District Court Lacks Jurisdiction to Hear Lanham Act Claim Arising Out of Allegedly Infringing Canadian Sale of Products Bought in U.S., Where U.S. Plaintiff Did Not Do Business in Canada and Canadian Defendant Did Not Do Business in U.S.

The World in U.S. Courts: Winter 2014 - Intellectual Property (IP)

Trader Joe’s Co. v. Hallatt, U.S. District Court, Western District of Washington, October 2, 2013

Defendant Hallatt bought branded products from plaintiff Trader Joe’s supermarket in Washington State and resold them in his "Pirate Joe’s" store just across U.S.-Canada border in Vancouver. Trader Joe’s sued Hallatt for trademark infringement and false advertising. Hallatt moved to dismiss, claiming that the Lanham Act did not confer jurisdiction over his allegedly infringing sales in Canada.

The district court applied the so-called "Star-Kist/Timberlane" test adopted by the U.S. Court of Appeals for the Ninth Circuit, which finds jurisdiction based on the presence of a combination of three factors: (i) some effect on U.S. foreign commerce, (ii) an effect large enough to satisfy the requirements of the Lanham Act, and (iii) a U.S. interest that outweighs that of other countries. As to the first two factors, the court noted that jurisdiction would be favored where non-U.S. actions that allegedly deceived non-U.S. persons caused financial injury in the U.S. That was not the case on the facts presented, because Trader Joe’s did not operate in Canada, and Pirate Joe’s did not market to the U.S. or sell products that returned to the U.S. in any significant quantity. The court considered a number of issues in connection with the third factor (the extent of the U.S. interest), finding that jurisdiction was not supported because pending trademark applications by Trader Joe’s in Canada would implicate the same conduct and potentially complicate Canada’s evaluation of the issue, because the defendant was a Canadian citizen whose allegedly unlawful activities were not occurring in the U.S., and because harm was not foreseeable, as the allegedly unlawful sales are of products lawfully purchased at full price from Trader Joe’s.

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