionally misled Canadian customers into thinking Pirate Joe’s was an authorized Trader Joe’s retailer by displaying its trademarks and mimicking its trade dress. Not surprisingly, Hallett denied these allegations and claimed that had had informed customers that he was not an authorized Trader Joe’s retailer and the district court agreed to dismiss the case, largely because of a determination that the Lanham Act did not apply to trademark infringement beyond U.S. borders.
But, on appeal, the Ninth Circuit reversed the district court’s findings on the federal trademark claims and held that Hallett’s conduct “could harm the reputation of Trader Joe’s American-held marks.” The appellate court reasoned that a defendant’s activities abroad, even if not substantial or significant, could fall within the purview of the Lanham Act.it also found that, under certain circumstances, the Lanham Act applies extraterritorially. The net effect on Hallett and Trader Joe’s is that the case was remanded back to the district court for further litigation and, eventually, trial.
Why It Matters. The Ninth Circuit’s opinion suggests that infringement abroad, even when the goods at issue are never brought into the U.S., can be the basis for a trademark claim if the infringement otherwise affects a U.S. mark. There are implications for companies doing business internationally that compete with U.S. marks because U.S. mark holders may only need to show the right amount of harm (actual or foreseeable) to broaden their ability to sue foreign companies for trademark infringement.
According to the Ninth Circuit, this is especially true where “(1) the alleged violations create… some effect on American foreign commerce; (2) the effect [is] sufficiently great to present a cognizable injury to the plaintiffs under the Lanham 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.”