Ninth Circuit Rules Trader Joe’s May Pursue Infringement Claim Against Infringing Activity in Canada

by Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
Contact

Finnegan, Henderson, Farabow, Garrett & Dunner, LLP

The Ninth Circuit recently became the latest appeals court to address the extraterritorial reach of the Lanham Act, holding that a U.S. trademark holder can pursue a Lanham Act claim in the U.S. against infringing activity that occurred mainly in Canada.

The defendant in the case, Michael Norman Hallatt, was a lawful permanent resident of the United States and was thus allowed to live and work legally in the U.S. Hallatt purchased Trader Joe’s-branded goods in Washington state, transported them to Canada, and resold them in his store named “Pirate Joe’s.” Hallatt used Trader Joe’s trademarks in his Canadian advertising, used a font similar to the Trader Joe’s insignia for his “Pirate Joe’s” sign, and sold perishable goods that were not transported or stored in accordance with Trader Joe’s strict quality control standards. Trader Joe’s received at least one complaint from a customer who became sick after eating a Trader Joe’s branded product purchased from Pirate Joe’s.

Trader Joe’s sued for trademark infringement and unfair competition. The District Court dismissed the Lanham Act claims for lack of subject matter jurisdiction, concluding that the Lanham Act did not apply to the defendant’s activities in Canada. Trader Joe’s appealed.

To determine whether the Lanham Act could reach Hallatt’s conduct in Canada, the Ninth Circuit examined two questions: (1) is the extraterritorial application of the Lanham Act an issue that implicates federal courts’ subject-matter jurisdiction; and (2) were Trader Joe’s allegations that Defendant’s conduct had an impact on American commerce sufficient to invoke the Lanham Act’s protections?

With respect to the first question, the Ninth Circuit held that the extraterritorial reach of the Lanham Act is a merits question, in contrast to subject matter jurisdiction which refers to the court’s power to hear a case. The Lanham Act’s “use in commerce” element and its broad definition of “commerce” give the statute its extraterritorial reach, and these elements derive from Congress’s power to regulate interstate and foreign commerce under the Commerce Clause. Because the “use in commerce” element of the Lanham Act is not connected to its jurisdictional grant in 15 U.S.C. 1121(a), that element is not a jurisdictional requirement.

With respect to the second question, the Ninth Circuit applied a three-part test. The Lanham Act can apply extraterritorially if: (1) the alleged violations create some effect on American foreign commerce; (2) the effect is sufficiently great to present a cognizable injury under the Lanham Act; and (3) the interests of and links to American foreign commerce are sufficiently strong in relation to those of the foreign jurisdiction to justify the assertion of extraterritorial authority. Trader Joe’s allegations met all three elements.

Trader Joe’s satisfied the first two elements because it sufficiently alleged a nexus between Hallatt’s foreign conduct and American commerce. Its Lanham Act claim was based, in part, on the allegation that Hallatt transported and sold Trader Joe’s products without using the proper quality control measures. Further, Hallatt’s infringing scheme including sourcing his inventory entirely from the United States. The Ninth Circuit observed, “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.”

Trader Joe’s satisfied the third element even though most of Hallatt’s infringing activity occurred in Canada because Trader Joe’s alleged, among other things, that (1) Hallatt subjected himself to U.S. law by virtue of his permanent resident status, (2) the harm to Trader Joe’s was foreseeable, and (3) Trader Joe’s trademarks are well-known in Canada.

The case is Trader Joe’s Company v. Hallatt, Case No. 14-35035 (9th Cir.).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Finnegan, Henderson, Farabow, Garrett & Dunner, LLP | Attorney Advertising

Written by:

Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
Contact
more
less

Finnegan, Henderson, Farabow, Garrett & Dunner, LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.