The Ninth Circuit recently became the latest appeals court to
address the extraterritorial reach of the Lanham Act, holding that
a U.S. trademark holder can pursue a Lanham Act claim in the U.S.
against infringing activity that occurred mainly in Canada.
The defendant in the case, Michael Norman Hallatt, was a lawful
permanent resident of the United States and was thus allowed to
live and work legally in the U.S. Hallatt purchased Trader
Joe's-branded goods in Washington state, transported them to
Canada, and resold them in his store named "Pirate
Joe's." Hallatt used Trader Joe's trademarks in his
Canadian advertising, used a font similar to the Trader Joe's
insignia for his "Pirate Joe's" sign, and sold
perishable goods that were not transported or stored in accordance
with Trader Joe's strict quality control standards. Trader
Joe's received at least one complaint from a customer who
became sick after eating a Trader Joe's branded product
purchased from Pirate Joe's.
Trader Joe's sued for trademark infringement and unfair
competition. The District Court dismissed the Lanham Act claims for
lack of subject matter jurisdiction, concluding that the Lanham Act
did not apply to the defendant's activities in Canada. Trader
To determine whether the Lanham Act could reach Hallatt's
conduct in Canada, the Ninth Circuit examined two questions: (1) is
the extraterritorial application of the Lanham Act an issue that
implicates federal courts' subject-matter jurisdiction; and (2)
were Trader Joe's allegations that Defendant's conduct had
an impact on American commerce sufficient to invoke the Lanham
With respect to the first question, the Ninth Circuit held that
the extraterritorial reach of the Lanham Act is a merits question,
in contrast to subject matter jurisdiction which refers to the
court's power to hear a case. The Lanham Act's "use in
commerce" element and its broad definition of
"commerce" give the statute its extraterritorial reach,
and these elements derive from Congress's power to regulate
interstate and foreign commerce under the Commerce Clause. Because
the "use in commerce" element of the Lanham Act is not
connected to its jurisdictional grant in 15 U.S.C. 1121(a), that
element is not a jurisdictional requirement.
With respect to the second question, the Ninth Circuit applied a
three-part test. The Lanham Act can apply extraterritorially if:
(1) the alleged violations create some effect on American foreign
commerce; (2) the effect is sufficiently great to present a
cognizable injury under the Lanham Act; and (3) the interests of
and links to American foreign commerce are sufficiently strong in
relation to those of the foreign jurisdiction to justify the
assertion of extraterritorial authority. Trader Joe's
allegations met all three elements.
Trader Joe's satisfied the first two elements because it
sufficiently alleged a nexus between Hallatt's foreign conduct
and American commerce. Its Lanham Act claim was based, in part, on
the allegation that Hallatt transported and sold Trader Joe's
products without using the proper quality control measures.
Further, Hallatt's infringing scheme including sourcing his
inventory entirely from the United States. The Ninth Circuit
observed, "There is nothing implausible about the concern that
Trader Joe's will suffer a tarnished reputation and resultant
monetary harm in the United States from contaminated goods sold in
Trader Joe's satisfied the third element even though most of
Hallatt's infringing activity occurred in Canada because Trader
Joe's alleged, among other things, that (1) Hallatt subjected
himself to U.S. law by virtue of his permanent resident status, (2)
the harm to Trader Joe's was foreseeable, and (3) Trader
Joe's trademarks are well-known in Canada.
The case is Trader Joe's Company v. Hallatt, Case
No. 14-35035 (9th Cir.).
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