Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-14-35035/USCOURTS-ca9-14-35035-0/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 

---

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

TRADER JOE’S COMPANY, a

California Corporation,

Plaintiff-Appellant,

v.

MICHAEL NORMAN HALLATT, an

individual, DBA Pirate Joe’s,

AKA Transilvania Trading,

Defendant-Appellee.

No. 14-35035

D.C. No.

2:13-cv-00768-MJP

OPINION

Appeal from the United States District Court

for the Western District of Washington

Marsha J. Pechman, Senior District Judge, Presiding

Argued and Submitted on June 7, 2016

Seattle, Washington

Filed August 26, 2016

Before: Richard A. Paez. Jay S. Bybee,

and Morgan Christen, Circuit Judges.

Opinion by Judge Christen

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2 TRADER JOE’S V. HALLATT

SUMMARY*

Lanham Act / Extraterritorial Application

The panel affirmed in part and reversed in part the district

court’s dismissal of trademark infringement and unfair

competition claims for lack of subject-matter jurisdiction.

Defendant Michael Norman Hallatt purchased Trader

Joe’s-branded goods in Washington State, transported them

to Canada, and resold them there in a store he designed to

mimic a Trader Joe’s store. Trader Joe’s sued under the

Lanham Act and Washington law.

Reversing the dismissal of the Lanham Act claims, the

panel held that the extraterritorial reach of the Lanham Act

raises a question relating to the merits of a trademark claim,

not to federal courts’ subject-matter jurisdiction. On the

merits, the panel concluded that Trader Joe’s alleged a nexus

between Hallett’s conduct and American commerce sufficient

to warrant extraterritorial application of the Lanham Act.

The panel affirmed the dismissal of the state law claims

because Trader Joe’s did not allege trademark dilution in

Washington or harm to a Washington resident or business.

The panel remanded the case to the district court for

further proceedings.

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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TRADER JOE’S V. HALLATT 3

COUNSEL

Anna-Rose Mathieson (argued), California Appellate Law

Group, San Francisco, California; Tim Byron, O’Melveny &

Myers LLP, San Francisco, California; Brian M. Berliner and

Jordan Raphael, O’Melveny & Myers, LLP, Los Angeles,

California; for Plaintiff-Appellant.

Nathan Alexander (argued), Dorsey& Whitney LLP, Seattle,

Washington, for Defendant-Appellee.

OPINION

CHRISTEN, Circuit Judge:

This trademark infringement case turns on the

extraterritorial reach of the Lanham Act. It is uncontested

that Defendant Michael Norman Hallatt purchases Trader

Joe’s-branded goods in Washington state, transports them to

Canada, and resells them there in a store he designed to

mimic a Trader Joe’s store. Trader Joe’s sued for trademark

infringement and unfair competition under the Lanham Act

and Washington state law. The district court recognized that

the Lanham Act can apply to conduct that occurs abroad, but

it dismissed the Lanham Act claims for lack of subject-matter

jurisdiction after concluding that Hallatt’s allegedly

infringing activity takes place in Canada, and that Trader

Joe’s did not adequately explain how Hallatt’s activity

impacts American commerce. The district court dismissed

Trader Joe’s’ state law claims for similar reasons.

We affirm in part and reverse in part. Consistent with

recent case law from the Supreme Court and our court, we

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4 TRADER JOE’S V. HALLATT

hold that the extraterritorial reach of the Lanham Act raises

a question relating to the merits of a trademark claim, not to

federal courts’ subject-matter jurisdiction. On the merits, we

conclude that Trader Joe’s alleges a nexus between Hallatt’s

conduct and American commerce sufficient to warrant

extraterritorial application of the Lanham Act. We therefore

reverse in part. But because Trader Joe’s does not allege

trademark dilution in Washington or harm to a Washington

resident or business, we affirm the court’s dismissal of the

state law claims.

BACKGROUND

The complaint alleges that Trader Joe’s is a well-known

American grocery store that sells specialty goods at

reasonable prices from its distinctive, South Pacific-themed

stores.1It is headquartered in Monrovia, California, but it

operates hundreds of stores throughout the United States,

including more than a dozen stores in Washington. About

eighty percent of the goods Trader Joe’s sells in its stores are

Trader Joe’s-branded products that are available only at

Trader Joe’s. Trader Joe’s does not franchise its intellectual

property or license others to sell its products. Trader Joe’s

maintains strict quality control standards when transporting

and storing perishable goods to protect the safety of its

customers and to ensure that Trader Joe’s stores sell only

fresh, high-quality goods. Trader Joe’s has rejected offers

1 We take these facts from the complaint and its exhibits. See Akhtar v.

Mesa, 698 F.3d 1201, 1212 (9th Cir. 2012) (“When reviewing a motion

to dismiss we ‘consider only allegations contained in the pleadings,

exhibits attached to the complaint, and matters properly subject to judicial

notice.’” (quoting Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir.

2007) (per curiam))).

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TRADER JOE’S V. HALLATT 5

from third parties to enter into franchise agreements, in part

because of the difficulty of “ensuring that these third parties

will ship, handle, and store food products pursuant to Trader

Joe’s exacting standards.” Trader Joe’s does not operate

outside of the United States, but Canadian consumers

regularly travel across the border to shop at Trader Joe’s

stores located in northern Washington.

Trader Joe’s owns several federally registered and

common-law trademarks associated with its stores and

products. Its family of marks includes a trademark for the

red, stylized “Trader Joe’s” text, see Fig. 1, and numerous

trademarks for Trader Joe’s-branded products. Trader Joe’s

also alleges that it has trade dress protection for its South

Pacific-themed store design. See Two Pesos, Inc. v. Taco

Cabana, Inc., 505 U.S. 763, 775–76 (1992) (recognizing that

distinctive store design is a form of trade dress). Trader Joe’s

carefully cultivates its brand through advertising, promotion,

and word-of-mouth referrals, and, according to the complaint,

its trademarks and trade dress “have come to symbolize

extraordinary goodwill and have achieved great fame both

within and outside the United States” due to these efforts.

This fame and popularity has generated substantial domestic

and international demand for Trader Joe’s products.

Fig. 1:

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6 TRADER JOE’S V. HALLATT

In October 2011, staff members at the Bellingham Trader

Joe’s store noticed something odd about one of their

customers: Canadian resident Michael Norman Hallatt

visited the store several times per week to buy large

quantities of Trader Joe’s products.2 When questioned,

Hallatt admitted that he drives the goods he purchases across

the Canadian border where he distributes them to Canadian

customers. Trader Joe’s later learned from one of its

Canadian customers that Hallatt opened a store in Canada

named Transilvania Trading (which he later renamed “Pirate

Joe’s”) where he resells, at substantially inflated prices,

Trader Joe’s goods purchased in Washington. Trader Joe’s

alleges that Hallatt uses its intellectual property to solicit

business for Pirate Joe’s: He advertises his wares with Trader

Joe’s trademarks, operates a website accessible from the

United States, displays an exterior sign at Pirate Joe’s that

uses a font similar to the trademarked “Trader Joe’s” insignia,

Fig. 2, and designed the Pirate Joe’s store to mimic Trader

Joe’s trade dress. Hallatt sells perishable goods at Pirate

Joe’s that he does not transport or store in a manner

consistent with the strict quality control standards used by

Trader Joe’s. Trader Joe’s has received at least one

complaint from a consumer who became sick after eating a

Trader Joe’s-branded product she purchased from Pirate

Joe’s.

2 Bellingham, Washington is located about twenty-five miles from the

Canadian border and about sixtymiles fromVancouver, BritishColumbia.

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TRADER JOE’S V. HALLATT 7

Fig. 2:

Trader Joe’s told Hallatt that it does not sanction his

activity and demanded that he stop reselling Trader Joe’s

products from Pirate Joe’s. Hallatt refused. Trader Joe’s

declined to serve Hallatt as a customer, but Hallatt,

undeterred, began donning “disguises to shop at Trader Joe’s

without detection” and driving “to Seattle, Portland, and even

California to purchase TRADER JOE’S-branded products

and evade Trader Joe’s refusal to sell to them.” The

complaint also alleges that Hallatt pays third parties in

Washington to buy Trader Joe’s goods on his behalf. On

appeal, Trader Joe’s contends that Hallatt accomplishes his

scheme in part because he is a United States Lawful

Permanent Resident (LPR), an immigration status that

enables him to live and work legally in the United States. All

told, Hallatt has spent more than $350,000 purchasing Trader

Joe’s products to resell in Canada.

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8 TRADER JOE’S V. HALLATT

Trader Joe’s sued Hallatt (doing business as Pirate Joe’s)

for trademark infringement in the Western District of

Washington, invoking that court’s federal question and

supplemental jurisdiction. 28 U.S.C. §§ 1331, 1367. Trader

Joe’s alleged that Hallatt violated federal and state trademark

and unfair competition laws by misleading consumers “into

falselybelieving that Pirate Joe’s and/or Transilvania Trading

have been authorized or approved by Trader Joe’s,”

displaying Trader Joe’s trademarks and mimicking Trader

Joe’s trade dress, and reselling Trader Joe’s goods without

authorization and without adhering to Trader Joe’s’ strict

quality control practices. According to Trader Joe’s, this

conduct dilutes its trademarks, confuses consumers, and

damages Trader Joe’s’ reputation by associating it with highcost, reduced-quality goods. The complaint includes six

claims for relief, four of which arise under the Lanham Act

and two of which arise under Washington law: (1) federal

trademark infringement, 15 U.S.C. § 1114(1); (2) unfair

competition, false endorsement, and false designation of

origin, 15 U.S.C. § 1125(a)(1)(A); (3) false advertising,

15 U.S.C. § 1125(a)(1)(B); (4) federal trademark dilution,

15 U.S.C. § 1125(c); (5) state trademark dilution, Wash. Rev.

Code § 19.77.160; and (6) deceptive business practices in

violation of the Washington Consumer Protection Act, Wash.

Rev. Code § 19.86.020. Trader Joe’s asked the district court

to award it damages and permanently enjoin Hallatt from

reselling its goods or using its trademarks in Canada.

The district court granted Hallatt’s motion to dismiss

Trader Joe’s’ federal claims for lack of subject-matter

jurisdiction, concluding that the Lanham Act did not apply to

Hallatt’s conduct in Canada. The court denied Trader Joe’s

leave to amend its federal claims, but granted Trader Joe’s the

opportunity to assert an independent jurisdictional basis for

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TRADER JOE’S V. HALLATT 9

its state law claims. Trader Joe’s filed a motion for

reconsideration in which it argued that the extraterritorial

scope of the Lanham Act is a merits question that does not

implicate the district court’s subject-matter jurisdiction. The

district court denied the motion. Trader Joe’s then filed an

amended complaint reasserting its state law claims and

invoking the district court’s diversity jurisdiction. Hallatt

filed a motion to dismiss for failure to state a claim, which the

district court granted.

The district court entered final judgment on December 18,

2013, and Trader Joe’s timely appealed. We have jurisdiction

under 28 U.S.C. § 1291.3

DISCUSSION

A. Lanham Act claims

The Lanham Act is the federal trademark and unfair

competition statute. It creates a civil cause of action against

“[a]ny person who shall . . . use in commerce any . . .

colorable imitation of a registered mark,” 15 U.S.C.

§ 1114(1) (Lanham Act section 32), or “[a]ny person who . . .

uses in commerce any” word, false description, or false

designation of origin that “is likely to cause confusion . . . or

3

“We review de novo a district court’s dismissal for lack of subject

matter jurisdiction, Fed. R. Civ. P. 12(b)(1), and a district court’s

dismissal for failure to state a claim, Fed. R. Civ. P. 12(b)(6).” Naffe v.

Frey, 789 F.3d 1030, 1035 (9th Cir. 2015). We review for an abuse of

discretion a district court’s denial of a motion for reconsideration, see Sch.

Dist. No. 1J, Multnomah Cty. v. ACandS, Inc., 5 F.3d 1255, 1262 (9thCir.

1993), but review de novo any legal conclusions on which the denial was

based, see United States v. Hinkson, 585 F.3d 1247, 1261–62 (9th Cir.

2009) (en banc).

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10 TRADER JOE’S V. HALLATT

to deceive as to the affiliation,” origin, or sponsorship of any

goods, id. § 1125(a)(1) (Lanham Act section 43). The Act

broadly defines commerce as “all commerce which may

lawfully be regulated by Congress,” id. § 1127, and gives

federal courts jurisdiction over all claims arising under it, id.

§ 1121(a).

We determine whether any statute, including the Lanham

Act, reaches foreign conduct by applying a two-step

framework. See RJR Nabisco, Inc. v. European Cmty., 136 S.

Ct. 2090, 2101 (2016). At step one we ask “whether the

statute gives a clear, affirmative indication that it applies

extraterritorially.” Id. The Supreme Court settled this

question with regard to the Lanham Act when it held that the

Act’s “use in commerce” element and broad definition of

“commerce” clearly indicate Congress’s intent that the Act

should apply extraterritorially. See Steele v. Bulova Watch

Co., 344 U.S. 280, 286 (1952). Where, as here, Congress

intended a statute to apply extraterritorially, we proceed to

step two and consider “the limits Congress has (or has not)

imposed on the statute’s foreign application.” RJR Nabisco,

136 S. Ct. at 2101.

We resolve two questions to decide whether the Lanham

Act reaches Hallatt’s allegedly infringing conduct, much of

which occurred in Canada: First, is the extraterritorial

application of the Lanham Act an issue that implicates federal

courts’ subject-matter jurisdiction? Second, did Trader Joe’s

allege that Hallatt’s conduct impacted American commerce

in a manner sufficient to invoke the Lanham Act’s

protections? Because we answer “no” to the first question but

“yes” to the second, we reverse the district court’s dismissal

of the federal claims and remand for further proceedings.

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TRADER JOE’S V. HALLATT 11

1. Subject-matter jurisdiction

Trader Joe’s argues on appeal that the extraterritorial

reach of the Lanham Act is a non-jurisdictional merits

question, and that the Supreme Court’s decision in Arbaugh

v. Y & H Corp., 546 U.S. 500 (2006), abrogated circuit case

law suggesting otherwise. Hallatt counters that this court has

long treated the extraterritorial application of the Lanham Act

as an issue of subject-matter jurisdiction, and that the panel

may not deviate from this precedent. We agree with Trader

Joe’s.

When the district court dismissed the federal claims for

lack of subject-matter jurisdiction, it did not have the benefit

of our recent decision in La Quinta Worldwide LLC v.

Q.R.T.M., S.A. de C.V., 762 F.3d 867 (9th Cir. 2014). There,

we held that the Lanham Act’s “use in commerce” element

(the element that gives the Act extraterritorial reach) is not

jurisdictional. Id. at 873–74. In La Quinta, an American

hotel chain, La Quinta Worldwide, sued a Mexican

competitor, Quinta Real, for trademark infringement after

Quinta Real expressed an intent to expand its business into

the United States. Id. at 872. The district court held a bench

trial and found in La Quinta’s favor. Id. On appeal, Quinta

Real asserted for the first time “that there is no federal

subject-matter jurisdiction over this case.” Id. Quinta Real

argued that the Lanham Act’s “use in commerce” requirement

is jurisdictional; its expressions of intent to open a hotel were

not sufficient to show a “use in commerce” under the Lanham

Act; and that the Ninth Circuit was required to dismiss the

appeal for lack of subject-matter jurisdiction. Id.

Our court rejected those arguments. Citing Arbaugh,

546 U.S. at 513–14, we reasoned that “federal courts have

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12 TRADER JOE’S V. HALLATT

subject-matter jurisdiction over all suits pleading ‘a colorable

claim “arising under” the Constitution or laws of the United

States,’ so long as Congress does not clearly indicate

otherwise.” La Quinta, 762 F.3d at 873. Because “the ‘use

in commerce’ element of Lanham Act claims under sections

32 and 43(a) is not connected to the Lanham Act’s

jurisdictional grant in 15 U.S.C. § 1121(a),” the element “is

not a jurisdictional requirement, and we have subject-matter

jurisdiction under 15 U.S.C. § 1121(a).” Id. at 872–73; see

also Arbaugh, 546 U.S. at 516 (“[W]hen Congress does not

rank a statutory limitation on coverage as jurisdictional,

courts should treat the restriction as nonjurisdictional in

character.”).

Hallatt correctly argues that La Quinta is not on all fours

with this case because La Quinta did not consider the Lanham

Act’s extraterritorial reach. The parties in La Quinta disputed

whether Quinta Real’s intent to expand its business to the

United States constituted “use” within the meaning of the

Lanham Act. See 762 F.3d at 872; see also Sensient Techs.

Corp. v. SensoryEffects Flavor Co., 613 F.3d 754, 762–63

(8th Cir. 2010) (explaining that the Lanham Act imposes

liability for trademark infringement only if there is use of

another’s mark in commerce). La Quinta did not need to

address the Lanham Act’s extraterritorial scope because

Quinta Real’s contemplated infringing activity was to occur

in the United States. 762 F.3d at 872.

Nevertheless, La Quinta’s jurisdictional analysis still

dictates the outcome here. As noted, it is the Lanham Act’s

“use in commerce” element and its broad definition of

“commerce” that give the statute extraterritorial reach. See

Steele, 344 U.S. at 283–84. These are the same elements that

the panel considered in La Quinta, see 762 F.3d at 872–73;

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TRADER JOE’S V. HALLATT 13

they derive from Congress’s power to regulate interstate and

foreign commerce under the Commerce Clause, U.S. Const.

art. I, § 8, cl. 3. See 15 U.S.C. § 1114 (applying to marks

“use[d] in commerce”); id. § 1125 (same); id. § 1127 (“The

word ‘commerce’ means all commerce which may lawfully

be regulated byCongress.”). The constitutional source of this

authority is the same whether or not the alleged infringement

implicates the extraterritorial scope of the Lanham Act: 

Congress can no more regulate intrastate, non-commercial

possession of another’s mark (the issue raised in La Quinta)

than trademark infringement that occurs entirely outside of

the country’s borders. See Wells Fargo &Co. v. Wells Fargo

Express Co., 556 F.2d 406, 427–28 (9th Cir. 1977)

(analogizing the Lanham Act’s application to purelyintrastate

activities to the Act’s application to purely foreign activities). 

Thus, La Quinta’s conclusion that the Lanham Act’s “use in

commerce” element is not jurisdictional applies here even

though La Quinta considered the scope of the word “use,”

rather than the Act’s extraterritorial reach.4

 

4 La Quinta did not discuss several Ninth Circuit cases that treated the

Lanham Act’s “use in commerce” requirement as “jurisdictional,” but that

does not lessen its thrust. See, e.g., Reebok Int’l, Ltd. v. Marnatech

Enters., Inc., 970 F.2d 552, 554 (9thCir. 1992); but see Love v. Associated

Newspapers, Ltd., 611 F.3d 601, 612 (9th Cir. 2010) (post-Arbaugh case

treating extraterritorial question as a merits question). As explained infra,

the Supreme Court plainly stated in Morrison and Arbaugh (which postdate Reebok) that whether a statute reaches foreign conduct is a merits

question, not a question of jurisdiction. See Morrison v. Nat’l Aust. Bank,

Ltd., 561 U.S. 247, 254 (2010) (statute’s extraterritorial reach is a merits

question); Arbaugh, 546 U.S. at 512–13 (criticizingEEOC v. Arabian Am.

Oil Co., 499 U.S. 244 (1991), in which the Court treated the

extraterritorial scope of Title VII as an issue of subject-matter

jurisdiction). These cases did not expressly consider the Lanham Act, but

we see no principled way to exclude the Lanham Act from their holdings,

particularly in light of La Quinta. Our prior characterization of the

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14 TRADER JOE’S V. HALLATT

More importantly, La Quinta is consistent with recent

Supreme Court case law addressing federal courts’ subjectmatter jurisdiction. See Morrison v. Nat’l Aust. Bank, Ltd.,

561 U.S. 247, 253–54 (2010); Arbaugh, 546 U.S. at 516. In

Arbaugh, the Court clarified “the difference between

elements of a claim and jurisdictional requirements,” La

Quinta, 762 F.3d at 873, holding that “the numerical

qualification contained in Title VII’s definition of ‘employer’

. . . delineates a substantive ingredient of a Title VII claim for

relief” and does not “affect[] federal-court subject-matter

jurisdiction,” Arbaugh, 546 U.S. at 503. In Morrison, the

Court applied Arbaugh and held that the extraterritorial reach

of the Securities and Exchange Act § 10(b) is a merits

question, not a question of federal courts’ subject-matter

jurisdiction. See 561 U.S. at 253–54. Its discussion of the

issue is particularly relevant:

Before addressing the question presented,

we must correct a threshold error in the

Second Circuit’s analysis. It considered the

extraterritorial reach of § 10(b) to raise a

question of subject-matter jurisdiction,

wherefore it affirmed the District Court’s

dismissal under Rule 12(b)(1). . . .

Lanham Act’s reach as “jurisdictional” is therefore “irreconcilable with

the reasoning or theory” of this higher and more recent authority. Miller

v. Gammie, 335 F.3d 889, 893 (9th Cir. 2003) (en banc); see also United

States v. Lindsey, 634 F.3d 541, 548 (9th Cir. 2011) (“In order to be

controlling on the panel, a higher court’s decision ‘need not be identical’

to our precedent, but must instead ‘undercut the theory or reasoning

underlying the prior circuit precedent . . . .’” (citation omitted)); id. at 550

(Miller “instructs us to focus on the reasoning and analysis in support of

a holding, rather than the holding alone.”).

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TRADER JOE’S V. HALLATT 15

But to ask what conduct § 10(b) reaches is

to ask what conduct § 10(b) prohibits, which

is a merits question. Subject-matter

jurisdiction, by contrast, “refers to a tribunal’s

‘power to hear a case.’” It presents an issue

quite separate from the question whether the

allegations the plaintiff makes entitle him to

relief. The District Court here had

jurisdiction under 15 U.S.C. § 78aa to

adjudicate the question whether § 10(b)

applies to National’s conduct.

Id. (citations and footnote omitted). This analysis is equally

applicable to the Lanham Act. See Love v. Associated

Newspapers, Ltd., 611 F.3d 601, 613 (9th Cir. 2010)

(explaining the Lanham Act applies to defendants’ foreign

conduct when that conduct impacts American commerce). 

We hold that the extraterritorial reach of the Lanham Act is

a merits question that does not implicate federal courts’

subject-matter jurisdiction, and that the district court erred as

a matter of law when it decided otherwise.

But this conclusion does not end our work. The district

court dismissed Trader Joe’s case at the pleadings stage, but

as in Morrison, “nothing in [its analysis] turned on” the fact

that it dismissed the case under Rule 12(b)(1), rather than

under Rule 12(b)(6). Morrison, 561 U.S. at 254; see also

Arbaugh, 546 U.S. at 507 (explaining that a merits argument

“endures up to . . . trial on the merits”). As explained infra,

our longstanding Timberlane test for the Lanham Act’s

extraterritorial application applies whether the extraterritorial

scope of the statute is a jurisdictional or merits question, so

remand to the district court would only “require [it to put] a

new Rule 12(b)(6) label [on] the same Rule 12(b)(1)

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16 TRADER JOE’S V. HALLATT

conclusion.” Morrison, 561 U.S. at 254. Rather than asking

the district court to engage in this exercise, we consider

whether the Lanham Act reaches Hallatt’s allegedly

infringing conduct under the standards set by Rule 12(b)(6).

2. The merits of the Lanham Act

We next consider the limits, if any, Congress imposed on

the Act’s extraterritorial application. See RJR Nabisco,

136 S. Ct. at 2101 (discussing “step two”). In 15 U.S.C.

§ 1127, Congress directed that the Lanham Act applies to “all

commerce which may lawfully be regulated by Congress.” 

Whether this provision sweeps foreign activities into the

Act’s proscriptive reach depends on a three-part test we

originally applied to the Sherman Act in Timberlane Lumber

Co. v. Bank of America National Trust & Savings Ass’n,

549 F.2d 597 (9th Cir. 1976). See Wells Fargo, 556 F.2d at

427 (extending Timberlane test to the Lanham Act). Under

Timberlane, the Lanham Act applies extraterritorially if:

(1) the alleged violations . . . create some

effect on American foreign commerce; (2) the

effect [is] sufficiently great to present a

cognizable injury to the plaintiffs under the

Lanham Act; and (3) 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.

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TRADER JOE’S V. HALLATT 17

Love, 611 F.3d at 613.5

a. Timberlane prongs one and two

Timberlane’s first two prongs require Trader Joe’s to

allege that Hallatt infringes its trademarks (1) in a way that

affects American foreign commerce, and (2) causes Trader

Joe’s a cognizable injury under the Lanham Act. Id. A

defendant’s foreign activities need not have a substantial or

even significant effect on American commerce, rather, “some

effect” may be sufficient. Compare Am. Rice, Inc. v. Ark.

Rice Growers Coop. Ass’n, 701 F.2d 408, 414 n.8 (5th Cir.

1983) (joining the Ninth Circuit in requiring “some effect”),

with Vanity Fair Mills v. T. Eaton Co., 234 F.2d 633, 642 (2d

Cir. 1956) (requiring effect to be substantial); see also J.

Thomas McCarthy, 5 McCarthy on Trademarks & Unfair

Competition § 29:58 (4th ed. 2016) (discussing different

tests).

Plaintiffs usually satisfy Timberlane’s first and second

prongs by alleging that infringing goods, though sold initially

in a foreign country, flowed into American domestic markets. 

5 Trader Joe’s argues that Timberlane does not apply here because

Hallatt executed part of his infringing scheme in the United States. We

have applied Timberlane in cases where some of the defendant’s conduct

was domestic, so long as the entire scheme culminated in infringing

activity abroad. See, e.g., Reebok, 970 F.2d at 557 (applying Timberlane

where “Reebok’s trademark infringement claim [was] based both on

actions that occurred in the United States as well as in Mexico”); Wells

Fargo, 556 F.2d at 429 (“We note, however, that, when faced with both

Mexican and United States activities of an American citizen that were part

of one infringing scheme, this court adopted an analysis which at least in

part was premised on the need to deal with the extraterritorial nature of

defendant’s activities.”). We follow that same tack here.

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18 TRADER JOE’S V. HALLATT

See Reebok Int’l, Ltd. v. Marnatech Enters., Inc., 970 F.2d

552, 556 (9th Cir. 1992) (prongs one and two met when

defendants “knew that their counterfeit shoes went back into

the United States with regular frequency”); McBee v. Delica

Co., Ltd., 417 F.3d 107, 125 (1st Cir. 2005) (“Quite

commonly, plaintiffs . . . meet their burden by presenting

evidence that while the initial sales of infringing goods may

occur in foreign countries, the goods subsequently tend to

enter the United States in some way and in substantial

quantities.”).6 Trader Joe’s does not allege that the Trader

Joe’s-brand products Hallatt resells from his Canadian store

trickle back into American commerce in a manner likely to

confuse American consumers. This fact distinguishes Steele,

where the Court applied the Lanham Act to a defendant’s

foreign conduct (his sale of counterfeit watches in Mexico)

largely because “spurious ‘Bulovas’ filtered through the

Mexican border into this country.” 344 U.S. at 286. It also

undermines Trader Joe’s’ argument that Steele controls the

outcome here. But, as Trader Joe’s alternatively argues,

whether infringing goods flow into the United States is not

dispositive; plaintiffs may show “some effect” on American

commerce in myriad ways. See, e.g., Am. Rice, 701 F.2d at

414–15 (applying the Lanham Act to defendant’s sale of rice

in Saudi Arabia, though the goods did not flow back into

United States markets, because defendant’s business was

located in the United States).

6 Timberlane refers to defendant’s impact on “American foreign”

commerce, Love, 611 F.3d at 613, but, as these cases show, we regularly

apply the LanhamAct to foreign conduct that impacts domestic commerce

because infringing goodsflowinto American domestic commerce streams. 

See, e.g., Steele, 344 U.S. at 286.

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TRADER JOE’S V. HALLATT 19

Trader Joe’s alleges that Hallat’s foreign conduct has

“some effect” on American commerce because his activities

harm its reputation and decrease the value of its Americanheld trademarks. It argues that Hallatt violates 15 U.S.C.

§ 1114(1)(a), the Lanham Act’s general prohibition on

trademark infringement, by transporting and selling Trader

Joe’s goods without using proper quality control measures or

established product recall practices.7 By framing its

allegation this way, Trader Joe’s seeks to circumvent the first

sale doctrine, which establishes that “resale by the first

purchaser of the original article under the producer’s

trademark is generally neither trademark infringement nor

unfair competition.” See Enesco Corp. v. Price/Costco Inc.,

146 F.3d 1083, 1085 (9th Cir. 1998). The quality control

theory of infringement is cognizable under the Lanham Act

notwithstanding the first sale doctrine: “[d]istribution of a

product that does not meet the trademark holder’s quality

control standards may result in the devaluation of the mark by

tarnishing its image.” Id. at 1087 (alteration in original)

(internal quotation marks omitted) (recognizing viable claim

for Costco’s repackaging of plaintiff’s figurines, which

caused chips and other damage); see also Adolph Coors Co.

v. A. Genderson & Sons, Inc., 486 F. Supp. 131, 132–33 (D.

Colo. 1980) (enjoining defendant from purchasingCoors beer

in Colorado and reselling it in Maryland because defendant

did not refrigerate beer during transport and the sale of

skunked beer, an inferior product, harmed Coors’s

7 The amended complaint alleges that Hallatt stopped selling perishable

food pending resolution of this case, but neither party argues that this case

is moot, and voluntary cessation of allegedly infringing activities does not

moot an appeal. See Already, LLC v. Nike, Inc., 133 S. Ct. 721, 727

(2013) (describing mootness doctrine); Gator.com Corp. v. L.L. Bean,

Inc., 398 F.3d 1125, 1130 n.3 (9th Cir. 2005) (same).

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20 TRADER JOE’S V. HALLATT

reputation), cited favorably in Enesco Corp., 146 F.3d at

1085 n.2, 1087.

According to Trader Joe’s, Hallatt’s poor quality control

practices could impact American commerce if consumers

who purchase Trader Joe’s-brand products that have been

transported to Canada become ill, and news of such illness

travels across the border. Trader Joe’s alleges this may harm

its reputation, reduce the value of its trademarks, and cause

lost sales. Trader Joe’s argues its risk of harm is particularly

high because Pirate Joe’s displays Trader Joe’s trademarks,

which leads consumers to believe that it is an authorized

Trader Joe’s retailer. 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 Canada. Incidents of food-born

illness regularly make international news,8and Trader Joe’s

alleges that it is aware of at least one customer who became

sick after consuming food sold by Pirate Joe’s. Courts have

held that reputational harm to an American plaintiff may

constitute “some effect” on American commerce. Steele,

344 U.S. at 286 (applying Lanham Act extraterritorially

where “competing goods could well reflect adversely on

Bulova Watch Company’s trade reputation in markets

cultivated by advertising here as well as abroad”); Gucci Am.,

Inc. v. Guess?, Inc., 790 F. Supp. 2d 136, 143 (S.D.N.Y.

2011) (“It is well-settled that a showing of . . . harm to

plaintiff’s goodwill in the United States is sufficient to

8

See, e.g., Anita Balakrishnan, Analysts negative on Chipotle after CDC

launches new E.coli investigation, CNBC (Dec. 22, 2015, 10:28 a.m.),

http://www.cnbc.com/2015/12/21/cdc-investigating-another-outbreak-ofdifferent-e-coli-strain-at-chipotle.html(“Shares ofChipotle MexicanGrill

dropped more than 4 percent” after news of CDC investigation).

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TRADER JOE’S V. HALLATT 21

demonstrate a ‘substantial effect on United States

commerce.’” (quoting Steele, 344 U.S. at 286)); see also

15 U.S.C. §§ 1114, 1125 (making actionable conduct that is

likely to cause future harm).

Hallatt’s alleged attempt to pass as an authorized Trader

Joe’s retailer could similarly harm Trader Joe’s’ domestic

reputation and diminish the value of its American-held marks. 

The complaint alleges that Hallatt sells Trader Joe’s goods at

inflated prices, so customers who shop at Pirate Joe’s may

come to mistakenly associate Trader Joe’s with overpriced

goods. Trader Joe’s also alleges that Pirate Joe’s has inferior

customer service, something Trader Joe’s believes reflects

poorly on its brand. False endorsement gives rise to an

actionable harm under the Lanham Act, see 15 U.S.C.

§ 1125(a)(1)(A), and Trader Joe’s contends it will suffer this

harm in the United States because it draws international

shoppers to its northern-Washington stores, and its

trademarks stand to lose value in the United States. See

McBee, 417 F.3d at 119 (“One can easily imagine a variety of

harms to American commerce arising from wholly foreign

activities by foreign defendants. There could be harm caused

by false endorsements, passing off, or product disparagement,

or confusion over sponsorship affecting American commerce

and causing loss of American sales.”).

Finally, Trader Joe’s alleges that Hallatt engages in

commercial activity in the United States as part of his

infringing scheme. See Reebok, 970 F.2d at 554–55 (first two

Timberlane factors satisfied in part because defendant

“organized and directed the manufacture of counterfeit

REEBOK shoes from the United States”). According to

Trader Joe’s, Hallatt sources his inventory entirely from the

United States: he purchases thousands of dollars of Trader

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22 TRADER JOE’S V. HALLATT

Joe’s goods in the United States and re-sells them in his

Canadian store. Hallatt’s operation may be assisted in part by

his U.S. LPR status, 8 U.S.C. § 1101(a)(27)(A). See A.V. by

Versace, Inc. v. Gianni Versace, S.p.A., 126 F. Supp. 2d 328,

337 (S.D.N.Y. 2001) (applying Lanham Act to foreign

conduct of permanent resident alien who “has resided in and

done business in the United States”); cf. Steele, 344 U.S. at

285 (explaining that the United States government may

regulate American citizens’ foreign conduct). The complaint

also alleged that Hallatt began hiring third parties in

Washington, presumably United States citizens, to purchase

Trader Joe’s goods on his behalf when Trader Joe’s refused

to serve him as a customer. This domestic economic activity

weighs in favor of applying the Lanham Act to Hallatt’s

conduct. See Ocean Garden, Inc. v. Marktrade Co., 953 F.2d

500, 503–04 (9th Cir. 1991) (applying Lanham Act to foreign

conduct of California-based corporate defendant).

Hallatt’s domestic activity also distinguishes this case

from Love, the case the district court found dispositive. 

611 F.3d at 613. The plaintiff in Love (Mike Love, a former

member of the Beach Boys) sued several British defendants

after they distributed compact discs featuring Love’s

trademark as cover art. Id. at 607. In Love, it was undisputed

“that all relevant acts occurred abroad” (defendants designed,

manufactured, and disseminated the infringing CDs entirely

in Europe). Id. at 613. Love failed to show that the

defendants’ conduct directly caused Love “monetary injury

in the United States,” id., and we affirmed summaryjudgment

in favor of defendants. Id. at 613–14. Here, unlike in Love,

Hallatt executes a key part of his allegedly infringing scheme

in the United States, so the causal showing found lacking in

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TRADER JOE’S V. HALLATT 23

Love is satisfied.9See McBee, 417 F.3d at 118 (“the domestic

effect of the international activities may be of lesser

importance and a lesser showing of domestic effects may be

all that is needed” when defendant engages a scheme

involving domestic and foreign conduct (discussing Steele)).

For these reasons, Trader Joe’s satisfied its burden under

Timberlane prongs one and two, at least at this early stage of

the proceeding.

b. Timberlane prong three

The third Timberlane prong considers international

comity, see Hartford Fire Ins. Co. v. California, 509 U.S.

764, 797–98 & n.24 (1993), and gives effect to the “rule that

we construe statutes to avoid unreasonable interference with

other nations’ sovereign authority where possible,” RJR

Nabisco, 136 S. Ct. at 2106–07 & n.9. This prong involves

weighing seven factors:

[1] the degree of conflict with foreign law or

policy, [2] the nationality or allegiance of the

parties and the locations or principal places of

business of corporations, [3] the extent to

which enforcement by either state can be

9 Love also involved a summary judgment motion; we dismissed

plaintiff’s Lanham Act claim because Love’s evidence did not raise a

triable issue of fact about whether CD sales in England impacted

attendance at Love’s concerts in the United States. 611 F.3d at 613. Here,

we consider an appeal following a motion to dismiss, and so we

accept—without requiring Trader Joe’s to prove—that the domestic

components of Hallatt’s operation impact American commerce. See Lee

v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001) (on a Rule

12(b)(6) motion, we accept as true the facts alleged in the complaint).

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24 TRADER JOE’S V. HALLATT

expected to achieve compliance, [4] the

relative significance of effects on the United

States as compared with those elsewhere,

[5] the extent to which there is explicit

purpose to harm or affect American

commerce, [6] the foreseeability of such

effect, and [7] the relative importance to the

violations charged of conduct within the

United States as compared with conduct

abroad.

Star-Kist Foods, Inc. v. P.J. Rhodes & Co., 769 F.2d 1393,

1395 (9th Cir. 1985) (citing Timberlane). No one factor is

dispositive; each factor “is just one consideration to be

balanced.” Wells Fargo, 556 F.2d at 428. Having considered

these factors, we conclude that it is appropriate to apply the

Lanham Act to Hallatt and Pirate Joe’s.

Degree of conflict with foreign laws. Courts typically

find a conflict with foreign law or policy when there is an

ongoing trademark dispute or other proceeding abroad. 

Compare Star-Kist, 769 F.2d at 1396 (finding conflict when

defendant’s petition to cancel plaintiffs’ Philippine trademark

registration was pending in the Philippine Patent Office), with

Am. Rice, 701 F.2d at 415–16 (finding no conflict when

defendant’s conduct was lawful under Saudi Arabian

trademark law). In 2012, Trader Joe’s applied for, and was

granted, Canadian recognition for its TraderJoe’strademarks,

but there is no pending or ongoing adversarial proceeding

between Trader Joe’s and Hallatt in Canada. Nor is Trader

Joe’s engaged in any proceeding (so far as we are aware)

relating to its Canadian trademarks. This factor therefore

weighs in favor of extraterritorial application.

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TRADER JOE’S V. HALLATT 25

Nationality of parties & location of businesses. This

factor typically weighs in favor of extraterritoriality when

both parties are United States citizens, or the parties are

foreign citizens who operate domestic businesses. See

Reebok, 970 F.2d at 556 (defendant operated his business

from the United States); Ocean Garden, 953 F.2d at 504

(both parties were Californian corporations). Trader Joe’s is

an American corporation with its principal place of business

in Monrovia, California. Although Trader Joe’s operates no

stores in Canada, its trademarks are well-known there. The

complaint alleges that Transilvania Trading and Pirate Joe’s

are (or were) Canadian entities, and that both have (or had)

their principal places of business in Vancouver, Canada. As

far as we can tell, Hallatt is a Canadian citizen, but because

he maintains LPR status in the United States, he subjects

himself to the laws of this country. Hallat is also the driving

force behind Pirate Joe’s. This is not, as Trader Joe’s argues,

simply a dispute between an American plaintiff and an

American defendant, because the complaint alleges that

Hallatt is a Canadian citizen who domiciles in Vancouver.10

But Hallatt’s admission that he holds LPR status edges this

factor into Trader Joe’s’ column. See A.V. by Versace, 126 F.

Supp. 2d at 337 (applying Lanham Act to foreign conduct

10 The complaint’s allegation that Hallatt domiciles in Vancouver is

inconsistentwith Hallatt’s claimto LPR status. Compare U.S. Citizenship

& Immigration Servs., Maintaining Permanent Residence,

https://www.uscis.gov/green-card/after-green-card-granted/maintainingpermanent-residence (an LPR intentionally abandons his or her status by

moving “to another country, intending to live there permanently”) (last

visited Aug. 19, 2016), with Mas v. Perry, 489 F.2d 1396, 1399 (5th Cir.

1974) (“A change of domicile may be effected only by a combination of

two elements: (a) taking up residence in a different domicile with (b) the

intention to remain there.”). Neither party reconciled this disparity in their

briefing or at oral argument.

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26 TRADER JOE’S V. HALLATT

when defendant was permanent resident alien, had “resided

in and done business in the United States for over forty

years,” and was the driving force behind the corporate

defendant), at least at this stage in the proceedings.

Remedy & enforcement. The third factor requires us to

consider the remedy sought and the extent to which the trial

court will be able to enforce its order. See Ocean Garden,

953 F.2d at 504. Trader Joe’s seeks damages, including

disgorgement to compensate for losses incurred as a result of

the infringement, and a permanent injunction to prevent

Hallatt from using Trader Joe’s trademarks, offering Trader

Joe’s goods for resale, or mimicking Trader Joe’s trade dress. 

There is nothing to suggest that the district court would have

difficulty enforcing a damages award against Hallatt: Hallatt

is an LPR and Trader Joe’s argues he holds assets here. See

Reebok, 970 F.2d at 557 (finding American court to be in a

superior enforcement position vis-à-vis its Mexican

counterparts because “[e]ach of the defendants, their principal

places of business, and the vast majority of their assets are

located in the United States”). And there is no doubt that the

district court could stop Hallatt’s operation with a domestic

injunction because Hallatt sources his goods entirely from the

United States. See Ocean Garden, 953 F.2d at 504 (“The

injunction would be effective against Marktrade because it is

a U.S. corporation which ‘orchestrated [its] infringing

activities’” here (alteration in original) (citation omitted)). 

The district court could likewise enforce an injunction against

Hallatt’s foreign conduct if that conduct is found to violate

the Lanham Act. See Steele, 344 U.S. at 289 (“[T]he District

Court in exercising its equity powers may command persons

properly before it to cease or perform acts outside its

territorial jurisdiciton.”); Ramirez & Feraud Chili Co. v. Las

Palmas Food Co., 146 F. Supp. 594 (S.D. Cal. 1956) (same),

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TRADER JOE’S V. HALLATT 27

aff’d, 245 F.2d 874 (9th Cir. 1957) (per curiam). Neither the

remedies sought nor the district court’s ability to enforce its

orders weigh against applying the Lanham Act here.

Relative significance of effects. Trademark law has two

goals: “[p]rotect property in the trademark and protect

consumers from confusion.” J. Thomas McCarthy,

1 McCarthy on Trademarks & Unfair Competition § 2:1 (4th

ed. 2013). Hallatt’s conduct primarily affects the value of

Trader Joe’s’ trademarks in the United States because Trader

Joe’s holds most of its intellectual property here. On the

other hand, Canadian consumers are the most likely to be

deceived by Hallatt’s conduct because he displays Trader

Joe’s marks and sells Trader Joe’s goods only in Canada. 

Federal courts ordinarily do not have an interest in protecting

foreign consumers from confusion. See McBee, 417 F.3d at

126. But Trader Joe’s also alleges that its trademarks are

well-known in Canada, and that more than forty percent of

the credit card transactions at its Bellingham, Washington

store are with non-United States residents. Hallatt’s sale of

Trader Joe’s goods in Canada has the potential to mislead

these consumers, so this factor weighs in favor of

extraterritorial application.

Purpose to harm American commerce & foreseeability.

The pleadings, taken in the light most favorable to Trader

Joe’s, tend to support the conclusion that Hallatt intended to

harm Trader Joe’s, or, at a minimum, that such harm was

foreseeable. Hallatt chose to name his store “Pirate Joe’s,”

suggesting that he knowingly treads on Trader Joe’s’

goodwill and pirates Trader Joe’s’ intellectual property. 

Indeed, one of Hallatt’s employees allegedly admitted that

“we’re pirating Trader Joe’s, sort of.” The complaint further

alleges that Trader Joe’s disapproved of Hallatt’s conduct,

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28 TRADER JOE’S V. HALLATT

and Hallatt began engaging in subterfuge (such as donning

costumes) to purchase goods at Trader Joe’s stores without

being identified. These factors therefore weigh in favor of

extraterritorial application.

Relative importance of conduct within the United States

as compared to conduct abroad. Trader Joe’s alleges, and

Hallatt admits, that an essential part of his commercial

venture takes place in the United States: Hallatt purchases

Trader Joe’s products in Washington with the purpose of

reselling them in Canada. That Hallatt uses American

commerce streams to accomplish his allegedly infringing

scheme weighs in favor of applying the Lanham Act to his

conduct. But arguably the conduct most important to

Hallatt’s operation happens in Canada: According to Trader

Joe’s, Hallatt displays Trader Joe’s trademarks on his

Canadian store in a way that confuses Canadian consumers,

and Hallatt resells Trader Joe’s goods—including perishable

goods not transported according to Trader Joe’s quality

control standards—in Canada. Because most of Hallatt’s

infringing activity occurs abroad, this factor weighs against

extraterritorial application to some extent. See Reebok,

970 F.2d at 557 (reasoning that the factor would weigh

against extraterritorial application when “actual consumer

sales of [the infringing] products may have occurred only”

abroad); Star-Kist, 769 F.2d at 1396 (“The effect on United

States commerce from the alleged illegal use of the

trademarks in trade between the Philippines and other foreign

countries is relatively insignificant compared to the effect on

Philippine commerce.”).

* * *

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TRADER JOE’S V. HALLATT 29

In sum, Timberlane’s three prongs favor extraterritorial

application of the Lanham Act here. On prongs one and two,

Trader Joe’s alleges a nexus between Hallatt’s foreign

conduct and American commerce sufficient to state a Lanham

Act claim: Hallatt’s conduct may cause Trader Joe’s

reputational harm that could decrease the value of its

American-held trademarks, and Hallatt operates in American

commerce streams when he buys Trader Joe’s goods in

Washington and hires locals to assist him. On prong three,

the seven subfactors we use to evaluate potential

“interference with other nations’ sovereign authority,” RJR

Nabisco, 136 S. Ct. at 2107 n.9, taken together, do not

counsel against applying the Lanham Act here. We therefore

conclude that the Lanham Act reaches Hallatt’s allegedly

infringing activity, and we reverse the district court’s

dismissal of Trader Joe’s’ four Lanham Act claims.

B. State Law Claims

Trader Joe’s next contends the district court erred when

it granted Hallatt’s motion to dismiss its state trademark

dilution and Washington Consumer Protection Act (CPA)

claims. We agree with the district court that Trader Joe’s

failed to state a claim under either statute, and we affirm its

order dismissing those claims.

1. Trademark dilution

Washington’s trademark dilution statute largely mirrors

the federal trademark dilution statute. It says:

The owner of a mark that is famous in this

state shall be entitled, subject to the principles

of equity and upon such terms as the court

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30 TRADER JOE’S V. HALLATT

deems reasonable, to an injunction against

another person’s commercial use in this state

of a mark, commencing after the mark

becomes famous, which causes dilution of the

distinctive quality of the mark, and to obtain

such other relief as is provided in this section.

Wash. Rev. Code § 19.77.160(1). The district court

concluded, and Hallatt maintains on appeal, that Trader Joe’s

failed to state a claim for relief under this statute because

Trader Joe’s did not allege that Hallatt used Trader Joe’s

trademarks in Washington. Trader Joe’s counters that

“Washington’s Antidilution Act requires dilution in

Washington, not ‘diluting activity’ in Washington,” and

“nothing in the statute suggests this protection is limited to

only dilution caused by a defendant’s use of a mark within

the state.” Hallatt has the better argument.

Washington’s dilution statute entitles courts to enjoin

“commercial use in this state of a [famous] mark.” Wash.

Rev. Code § 19.77.160(1) (emphasis added). The

legislature’s choice to limit the Antidilution Act’s primary

remedy to a defendant’s use of a famous mark in Washington

reflects its intent that the law reach only infringing activities

that occur in Washington. Wash. Dep’t of Ecology v.

Campbell & Gwinn, LLC, 43 P.3d 4, 9 (Wash. 2002) (“[I]f

the statute’s meaning is plain on its face, then the court must

give effect to that plain meaning as an expression of

legislative intent.”). We find no support for Trader Joe’s’

contrary contention that the Antidilution Act proscribes

dilution that occurs abroad and creates a ripple effect in

Washington, so we opt for a simpler, more textual reading of

the statute: to state a claim for relief under Washington’s

trademark dilution statute, a plaintiff must allege, inter alia,

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TRADER JOE’S V. HALLATT 31

that the defendant used its mark in Washington. See Wash.

Rev. Code § 19.77.160(1).11

Trader Joe’s does not allege that Hallatt uses Trader Joe’s

trademarks in Washington. To the contrary, Trader Joe’s

alleges that Hallatt’s diluting activity—selling Trader Joe’sbranded goods, using Trader Joe’s trade dress to decorate his

store, displaying the confusingly similar “Pirate Joe’s” mark

on his storefront—takes place in Vancouver, British

Columbia. The complaint does allege that Hallatt purchases

Trader Joe’s goods in Washington to resell in his store, but

this action (while possibly deceptive) is not “commercial use

in this state of a mark . . . which causes dilution.” Wash.

Rev. Code § 19.77.160(1) (emphasis added); see also id.

§ 19.77.010(6) (defining dilution); cf. Sensient Techs.,

613 F.3d at 762–63 (explaining the concept of “use” in

federal trademark law). We agree with the district court that

Trader Joe’s failed to state a plausible claim for relief under

Washington’s trademark dilution statute.

2. Consumer Protection Act

The CPA declares unlawful “[u]nfair methods of

competition and unfair or deceptive acts or practices in the

conduct of any trade or commerce.” Wash. Rev. Code.

11 Trader Joe’s urges usto analyze whether Washington’s dilution statute

applies to Hallatt’s conduct as a choice-of-law issue. But this case is not

about whether the district court could have applied Canadian law to

Hallatt’s infringing conduct; it is about whether Trader Joe’s stated a

claim for violation of a Washington law. See Haberman v. Wash. Pub.

Power Supply Sys., 744 P.2d 1032, 1053 (Wash. 1987) (distinguishing

“the choice of law to be applied in this case” from “whether [a

Washington statute] can be applied extraterritorially to regulate out-ofstate transactions”).

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32 TRADER JOE’S V. HALLATT

§ 19.86.020. The CPA’s purpose is “to protect the public and

foster fair and honest competition.” Id. To state a claim

under the CPA, a plaintiff must allege: “(1) [an] unfair or

deceptive act or practice; (2) occurring in trade or commerce;

(3) public interest impact; (4) injury to plaintiff in his or her

business or property; [and] (5) causation.” Hangman Ridge

Training Stables, Inc. v. Safeco Title Ins. Co., 719 P.2d 531,

533 (Wash. 1986); Brummett v. Wash. Lottery, 288 P.3d 48,

54 (Wash. Ct. App. 2012). The parties contest only the

second element.

The Washington legislature broadly defines the terms

“trade” and “commerce” to include “the sale of assets or

services, and any commerce directly or indirectly affecting

the people of the state of Washington.” Hangman Ridge,

719 P.2d at 535; Wash. Rev. Code § 19.86.010(2). The

Washington State Supreme Court recently considered the

scope of this statute. See Thornell v. Seattle Servs. Bureau,

363 P.3d 587, 589 (Wash. 2015). Thornell held that the CPA

creates “a cause of action for a plaintiff residing outside of

Washington to sue a Washington corporate defendant for

allegedly deceptive acts.” Id. at 589, 592. The CPA likewise

creates a cause of action for an out-of-state plaintiff against

an out-of-state defendant for the allegedly deceptive acts of

the defendant’s in-state agent. Id. at 592; see also Red Lion

Hotels Franchising, Inc. v. MAK, LLC, 663 F.3d 1080, 1091

(9th Cir. 2011) (Washington’s Franchise Investment

Protection Act creates cause of action for out-of-state plaintiff

to sue Washington company). Thornell reasoned that a

contrary holding would permit Washington companies to

subvert CPA liabilitybytargeting out-of-state consumers, and

that such a result would thwart a primary purpose of the Act:

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TRADER JOE’S V. HALLATT 33

Washington businesses engaging in unfair and

deceptive practices that indirectly affect

others do not advance the purpose of fair and

honest competition. Honest businesses could

be placed at a competitive disadvantage

competing against a business that generates

revenue from unlawful acts that violate the

statute.

363 P.3d at 591.

Thornell holds that the CPA applies broadly, but its

holding does not encompass Hallatt’s conduct. Here, unlike

in Thornell, none of the defendants are Washington residents:

the complaint alleges that Hallatt is a Canadian citizen

domiciled in Vancouver, Canada,12and Pirate Joe’s has its

principal place of business in Canada. Cf. Thornell, 363 P.3d

at 589. Trader Joe’s is a California corporation, so to the

extent Hallatt’s conduct diminishes the value of its

trademarks, that harm is not a Washington-based harm. 

Given the status of the parties in this case, Thornell’s

justification for applying the CPA extraterritorially—that it

may be applied to combat deceptive practices of Washington

businesses—would not be served by applying it here. See

Red Lion, 663 F.3d at 1090 (noting that a Washington law

would not apply extraterritorially when neither party is a

Washington resident and the acts giving rise to the claim

occurred outside of Washington). Nor did Trader Joe’s

plausibly allege that Hallatt’s activity harms “the people of

the state of Washington.” Cf. Hangman Ridge, 719 P.2d at

535. The primary theory of Lanham Act infringement in this

12 Although Hallatt admitted he is an LPR, Trader Joe’s did not allege

that he lives in Washington State.

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34 TRADER JOE’S V. HALLATT

case, the quality control theory, is based on harm to Trader

Joe’s reputation, not consumer confusion. The deceptive

practices claim centers on Hallatt’s attempt to pass-off his

store as a Trader Joe’s store, but this deception allegedly

occurs only in Canada and therefore harms only Canadian

consumers. Finally, unlike in Thornell—where defendant’s

competitive practices gave it a competitive advantage over

honest Washington businesses—Trader Joe’s’ complaint did

not allege that the existence of a low-quality, high-cost Trader

Joe’s knock-off store in Vancouver puts honest Washington

grocery stores at a competitive disadvantage. Cf. Thornell,

363 P.3d at 591. The district court properly dismissed this

claim.

CONCLUSION

We conclude that the Lanham Act applies to Hallatt’s

allegedly infringing conduct, but that the district court

properly dismissed Trader Joe’s’ state law claims. We

therefore REVERSE dismissal of the federal claims,

AFFIRM dismissal of the state claims, and REMAND for

further proceedings. The district court’s judgment is

REVERSED in part, AFFIRMED in part, and

REMANDED. Each party shall bear its own costs.

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