Trader Joe's Co. v. Hallatt, No. 14-35035 (9th Cir. Aug. 26, 2016) [click for opinion]
Trader Joe's, the well-known grocery store based in California, brought an action against an individual defendant, Hallatt, in the Western District of Washington for trademark infringement under the Lanham Act and state trademark laws. Trader Joe's alleged that Hallatt, a Canadian resident, visited its stores in the United States several times a week to purchase mass quantities of Trader Joe's goods and then resold them in Canada at his store that he called "Pirate Joe's." Hallatt designed "Pirate Joe's" and his marketing materials to mimic Trader Joe's trade dress.
The district court granted Hallatt's motion to dismiss for lack of subject-matter jurisdiction over Trader Joe's Lanham Act claim, ruling that the Lanham Act did not apply to Hallatt's conduct in Canada. On appeal, the Ninth Circuit held that the district court erred by treating the extraterritorial reach of the Lanham Act as a threshold issue relating to the court's subject-matter jurisdiction over Trader Joe's claim instead of the merits of its claim.
The Lanham Act creates a civil cause of action against "[a]ny person who shall . . . use in commerce any . . . colorable limitation of a registered mark." Under Supreme Court precedent, the "use in commerce" element of an offense indicated Congress's intent to give the Act extraterritorial application. Relying on that ruling and other recent Ninth Circuit precedent, the Ninth Circuit held that "[b]ecause the 'use in commerce' element . . . is not connected to the Lanham Act's jurisdictional grant . . . the element 'is not a jurisdictional requirement' . . . ." Thus, the district court should not have considered whether the Lanham Act proscribed Hallatt's conduct in Canada when it determined whether it had subject-matter jurisdiction over Trader Joe's action.