Posted: October 28th, 2016
By: Libby Casale*| Staff Writer
Trader Joe’s first opened in 1967 in Southern California. Trader Joe’s seeks to embody a farmer’s market style feel, with unique and exclusive products. There are Trader Joe’s stores in forty-one states and Washington, D.C. There are no Trader Joe’s stores in Canada.
Pirate Joe’s is a Canadian grocery store that sells Trader Joe’s goods. The goods are purchased at Trader Joe’s in America and then moved across the border to Vancouver. The goods are sold at a 30-40% markup. Pirate Joe’s also imports other brands that Canadians do not have access to.
The saga of Trader Joe’s versus Pirate Joe’s began in 2011 when Trader Joe’s employees in Bellingham, WA noticed that Hallat was purchasing large quantities of products multiple times a week. Hallat would sometimes travel as far as California to purchase goods. He also placed ads on Craigslist calling for a “co-pirate for undercover work” with “a well-established international grocery smuggling operation.”
In 2013, Trader Joe’s sued, claiming that Pirate Joe’s harmed its brand. The complaint alleged, among other things, trademark infringement, false advertising, and dilution. The owner of Pirate Joe’s argued that because he had bought the goods at full retail price, he owned the items and should be able to do whatever he wished with them. This argument would be in line with the doctrine of first sale, which means that after you buy a good you are free to do with it what you want. Hallat also argued that he was providing a service to Canadians who wanted Trader Joe’s products but who were unwilling or unable to travel to the United States to get them and that he never represented himself as an authorized retailer or affiliate of Trader Joe’s.
The district court dismissed the trademark case against Pirate Joe’s on the grounds that the violations had occurred in Canada, where Trader Joe’s has no stores. The court also said that the harm posed by one small shop did not merit extraterritorial application of the law. Trader Joe’s appealed the ruling.
The 9th Circuit recently decided the lawsuit can proceed. The 9th Circuit said that there needs to be some effect on Trader Joe’s, not a substantial effect. This is different than the traditional dispute over affect, which usually involves foreign goods coming into the U.S. and harming a trademark. The 9th Circuit based its determination on the idea that the conduct of Pirate Joe’s could harm Trader Joe’s reputation. Trader Joe’s centered their reputational concerns around Pirate Joe’s shipping and storage process and the subsequent possibility of people getting sick. The 9th Circuit agreed that this could be a valid concern and thus the reputational harm could constitute “some effect.” The fact that the goods were being sold at a higher price and to people who have familiarity with the goods was also enough for “some effect.” The court also determined that Trader Joe’s had met the required standard to bring a Lantham Act complaint and that it didn’t matter that the alleged trademark infringement took place in Canada.
Libby Casale is a second year law student at Wake Forest University School of Law. She holds a degree in Business Administration with an emphasis in Entrepreneurship, and minors in Economics and History from Oregon State University. Upon graduation, she plans to practice in the areas of privacy and cybersecurity law.