(Reuters) -A federal appeals court on Monday revived a Trader Joe's lawsuit accusing a fledgling employee union of trademark infringement for selling t-shirts, buttons, mugs and reusable tote bags featuring the grocery chain's distinctive red typeface and logo.

In a 3-0 decision, The 9th U.S. Circuit Court of Appeals in Pasadena, California said a trial judge was too quick to dismiss the lawsuit against Trader Joe's United, which said it was created in 2022 and has four local chapters.

Circuit Judge Gabriel Sanchez said the strength of the Trader Joe's name, the chain's own sale of tote bags, and the "strikingly similar" marks featuring the same red color, similar fonts and concentric circles could confuse consumers.

"This is not one of the rare trademark infringement cases in which there is no plausible likelihood that a reasonably prudent consumer would be confused," Sanchez wrote.

Monday's decision reversed a January 2024 ruling by U.S. District Judge Hernan Vera in Los Angeles, and returned the case to him.

Vera called the union's use of the Trader Joe's mark fair use, and accused Trader Joe's of trying to "weaponize the legal system" by suing to gain advantage in a labor dispute.

Trader Joe's disagreed, telling the appeals court that federal labor law protects many important union rights including advocacy, organizing and striking, but "selling branded goods in commerce is not one of them."

The union countered that no reasonable consumer would be confused by its tote bag, the only product sold by both parties.

According to court papers, the Trader Joe's bag featured wine, fruit, cheese and a cutting board. The union bag included a fist holding a box cutter, and the word "union."

Trader Joe's is based in Monrovia, California, and has about 600 stores.

Lawyers for the union did not immediately respond to requests for comment. Trader Joe's and its lawyers did not immediately respond to similar requests.

The case is Trader Joe's Co v Trader Joe's United, 9th U.S. Circuit Court of Appeals, No. 24-720.

(Reporting by Jonathan Stempel in New York)