Why the Trader Joe’s lawsuit against a similarly named crypto firm may not be ‘a slam dunk’

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Trader Joe’s strives to offer a sunny, upbeat grocery store experience to its customers—but is much less friendly with those who come near its intellectual property. The latest example is a lawsuit the grocery chain filed this week in Los Angeles that accuses the crypto trading platform Trader Joe of violating its trademark rights.

The platform, registered in the British Virgin Islands with a headquarters in New York, bills itself as a decentralized site where crypto users can borrow and lend funds on the Avalanche and Ethereum blockchains. Trader Joe’s got wind of the operation and, after failing last year to persuade a domain name authority to hand over the crypto site’s traderjoexyz.com address, filed the federal lawsuit.

The complaint accuses the founder of Trader Joe of fraudulently claiming he named the site after his brother and points to social media comments where he contradicts this and writes instead the site is named “after the grocery store.” The grocery chain also points to an image on Twitter (now X) where it uses an image of a produce stand.

The lawsuit also accuses the crypto site of undertaking “a vandalism-based marketing campaign in Paris during Paris Blockchain Week—plastering ‘Trader Joe’ branded material on public and private property around the city.”

Despite all this, Trader Joe’s faces several obstacles in getting the crypto site to stop using its name. For starters, even though names are very similar and the grocery chain has registered numerous marks with the U.S. Patent and Trademark Office, that is not necessarily enough to prevail. The reason is that trademarks are tied to certain classes of services and, in this case, the crypto outfit is offering something very different than groceries. This means few consumers would think Trader Joe’s and the crypto site were the same brand.

Trader Joe’s though, may have a stronger case when it comes to “trademark dilution,” according to Michael Keyes, an intellectual property expert at Dorsey & Whitney. Keyes told Fortune that Trader Joe’s, which is in 42 states, has built incredibly strong brand recognition—approaching the level of Amazon or McDonald’s—which means it can prevail even in the absence of consumer confusion by arguing that Trader Joe is harming its famous name.

“The clear intent here is to trade off Trader Joe’s goodwill,” said Keyes, adding the grocery chain has “a strong case on infringement though not a slam dunk.”

Unfortunately for Trader Joe’s, even if it wins in court, that may not be enough. That’s because the company has only identified one person behind the trading site—a Chinese national living in Singapore—and listed the other defendants as “John Does.” This means that the company likely will struggle to enforce any court victory it obtains.

According to Keyes, it’s possible Trader Joe’s could use the order to apply pressure to third-party vendors that do business with the crypto platform in the U.S.—such as cloud computing vendors—but that doing so can be onerous. He added that, even if the lawsuit is an uphill battle, Trader Joe’s may be pursuing it partly to signal it will continue aggressively protecting its brand.

In 2013, Trader Joe’s sued a firm called Pirate Joe’s that made a business of bringing legally purchased items from a grocery store across the border into Canada and reselling them. The Vancouver-based vendor finally called it quits in 2017, with owner Mike Hallatt telling the Guardian that “the prospect of going to trial against a major corporation when you’re one guy—you get lots of opinions from lawyers telling you: ‘Run.’”

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