Trader Joe’s Ruling Signals Healthy Litigation Prospects for Trademark Plaintiffs

On September 8, the U.S. Court of Appeals for the Ninth Circuit issued a much-awaited ruling reversing the trial court’s dismissal of trademark claims filed by Trader Joe’s against the labor union Trader Joe’s United. The grocery franchise specifically protested the union’s sale of tote bags and other merchandise bearing the name “Trader Joe’s United.” According to Trader Joe’s, this was a commercial use that caused consumer confusion related to sales of goods, thus exceeding the permissible function of simply identifying the union as being Trader Joe’s-related. The lower court dismissed the claims, but the appellate court reversed, on the basis that the merit of the claims could not be decided at such an early stage.

This case is a testament to how early-stage trademark litigation has grown more plaintiff-friendly over the years. Dismissal of claims as a matter of law is rare and, as this case exemplifies, any such dismissal is subject to reversal by higher courts.

A Growing Trend

The Ninth Circuit issued a similar reversal of dismissal in another high-profile case in 2018, involving the famous “Honey Badger Don’t Care” trademark. In that case, the trademark owner had sued a greeting card company for producing birthday cards featuring the famous “Honey Badger” phrase. The lower court dismissed the claims on summary judgment based on fair use, but the Ninth Circuit reversed and remanded.

Nor is the Ninth Circuit alone in this trend of reversing the early dismissal of trademark claims by lower courts. As one example, the U.S. Court of Appeals for the Second Circuit in 2013 reversed the lower court’s dismissal of trademark claims targeting Oprah Winfrey’s use of the term “Own Your Power.” And back in 2006, the U.S. Court of Appeals for the Fifth Circuit reversed the lower court’s dismissal of trademark claims filed by a group of college fraternities and sororities against Converse, finding facial merit to the allegations that the footwear company had infringed the plaintiffs’ trademarks and trade dress.

Although the trend is not new, it has been heightened by the U.S. Supreme Court’s Jack Daniel’s v. VIP Products ruling in 2023. Jack Daniel’s notably restricted the availability of the First Amendment-based Rogers defense, which previously had applied to most instances where the accused trademark use occurred within an expressive work. Now that Rogers is less broadly applicable, early-stage defense-favorable decisions are even harder to come by.

The Upshot of Trader Joe’s

The Trader Joe’s case highlights the impact of judicial notions of equity on trademark decisions. The lower court clearly believed that the grocery store’s claims were frivolous and were simply meant to punish the labor union, which had recently initiated labor complaints against Trader Joe’s not long before the trademark suit was filed. In addition to dismissing the suit, the lower court ordered Trader Joe’s to pay the union more than $100,000 in attorneys’ fees, a remedy typically reserved for exceptional cases.

The dismissal and the fee award were both reversed by the appellate court, which took the opposite approach in holding that the claims had at least facial merit. Trader Joe’s is known for its red-logoed tote bags, and the union sells tote bags with “Trader Joe’s Union” in red lettering mimicking the well-known Trader Joe’s tote bags. According to the court, the proclivity of consumers to view the union merchandise as being affiliated with the main grocery franchise was a question of fact unresolvable at the motion-to-dismiss stage.

The court posited that the union merchandise might cause initial interest confusion, a trademark theory that can be used to establish consumer confusion if consumers initially experienced confusion when they see the union tote bags or other merchandise, even if that confusion is ultimately resolved by the time the transaction is completed. Another potentially applicable theory, not discussed by the court, is post-sale confusion that could arise if passersby were to see people with the union tote bags or merchandise and assume that those products were created by Trader Joe’s.

In siding with the grocery franchise, the appellate court also observed that the lower court had relied on an affirmative defense that the union had not asserted in its motion to dismiss. The lower court found that the union’s trademark dilution claim was barred by the defense of nominative fair use, which protects the use of a trademark for the sole purpose of referring to the trademark owner. On appeal, the court reversed that ruling on the basis that the lower court should not have dismissed a claim based on a defense that the defendant did not raise below and that the plaintiff did not have the chance to respond to.

Indeed, nominative fair use in this context is a nuanced inquiry requiring resolution of disputed facts. To succeed, the defendant would need to prove that consumers readily understand that “Trader Joe’s United” on the merchandise is a logo talking about Trader Joe’s in reference to the labor union. It is quite possible that people who purposefully visit the union website and buy merchandise to support the union would understand the reference. But in the context of initial interest or post-sale confusion, as discussed above, it is also possible that some people would miss the reference and mistakenly infer that “Trader Joe’s United” is another mark owned by Trader Joe’s.

Takeaways

Judging from the appellate panel’s overall position that dismissal was premature, the court could very well have reversed the outright dismissal of claims based on nominative fair use, even had the issue been fully briefed. Still, this basis for reversal highlights the importance of properly preserving arguments in the litigation process. This type of error, coincidentally enough, also disadvantaged VIP Products in the Jack Daniel’s case. After the Supreme Court decision, VIP Products argued to the trial court that an injunction based on trademark dilution would be improper because the doctrine of dilution violates First Amendment free speech. In January 2025, the trial court granted the injunction and declined to rule on the constitutional argument, noting that VIP Products had not asserted any type of First Amendment defense in its original answer to the complaint. These procedural missteps may serve as a cautionary tale for IP litigators.

There are a few other takeaways from the Trader Joe’s case. The case highlights the competing judicial prerogatives of expeditiously deciding cases and giving deference to plaintiffs at the early stages of litigation. One, unavoidably, comes at the cost of the other. The Trader Joe’s ruling demonstrates that the current judicial preference seems to lean toward litigation of trademark claims on the merits in lieu of early dismissal—especially now that Rogers can serve as a dispositive defense in fewer cases.

Courts rarely issue early decisions in favor of either party based on the presence or absence of likelihood of confusion. More often, courts may rule definitively on affirmative defenses, such as Rogers and nominative fair use, on a motion to dismiss or summary judgment motion. The takeaway for defense attorneys hoping for early dismissal is to plead any and all applicable defenses, while plaintiffs’ attorneys should plead fully and carefully to avoid any potential loopholes that could give rise to dismissal on the face of the pleadings.

Here, it seems, the union was not allowed to skip to the front of the line to obtain an early decision on the merits. The case has been returned, and the union will need to complete the check-out process as the litigation unfolds.

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