Ninth Circuit Rules in Trader Joe’s Trademark Dispute with Union

The Ninth Circuit has reserved the Central District of California’s dismissal of trademark infringement claims brought by grocery store chain Trader Joe’s against a labor union representing some of its employees.

The case is in Trader Joe’s Co. v. Trader Joe’s United.

As the court explained,

This case lies at the intersection of two federal statutes, the Norris-LaGuardia Act (“NLGA”), 29 U.S.C. § 101 et seq., which restricts the power of federal courts to issue injunctions in labor disputes under certain circumstances, and the Lanham Act, 15 U.S.C. § 1051 et seq., which protects trademark owners against infringement, dilution, and unfair competition by other parties.

Trader Joe’s is a national chain of grocery stores that has used its distinctive TRADER JOE’S name and trademarks in commerce since 1967.

In addition to groceries, Trader Joe’s sells merchandise at its stores, including reusable tote bags and other branded goods.

Trader Joe’s alleged that its tote bags “have garnered tremendous consumer attention and serve as a valuable source of organic marketing for Trader Joe’s.”

Trader Joe’s United (TJU) is a labor union that represents certain Trader Joe’s employees. TJU operates a website where it markets and sells various products, including apparel, mugs, buttons, and reusable tote bags.

As the court noted,

Some of TJU’s items allegedly use the Trader Joe’s trademark, including the distinctive typeface, unique red coloring, capitalized lettering, and a similar font style. Trader Joe’s contends that TJU’s items are likely to cause consumer confusion and dilute its trademarks.

On June 27, 2023, Trader Joe’s sent TJU a cease-and-desist letter requesting that it stop any further sales of its allegedly infringing products on TJU’s website.

TJU responded that it would not do so and claimed that the company’s assertion of Lanham Act violations constituted retaliation against its unionization efforts.

Trader Joe’s sued TJU in July 2023, asserting claims of:

• trademark infringement under 15 U.S.C. §§ 1114–1118, 1125;
• unfair competition, false association, and false designation of origin under 15 U.S.C. § 1125(a);
• trademark dilution under 15 U.S.C. § 1125(c);
• unfair competition under California Business and Professions Code § 17200;
• and common law trademark infringement.

Trader Joe’s didn’t demand that TJU “stop using the phrase ‘Trader Joe’s’ for the purpose of identifying Trader Joe’s or communicating [TJU]’s message or using the phrase ‘Trader Joe’s United’ for the purpose of identifying [TJU] or communicating its message.”

However, Trader Joe’s sought a permanent injunction enjoining TJU from using its trademarks in connection with the sale of commercial merchandise on the union’s website. Trader Joe’s also sought the destruction of all infringing merchandise and the recovery of damages.

TJU moved to dismiss the complaint, arguing that Trader Joe’s filed its trademark infringement complaint in retaliation for an ongoing labor dispute.

TJU pointed out that Trader Joe’s filed its complaint against the union six days after the National Labor Relations Board issued a consolidated complaint against Trader Joe’s for unlawful labor practices.

TJU asserted that there is no plausible likelihood that a consumer would believe that the products sold on TJU’s website are sponsored, endorsed, or approved by Trader Joe’s.

The district court granted TJU’s motion to dismiss the complaint with prejudice.

The district court noted several differences between Trader Joe’s and TJU’s marks and observed that Trader Joe’s does not sell many of the products sold on TJU’s website, including buttons, t-shirts, and mugs.

The district court concluded that a reasonable consumer was unlikely to be confused about the origin of these products because TJU’s website clearly identifies itself as a website of a labor union and is openly critical of Trader Joe’s labor practices.

The Ninth Circuit reversed, finding that:

• the district court erred when applying the fact-specific likelihood-of-confusion test articulated in AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348–49 (9th Cir. 1979);
• the district court further erred in dismissing Trader Joe’s dilution claim under the nominative fair use doctrine without providing Trader Joe’s an opportunity to respond or applying the requisite three-factor test; and
• the district court prematurely concluded that the NLGA barred it from granting injunctive relief in this matter without further development of the record or the parties’ positions.

The court noted that in determining “whether a ‘reasonably prudent consumer’ in the marketplace is likely to be confused as to the origin of” the defendant’s products, it considers the eight factors outlined in its decision in Sleekcraft:

• strength of the mark;
• proximity of the goods;
• similarity of the marks;
• evidence of actual confusion;
• marketing channels used;
• type of goods and the degree of care likely to be exercised by the purchaser;
• defendant’s intent in selecting the mark; and
• likelihood of expansion of the product lines.

Here, the district court found, and TJU didn’t dispute, that Trader Joe’s mark is strong.

As for the second factor, the Circuit Court found that the district court erred by taking too narrow an approach, focusing solely on reusable tote bags (sold by both parties) rather than considering a broader category of similar non-grocery goods.

On the third factor, the court found that Trader Joe’s and TJU’s marks were strikingly similar:

The name “Trader Joe’s” in both parties’ marks uses capitalized lettering, the same red color, and similarly stylized fonts, and both marks are found within concentric circles.

On the fourth factor, the court found that consumers searching for “Trader Joe’s tote bags” online could be diverted to TJU’s merchandise website, such that TJU improperly benefited from the goodwill Trader Joe’s has developed in its marks, but that, overall, this factor was neutral.

The court found that the fifth through ninth factors were also neutral.

The district court found that TJU’s use of the Trader Joe’s mark constituted nominative fair use. But, noted the Circuit Court, TJU never raised the nominative fair use defense in its briefing before the district court.

Thus, the Circuit Court held that the district court erred in dismissing Trader Joe’s trademark dilution claim on this ground.