On Oct 2, 2013, a Washington District Court judge dismissed a trademark infringement lawsuit
against Vancouver businessman, Michael Hallatt. Powerful U.S.
discount grocer Trader Joe's had filed the suit, irked by
Hallatt's business of reselling its products in his
cheekily-named Vancouver shop, Pirate Joe's. Trader Joe's
has no Canadian locations, so Hallatt made frequent buying trips to
its U.S. outlets. There he paid retail prices, then declared the
goods at the border, marked them up and sold them in his store.
In its complaint, Trader Joe's made numerous
allegations under the Lanham Act(the U.S. federal trademark
legislation), including trademark infringement, false endorsement,
unfair competition, trademark dilution and false advertising. It
also alleged deceptive business practices and trademark dilution
under state law. Trader Joe's contended that Pirate Joe's
intentionally copied the appearance of its stores and used its
product images in order to confuse customers and pass as an
authorized Trader Joe's retailer. This, it argued, would damage
the Trader Joe's brand and dilute the source-designating
ability of its trademarks, as well as deter Canadian customers from
traveling to the United States to purchase its products.
Hallatt countered the lawsuit with a motion to dismiss it on jurisdictional
grounds. The court granted the motion. It held that, although the
Lanham Act can apply to activities in a foreign
jurisdiction, extraterritorial application was not supported in
this case. Significantly, all alleged infringing activity occurred
in Canada. As well, there was no proof of harm to Trader Joe's
– neither economic harm (since Hallatt paid retail prices),
nor harm to goodwill.
Since the court's decision was based on jurisdictional
questions, the trademark issues were not resolved. However, as
permitted in the court's Oct 2 order, Trader Joe's has now
submitted an amended claim to support federal diversity
jurisdiction over its state law claims. Diversity jurisdiction
allows a U.S. federal court to hear cases involving citizens of
different states or foreign citizenship, provided the value of the
matter exceeds $75,000. As well, Trader Joe's has filed a
motion asking the court to reconsider its dismissal of the
Lanham Act claims. So while Trader Joe's may have lost
the first battle, the "pirate wars" may not yet be
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A recent Saskatchewan Court of Queen's Bench decision allowed a court-appointed receiver to sell and transfer intellectual property rights free and clear of encumbrances, finding that a license to use improvements of an invention was a contractual interest and not a property interest.
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