UPDATE: Pirate Joe’s Prevails … For Now

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Irate joesNPR reports that a federal judge in Seattle has dismissed Trader Joe's suit against Pirate Joe's (now "_irate Joe's," at least temporarily) and its owner, Mike Hallatt. As you may recall, Hallatt's operation involves driving to the U.S. from Vancouver, buying products at various Trader Joe's locations and then driving back and reselling them at a markup in Canada. Trader Joe's took exception to this even though it doesn't have any stores in Canada. Judge Marsha Pechman ruled on October 2 (PDF) that there was no jurisdiction.

Trader Joe's sued under the Lanham Act, which can be applied "extraterritorially" but only if the alleged action has a sufficient effect on U.S. commercial interests. Here, the court held that even if Canadians are in fact confused by Pirate Joe's business model, there's no harm to Trader Joe's in the U.S. because Hallatt (and his agents) are buying the stuff there at the full retail price. And the infringement, if there is any, is all taking place in Canada.

Trader Joe's argued that it is harmed in the U.S. because Pirate Joe's is selling to Canadians who might otherwise drive to the U.S. and buy the stuff themselves. I'm not sure how that would constitute "harm," because under that theory the same goods are still being sold at the same price, just to a different person. The judge did not get into that, however, saying instead that there were just no cases applying the Lanham Act to facts like these and that doing so would stretch the act "too far."

Since there was no federal subject-matter jurisdiction, the court dismissed all the claims. It did hold that Trader Joe's could amend the state-law claims it had also brought, if it thinks there is a basis for federal diversity jurisdiction. That is, because the plaintiff is a U.S. citizen and the defendants are citizens of a foreign state (Canada, but still), a federal court can hear the case if the "amount in controversy" is more than $75,000.

Trader Joe's has 10 days to give that a shot, but how it would allege, let alone prove, that there's more than $75,000 at stake here is a puzzler. (Attorneys' fees don't count.) Again, it has been suing someone who may well be its single best customer, who is buying stuff from it at the full U.S. retail price. Seems like the only possible harm to Trader Joe's here is if it were to win and force him to stop doing that. Luckily for it, that seems very unlikely.