Trader Joe’s suit against DEX of same name might be more hassle than it’s worth

Supermarket giant Trader Joe’s is suing decentralised exchange Trader Joe, along with an individual believed to be its founder, for trademark infringement.

The supermarket’s suit alleges the exchange’s name, branding and fictional farmer mascot infringe on its trademarks. Alleged Trader Joe founder Cheng Chiu Liu has brushed off multiple cease-and-desist letters, and said he named the exchange after his brother.

Even if Trader Joe’s wins its case against the DeFi exchange, its lawyers will have their work cut out, intellectual property lawyer Jonathon Hance told DL News.

“These are decentralised crypto operators. They use aliases, they don’t necessarily have a corporate headquarters, some of them are not even clear on who their employees or founders are, and they certainly don’t like to tell you where they keep their assets,” said Hance, who is a partner at law firm Bracewell.

“So enforcement for Trader Joe’s, if they’re able to secure a judgement, will be a challenge.”

The recent suit, along with another targeting the supermarket’s own union members, comes as Trader Joe’s tries to protect the brand it has nurtured over 65 years in business.

The chain, whose Hawaiian-shirt-clad staff are encouraged to create a friendly in-store shopping experience, has cultivated a laid-back image that’s proved robust against rivals like Amazon-owned Whole Foods.

“Defendants’ intentional use of Trader Joe’s mark shows that their infringement is deliberate and designed to benefit from Trader Joe’s reputation and to cause confusion,” the suit alleges.

“Defendants’ unscrupulous activities — undertaken in the name of ‘Trader Joe’ — further degrade Trader Joe’s wholesome and high-quality brand and reputation.”

The team behind decentralised exchange Trader Joe did not immediately respond to DL News’ request for comment.

Brand infringement

Trader Joe’s the supermarket alleges that Trader Joe the exchange and a Chinese national, Cheng Chiu Liu, who the lawyers believe to be the DEX’s co-founder, intentionally copied the Trader Joe’s name, and has been leveraging its brand identity on its web interface, in its advertising and across social media.

Among other infringements, the lawsuit alleges that the exchange created a fictional character — a farmer who takes produce to sell at a local marketplace — that recalls associations with the grocery business.

The suit also takes issue with the exchange’s liberal use of the colour red, saying that the red cap the exchange’s farmer character wears evokes the supermarket’s branding.

Red is also the primary colour of the Avalanche blockchain where the Trader Joe exchange was launched. Many other DeFi protocols launched on Avalanche similarly use the colour red and themes around snow.

The supermarket chain is asking the court to stop the exchange from using its trademarks, and for monetary damages — including three times the defendants’ profits, to cover legal fees.

Launched in the middle of the roaring 2021 crypto bull run, Trader Joe became the most popular place to trade tokens on the Avalanche blockchain. At its peak, the exchange held $2.5 billion worth of deposits. However, after a brutal crypto winter, deposits have dropped to less than $80 million.

According to DefiLlama data, Trader Joe makes an annualised profit of around $800,000.

Collecting damages from a decentralised entity

Supermarket Trader Joe’s filed the lawsuit in California, where it is based. But the lawsuit is aimed at an entity incorporated in the British Virgin Islands, with headquarters in New York, doing business as Trader Joe. It also names Liu, who it says is a Chinese national based in Singapore.

Assuming that it wins the case, Hance said, the supermarket chain must then have a plan to collect whatever damages are awarded. And that’s complicated when dealing with entities based outside the US.

One obvious route for Trader Joe’s would be to focus on ties the defendant might have in the US. For example, if they used a US bank, that could be one pressure point to ensure enforcement, Hance said.

But this case is interesting, he added, because the exchange seems to be willing to thumb its nose at the retailer.

Trader Joe’s sued only after the exchange ignored multiple cease-and-desist letters. Trader Joe’s even turned to the World Intellectual Property Organization, disputing the exchange’s registered domain, traderjoexyz.com.

Liu allegedly told WIPO that he named his domain after his brother Joe, an active participant in the network. WIPO backed Liu based on this explanation and allowed him to keep the domain.

But the lawyers say in their complaint that the defendants admitted in a Substack post to naming the site after the retailer.

The defendants have three weeks to respond to the lawsuit. Considering that Liu never responded to any of the cease-and-desist letters, what happens next will be a test, Hance said.

“That will be the first interesting juncture. If they don’t respond, then you know that Trader Joe’s is going to have an impossible time collecting. If they do respond and actually show up to court, then the chances of Trader Joe’s doing something against them will become much better,” Hance said.

Like most large corporations, Trader Joe’s is litigious when it comes to protecting its brand identity. It’s currently also suing its own union for using its logo in selling branded apparel, coffee mugs, and tote bags to union members.

That’s of course a very different case, but the concern for Trader Joe’s is the same: Other parties’ use of its name and branding will dilute its brand identity and confuse consumers.

“Companies like Trader Joe’s have to take a pretty aggressive stance when even a small entity uses their brand. If they believe this is likely to cause consumer confusion, it’s their responsibility to step in and defend it, or risk losing significant brand value,” Hance said.

Joanna Wright is DL News’ Regulation Correspondent. Got a tip on policy, politics or anything else? Reach out to her via email joanna@dlnews.com.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out to him with tips at tim@dlnews.com.