Enforcing U.S. Trademark Rights Against a Foreign Infringer
American law generally does not apply to the activities of foreign citizens which occur outside the U.S. As with most general rules, however, there are exceptions. Recently, the United States Courts of Appeal in both the Ninth and Fourth Circuits have allowed Federal Trademark claims under the Lanham Act to reach activity outside U.S. borders since it affects commerce in the United States.
“Pirate Joe” Sets Sail
The Plaintiff in the Ninth Circuit is the popular Trader Joe’s food store chain[1], which operates stores under the name Trader Joe’s throughout the United States. Trader Joe’s holds federal trademark registrations for its name and a number of associated marks.
Canadian Michael Hallett discovered Trader Joe’s store-branded products while living in California. When he went back to Vancouver, Hallett established a specialty grocery outlet under the name “Pirate Joe’s”. Its stock consisted almost entirely of Trader Joe’s products purchased at Trader Joe’s retail stores in the U.S. and brought back to Canada by Hallett or his employees. The store became a favorite of local consumers and reportedly operated at a profit.
A Shot Across the Bow
Trader Joe’s sued Hallett in 2013, asserting both state law trademark dilution claims and violations of the federal Lanham Act, the principal statutory source of U.S. trademark law. Hallett contended that his conduct was beyond the reach of the Act because it occurred wholly within Canada, a country in which Trader Joe’s has no stores and into which it admittedly does not sell any goods.
Although the trial court acknowledged that the Lanham Act may have extraterritorial reach outside the U.S., it noted that this is possible only if the defendant’s conduct has an identifiable effect on U.S. commerce. The court concluded that Trader Joe’s had failed to show how Hallett’s wholly Canadian activity had such an impact and dismissed the complaint.
On appeal, the Ninth U.S. Circuit Court of Appeals reversed the dismissal of the Lanham Act claim. Applying a three part “extraterritoriality test” articulated in a 1976 case brought under the federal antitrust laws, the court found that:
- Hallett’s alleged conduct had an effect on American foreign commerce;
- Its effect is sufficiently great to present a cognizable injury to Trader Joe’s under the Lanham Act; and
- The interests of and links to American foreign commerce are sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority.
The Broad Reach of the Commerce Clause
As is true of many federal laws regulating business conduct, the Lanham Act was enacted pursuant to Congress’ Constitutional power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” [2] The appeals court in Trader Joe’s stands for the proposition that, like this “Commerce Clause” power itself, laws based on that power should be liberally interpreted.
What This Decision Means For Your Business
As economic globalization accelerates, the extent of trademark protection – for U.S. marks in other countries as well as of foreign marks in the U.S. – is complex and evolving. U.S. based businesses – even those with no plans to expand overseas – should consider the potential impact of foreign use, both when selecting a trademark and as part of a robust trademark policing policy.
The lawyers at Sherman IP have extensive experience in cross-border trademark matters and can help you minimize the risks posed by foreign businesses to your current or proposed marks.
[1] Trader Joe’s Co. v. Hallatt, No. 14-35035, 2016 WL 4488009 (9th Cir. Aug. 26, 2016).
[2] Article 1, Section 8, Clause 3