Trader Joe’s vs. Pirate Joe’s

Vancouver is one of the world’s most lovely and livable cities.  It sits on a glittering Pacific inlet at the base of dramatic mountains, has a temperate, mild climate, and a diverse and affluent population.  But for people who love to eat, it has one glaring flaw. There is no Trader Joe’s. [Related: do you know who owns Trader Joe's?]

That has always rankled Vancouverite Michael Hallatt. So much so that a couple of years ago Hallatt decided to open a store in the affluent Vancouver neighborhood of Kitsilano. He named it “Pirate Joe’s.” Hallatt stocked his new store by making frequent trips across the border to Trader Joe’s around the city of Bellingham, Washington. Hallatt spent over $350,000 on Trader Joe’s items, including Charmingly Chewy Chocolate Chip Cookies, Milk Chocolate Covered Potato Chips, Gluten Free Rice Pasta, and Tea Tree Tingle Conditioner. Hallatt marks the products up by a couple of bucks and puts them on the shelves of Pirate Joe’s, where hungry Vancouverites have been snapping them up.

Which sounds like a decent business for Hallatt, and also a sweet deal for Trader Joe’s, which gets to sell a lot of its product in a market where it would otherwise sell nothing. But apparently Trader Joe’s doesn’t want Hallatt’s money. And now they’ve filed a lawsuit in Seattle claiming that Hallatt’s Pirate Joe’s business is infringing their trademarks.

Why on earth would Trader Joe’s be suing one of their best customers? And what, if anything, is wrong with reselling products? 

On the first question, all we know is what Trader Joe’s says in their complaint. TJ’s makes some vague allegations that Hallatt has been handling some of their food items improperly, creating the risk that customers will get sick, and alleges that it “is aware of at least one customer who became ill after consuming a frozen food product purchased from Defendants.”

That’s pretty weak, and in any event, if Hallatt is handling food improperly there are plenty of health inspectors – yes, Canada has those – that can handle that.

TJ’s real concern isn’t about health and safety – it’s about their trademarks. Consumers shopping at Pirate Joe’s, TJ’s says, will be confused. Because the TJ’s trademarks are all over the items on Pirate Joe’s shelves, PJ’s customers will think that TJ’s is sponsoring the Vancouver store. And they’ll be mad that they’re being charged a couple of extra bucks for TJ’s items.

Is this persuasive? In a word, no. The Vancouver store is named Pirate Joe’s, for Pete’s sake. If there was ever a way effectively to communicate to customers that Trader Joe’s was not sponsoring your store, using the word “Pirate” in your name is it.  Plus, there’s the fact that consumers have eyes. By which we mean that if they have them, and if they use them, they are not likely to be confused. As usual, a picture is worth at least a thousand words. Here’s a Trader Joe’s: 

Trader Joe's

(Photo: Anthony92931 via Wikimedia Commons)

 And here’s Hallatt’s Pirate Joe’s store: 

(Photo: Mike Hallatt)

(Photo: Mike Hallatt)

(Photo: Mike Hallatt)

Do you think these look alike? If you do, you need new glasses. If, on the other hand, your vision is good, you may notice that the window display has been modified to read “Irate Joe’s.” Hallatt did this after TJ’s sued him. He also painted a message to his consumers on the sidewalk outside the front door: “Unauthorized. Unaffiliated. Unafraid.” In short, no reasonable person is going to confuse these stores, or believe that TJ’s is sponsoring Pirate Joe’s. 

Instead, PJ’s is reselling TJ’s popular merchandise. The ordinary rule of property is that once you purchase an item, it’s yours to use as you like. Or, to resell. This concept is the basis of a great American (and Canadian) institution: the yard sale.  And more recently, eBay.

Now, reselling on a larger scale is also possible. Sometimes resellers are authorized by the original manufacturer – as in the case of authorized Apple computer resellers like Peachmac. Sometimes they aren’t, as in the case of Pirate Joe’s. But our rules of real property (that is, tangible property, or as The Economist once called it, “things you can drop on your foot”) permit reselling as a general matter.

Does intellectual property law offer a different weapon to Trader Joe’s? Not really. Trademark law doesn’t confer on trademark owners the right to control subsequent unauthorized resales of genuine products, at least if the reseller doesn’t alter the product in a way that confuses consumers. PJ’s doesn’t do anything to the TJ’s products other than truck them across the border in a white panel van. 

If TJ’s has the right to stop PJ’s from reselling their products, then any trademark owner might assert a similar right. Ford could sue Carmax for reselling Fords. Prince (the sports gear company, not the musician) could sue Play It Again Sports for reselling Prince tennis racquets. And if this were true, a trademark law that is aimed at preventing consumer confusion will be preventing something else entirely – competition.  

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  1. Jerry Stevens says:

    I live nowhere near Vancouver but this story has gained wide coverage so I’ve seen it before. I like Trader Joe’s a lot but the only one hurting the Trader Joe’s brand is Trader Joe’s with this lawsuit.

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  2. Lisa Sansom says:

    Hidden due to low comment rating. Click here to see.

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  3. RJ says:

    As a Bellingham resident – I have to wonder if there is at least some pressure on Trader Joe’s in terms of complaints…our local shelves can be completely wiped out of most product by the early afternoon by Canadians crossing the border let alone by someone buying up large amounts for resale…

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    • James says:

      The logical response to such empty shelf complaints would be to just re-stock them more often, and count the cash in the registers :-)

      Personally, I can’t really see the appeal. Other than a few specific products (like their cherry cider), I can usually find most things elsewhere, as good or better and at lower cost than TJ’s.

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      • Chris says:

        For whatever market/tax/subsidy/distribution/currency reasons, food in Canada is much more expensive than in the US. Even with the mark-up, Pirate Joe prices are really quite good.

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    • Chad C says:

      That seems to be a problem of Trader Joe’s not stocking enough. They could just put limits on items. Very easy and much cheaper than a lawsuit.

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    • RicardoB says:

      PJ’s is a drop in the bucket of Bellingham TJ’s customers. $350,000 over the last 3 years is little of that store’s revenue of the enormous amount Canadians are buying from it (if Canadians are wiping things off the shelves). (Which we are. We bought 60lb of butter for a wedding cake from a TJ just last month.)

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  4. Mike B says:

    If one is wondering why Trader Joe’s doesn’t just enter the Canadian market it could be because Trader Joe’s is owned by the Aldi supermarket chain, which itself two chains, Aldo Nord and Aldi Sud, each owned by different billionaire brothers. Aldi had carefully divided up the globe to avoid cross competition with the exception that in the United States branded Aldi markets are Aldi Sud and Trader Joe’s is Aldi Nord. It could be that Aldi Sud was given the Canada upscale market and has just not entered it yet. Andi Nord would want to remove itself as a competitor.

    http://en.wikipedia.org/wiki/Aldi

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    • JK says:

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      • moosh says:

        Since Nord and Sued are German words, is it difficult to imagine the distinction of the two chains is bases on the geography of Germany, not the US?

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      • Jeff says:

        Nord- and Süddeutschland. Has nothing to do with North American geography.

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      • skh.pcola says:

        “Since Nord and Sued are German words, is it difficult to imagine the distinction of the two chains is bases on the geography of Germany, not the US?”

        Because obviously “north” and “south” mean something completely orthogonal to what those terms mean in the United States. Germany is, like, in a different hemisphere. Or something.

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  5. AZ says:

    “Who own’s” Really? I’m sadly getting used to folks tossing apostrophesaround willy-nilly when making a plural, but in a verb?

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  6. Will says:

    What I can’t figure out is why TJs hasn’t seized on this as a marketing opportunity and has instead shot itself in the foot with most of the public. They should be out there with a US ad campaign about how their products are so good, Canadians are paying a premium to get them from Pirates “…but you don’t have to.” They should withdraw their suit, make peace with the guy, and work out an inventory plan with the Bellingham store to supply this guy with everything he needs. I’m sure it was listening to lawyers rather than the sales dept that got them into this trouble.

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    • Peter Lippman says:

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      • Francesc says:

        Nope. Sud is Catalan, French and Italian, but not Spanish. “Sur” is the Spanish word for South.

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  7. J1 says:

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    • Jesse Oehlert says:

      Hypothetical: You buy a case of snickers candy bars from your local store. Your kid resells them (at a markup above your retail cost) at his lemonade stand based in your front yard.

      Let’s even assume, however improbably, that this was a snickers retail candy store, so that as with TJ’s there is no distinction between the store and the manufacturer of the product.

      Are they going to sue you because your kid “diluted” their brand or sold snickers candy bars outside of their “quality control structure?”

      Additional Hypothetical: Does the guy that stocks the vending machine at work get permission from each candy bar manufacturer? Is he an “authorized agent?” Or does he just buy whatever he thinks will sell (at retail cost) and cram it in the machine? Vending machine prices are kind of high! When you buy stuff and it’s bad or the machine eats your money do you send the candy company angry letters? Or do you just leave a note for the guy that owns and stocks the machine ?

      Because this is the exact same damn thing. As the authors correctly note it would set a horrific legal precedent.

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      • Dan says:

        Is the lemonade stand called “Pirate Snickers”? That’s the key. If not, no issue. If so, possible risk. Again, TJ’s claim is based on the similarity of the mark. If Hallat called his store “Hallat Supermarket,” no lawsuit. But that wouldn’t work. Deep down, he needs people to see the “tie” to TJ’s in his name. Which just proves TJ’s is right when they suggest trademark dilution. Otherwise, Hallat would change his name and be on his merry way. That he doesn’t change his name proves TJ’s point.

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  8. Kris Wilkos says:

    Trader Joe’s should not be mad. Mike Hallett has only increased Trader Joe’s business without any added investment or risk on their part. His successful store has only proven that there is a viable and lucrative market for Trader Joe’s in Vancouver.

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