Shiver Me Timbers! US Court Declines to Exert Jurisdiction Over Pirate Joe's

Shiver Me Timbers! US Court Declines to Exert Jurisdiction Over Pirate Joe's

In the past, Canada has been labeled as a pirate haven, but this is now literally true for Trader Joe’s lovers in Vancouver. 

At Pirate Joe’s in Vancouver BC, Michael Hallatt resells marked-up and unmodified Trader Joe’s products purchased at retail price in Washington State Trader Joe’s locations. Currently, Trader Joe’s only operates in the United States and hold several registered trade-marks on TRADER JOE’S. The mark is used to identify both the company itself, and its branded goods. Trader Joe’s also currently has two trade-mark applications for retail grocery services in Canada.

In the complaint, Trader Joe’s alleged that Hallatt prominently displayed their mark in an attempt to pass as an authorized dealer of their products. Interestingly, in the wake of the trade-mark infringement claim made by Trader Joe’s, Hallat’s store now goes by _IRATE JOE’S with the tagline “Unauthorized, Unaffiliated and Unafraid”. On October 2nd, a Seattle Washington court granted a motion to dismiss the claim for lack of subject-matter jurisdiction, but allowed Trader Joe's to amend the claim under state laws.

Under Rule 12(b)(1) of the United States Federal Rules of Civil Procedure, a court can dismiss a claim only if it is immaterial and appears to be made solely for the purpose of obtaining jurisdiction, or the claim is wholly immaterial or frivolous. In making this determination, the court must accept the allegations as true unless the party mounting a jurisdictional challenge asserts facial or factual attacks on the claims. The court held that Hallatt failed to make a factual or facial attack but that nevertheless there was no basis for extra-territorial application of the Lanham Act in this case.

The Lanham Act confers broad power on the court to exert jurisdiction. To make this determination, courts must apply the Timberlane Test.  First, courts ask whether the actions complained of effect American foreign commerce. Second, whether this effect presents a cognizable injury under the Lanham Act. Third, the court must conduct a seven-factor analysis as to whether assertion of extra territorial authority is justifiable. To satisfy the first two parts of the test, a plaintiff must show only that there has been “some” effect on foreign commerce when construing all facts in their most favourable interpretation. In this case, all the alleged trade-mark infringement took place in Canada and there was no proof of economic harm in the United States.

Trader Joe’s failed to show an effect on American commerce that would warrant the application of the Lanham Act.  The degree of conflict with foreign law or policy weighed against establishing jurisdiction because Trader Joe’s has two trade-mark applications in Canada and the infringement is wholly foreign. Hallatt’s permanent resident alien status and his frequent purchase trips to the US would likely be sufficient for establishing jurisdiction through the nationality factor. Third, Hallatt’s presence is not strong enough in the US to apply jurisdiction. Fourth, as wholly foreign acts, there was not a significant effect in the United States. (Even if there was some diversion of business or impact on the reputation of Trader Joe's, this factor still weighed against applying jurisdiction.) Fifth, Pirate Joe’s  clearly purchased Trader Joe’s products at retail value to resell and it was unclear whether this was intended to harm Trader Joe's since it did not actually lose sales. As a result, it was was not necessarily foreseeable under the sixth factor that the actions would cause harm. Finally, the actions were clearly more significant in Canada than in the United States, since that is where the products were sold after being lawfully purchased in the US. The court found that on the whole the seven factors supported not extending jurisdiction.

Until Trader Joe’s actually enters into the Canadian market they may have a difficult time preventing Hallat from selling their products at Pirate Joe's. To be successful in a claim in a Canadian court, Trader Joe’s would have to show actual use of the mark in Canada. Trader Joe's may have an argument that if their mark is displayed on a website accessed by Canadians it should be considered “used” even without a physical presence in Canada, though this has been a controversial point of law in recent times. (It is important to note that a mark displayed on a website is not  “used” in Canada unless Canadians can access the products or services associated with the mark.) Currently, Trader Joe’s does not allow Canadians to purchase goods through their site and therefore may not pass the threshold for use in Canada. As time goes on, even with trade-mark applications, if the mark is not used  in Canada the registration could be expunged. Moreover, with Pirate Joe's tagline "Unauthorized, Unaffiliated and Unafraid", I think it would be difficult to indicate consumer confusion in the face of such clear indications about the lack of association with Trader Joe's.

Despite the favourable ruling, Hallatt may still have difficulty stocking his shelves. Several Trader Joe's locations now refuse to serve him, and Hallatt has already had to resort to sending others in to shop for him.  That said, for the time being, fans of Pirate Joe’s can continue to sing “Yo ho ho and a bottle of all-natural apple juice!”

Allison McLean is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.