In Trader Joe’s Company v Hallatt, the US Court of Appeals for the Ninth Circuit reversed the dismissal of Trader Joe’s claims under the Lanham Act. The District Court dismissed these claims for lack of subject matter jurisdiction, as the alleged trademark infringement took place in Canada. The Court of Appeals found that the extraterritorial application of the Lanham Act relates to the merits of a claim, not to subject matter jurisdiction, and that Trader Joe’s had alleged a sufficient nexus between the impugned conduct and American commerce for the case to proceed on its merits.

The facts of the dispute were largely uncontested. Trader Joe’s operates hundreds of stores in the US, but does not operate in Canada. Michael Norman Hallatt operates a store called Pirate Joe’s in Vancouver. Mr Hallatt’s store sells Trader Joe branded goods that he purchases in the US. Trader Joe’s refuses to serve Mr Hallatt, a ban that he circumvents by donning disguises and visiting Trader Joe’s locations in different states.

A District Court initially dismissed Trader Joe’s claims under the Lanham Act, finding that the Court lacked subject matter jurisdiction to restrain conduct that takes place in Canada. The Court of Appeal found that this was an error of law, as extraterritorial application of the Lanham Act is a question on the merits of a claim. The Court of Appeal went on to apply the three-part test from Timberlane Lumber Co v Bank of America National Trust and Savings Ass’n to find that Trader Joe’s allegations justify the extraterritorial application of the Lanham Act on the merits. In particular,

  1. Trader Joe’s had alleged that Mr Hallatt infringes its trademarks in a way that affects American foreign commerce, as he transports and sells its goods without using proper quality control measures or established recall practices, and part of his infringing scheme takes place in the US;
  2. this conduct therefore causes an injury recognized under the Lanham Act; and
  3. applying the Lanham Act to Mr Hallatt’s conduct would not violate principles of international comity.

The Court of Appeals has remanded the case back to the District Court for further proceedings.

E-TIPS® ISSUE

16 09 21

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