Academic journal article Suffolk Transnational Law Review

Trademark Law - Extraterritorial Application of the Lanham Act Saves an American Brand from a Canadian Retail Pirate

Academic journal article Suffolk Transnational Law Review

Trademark Law - Extraterritorial Application of the Lanham Act Saves an American Brand from a Canadian Retail Pirate

Article excerpt

TRADEMARK LAW--EXTRATERRITORIAL APPLICATION OF THE LANHAM ACT SAVES AN AMERICAN BRAND FROM A CANADIAN RETAIL PIRATE--Trader Joe's Co. v. Hallatt, 835 F.3d 960 (9th Cir. 2016).

The Lanham Act sets out the fundamental requirements that must be met by an individual or business to determine whether a trademark is infringed. (1) A foreign business that infringes on an American company's trademarks raises the question of international trademark protection. (2) In Trader Joe's Co. v. Hallatt, (3) the United States Court of Appeals for the Ninth Circuit was confronted with whether a competitor, selling Trader Joe's products in Canada under the name Pirate Joe's, generated a connection to American commerce strong enough to warrant extraterritorial application of the Lanham Act. (4) The Court held that Pirate Joe's economic activity does create a necessary connection to American commerce sufficient to permit extraterritorial application of the Lanham Act. (5)

In October 2011, employees at the Bellingham, Washington, Trader Joe's store noticed Canadian resident, Michael Norman Hallatt, visiting the store three to five times per week to buy large amounts of Trader Joe's products. (6) When questioned by Trader Joe's employees, Hallatt admitted that he drove the goods he purchased across the Canadian border where he sold them to Canadian customers at Pirate Joe's. (7) Hallatt owns and operates Pirate Joe's, a Trader Joe's themed store in Canada, where he resells Trader Joe's goods purchased in Washington State at substantially inflated prices. (8) Hallatt displays an exterior sign at Pirate Joe's that uses a font similar to the trademarked "Trader Joe's" sign. (9) Trader Joe's informed Hallatt that it does not tolerate his activity and demanded that he stop reselling Trader Joe's products at Pirate Joe's, nonetheless, Hallatt refused. (10) "Trader Joe's declined to serve Hallatt as a customer," however, he "began donning disguises to shop at Trader Joe's without detection and driving to Seattle, Portland, and even California to purchase Trader Joe's branded products." (11)

Trader Joe's sued Hallatt, the owner of Pirate Joe's, for trademark infringement in the Western District of Washington State. (12) Trader Joe's alleged that Hallatt violated the Lanham Act by misleading consumers into believing Pirate Joe's is authorized to sell Trader Joe's-branded products. (13) Trader Joe's asked the court to award it damages and permanently enjoin Hallatt from reselling its goods using its trademarks in Canada based "on (1) federal trademark infringement, (2) unfair competition, false endorsement, and false designation of origin, (3) false advertising, and (4) federal trademark dilution." (14) The district court granted Hallatt's motion to dismiss for lack of subject-matter jurisdiction, holding that the Lanham Act did not apply to Hallatt's reselling of Trader Joe's products in Canada, consequently, Trader Joe's appealed. (15) On appeal, the Ninth Circuit reversed, concluding that Hallatt's conduct does create a connection to American commerce sufficient to warrant extraterritorial application of the Lanham Act. (16)

The Lanham Act is the primary federal trademark act in the United States which prohibits a number of activities, including trademark infringement, trademark dilution, and false advertising. (17) To determine whether the Lanham Act reaches foreign conduct, a two part test must be applied. (18) Step one considers whether the statute applies extraterritorially on its face, and step two considers the limits Congress has imposed on the statute's foreign application. (19) With regard to the first step, the Supreme Court of the United States held that the Act's broad language with respect to commerce clearly indicates Congress' intent that it apply extraterritorially. (20) Furthermore, the Lanham Act only applies to foreign conduct that impacts American commerce. (21) In considering the second step, note that Congress has not imposed many limits on the Lanham Act's extraterritorial application and therefore the limits of the Act must be analyzed through precedent that has previously been applied to the Sherman Antitrust Act. …

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