SAN FRANCISCO — A U.S. court has the authority to hear a trademark lawsuit by grocery chain Trader Joe's against a man who buys the company's products and resells them in Vancouver at Pirate Joe's, a store designed to mimic a real Trader Joe's, a federal appeals court ruled Friday.
The 9th U.S. Circuit Court of Appeals overturned a district court's decision to dismiss California-based Trader Joe's federal trademark claims.
The district court in Washington state said it lacked authority to hear those claims because the defendant's alleged trademark violations occurred in Canada and Trader Joe's had failed to clearly explain how they affected U.S. commerce.
The 9th Circuit said defendant Michael Hallatt's conduct could harm Trader Joe's reputation, decreasing the value of its American-held trademarks.
Circuit Judge Morgan Christen also pointed out that Hallatt bought the Trader Joe's goods he resold in Washington state.
Hallatt's attorney, Nathan Alexander, said in an email he and Hallatt disagree with the ruling and are evaluating their options.
Trader Joe's does not have stores in Canada. The company sued Hallatt in 2013, alleging he drove across the border to a Trader Joe's store in Washington state, bought the company's products and resold them at higher prices at his Vancouver store.
A Trader Joe's store refused to sell to Hallatt, but he put on disguises to avoid detection, shopped at other stores as far away as California and hired others to shop for him, the company said in its lawsuit. It estimated Hallatt had spent more than $350,000 on its products.
Hallatt said his business was lawful. He provided a service to Canadians who wanted Trader Joe's products but didn't want to go through the trouble of to the U.S. to get them.
In court documents responding to the lawsuit, Hallatt said he never represented himself as an authorized reseller of Trader Joe's products or as an affiliate of Trader Joe's.
The 9th Circuit sent the case back to the district court for further proceedings.
Customers at Pirate Joe’s can expect to pay a 30-per-cent markup after the currency exchange, Hallatt said, adding he doubled the store space after recently moving to a new location.
Hallatt said he's confident he'll prevail legally because he has a right to resell what he buys under an old law called the first-sale doctrine.
The name Pirate Joe's is "shorthand for unauthorized and unaffiliated. It doesn't get much clearer than that," he said, explaining that his store isn't trying to mimic Trader Joe's
"We're doing nothing but good things for Trader Joe's."
— With files from The Canadian Press