>> consumers might actually be confused by the name
Only problem is those consumers are in a different country - one where Trader Joe's does not operate. I would bet Pirate Joe's would have happily closed down if Trader Joe's opened up a store in Vancouver, since that's all the Pirate Joe guy wanted in the first place.
That's true, but trademark is covered by treaty and simply being in another country isn't a defense against violating trademark, and the average consumer doesn't know that Trader Joe's hasn't decided to open a store in Canada.
I'm not arguing that it's necessarily a good thing or that Trader Joe's would have won. I don't think Trader Joe's should have shut him down. But the fact that he called it Pirate Joe's, and setup the store to look like a Trader Joe's (along with carrying Trader Joe's merchandise), means that it wasn't just a nuisance lawsuit. Trader Joe's had a least some chance of winning, and they had a reasonable legal argument.
>> the average consumer doesn't know that Trader Joe's hasn't decided to open a store in Canada.
Honestly, the average consumer in Canada doesn't even know what Trader Joe's is (well they probably do now, since the Pirate Joe's story has made national news here).
I get all of your points about the legal stuff, but I don't think anybody walking into P/Irate Joe's didn't know what was going on. The owner was very transparent about it, and most of the publicity P/Irate Joe's got in the news was about what the store's premise was.
I look at it very simply. You have a super enthusiastic fan in another country who wants people to have access to your products. You can look at it as an opportunity (to find an amicable solution) or as a threat (to be addressed with lawyers).
One approach generates positive goodwill and the other one generates negative goodwill.
Obviously, it's Trader Joe's prerogative to choose which way they wanted to go, but I personally think they missed out on a marketing opportunity to expand their reach.
They may have thought it was confusingly similar to the pattern they use for their brands (e.g. Trader Jose's, Baker Josef's).
Update: I went and read the actual complaint by Trader Joe's and, though it does mention this, I think this comment may be overly generous to their thought process.
The complaint[1], as far as I can tell, was basically that their decor looked kinda like Trader Joe's and they sold Trader Joe's products and this combination is deceptive.
Hey may still have won that one, but it's at least somewhat plausible that consumers might actually be confused by the name.