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Originally published August 17, 2013 at 4:26 PM | Page modified August 19, 2013 at 6:27 AM

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Trader Joe’s suing man who resells its products in Canada

Michael Hallatt, of Vancouver, B.C., considers himself Trader Joe’s “best customer,” and is downright irate that the California company has sued him, seeking to shut down his shop.

San Francisco Chronicle

Pirate Joe’s pricing

Bought prices in U.S. dollars, sold in Canadian

Milk chocolate-covered potato chips: Bought $2.99, sold $4.99

Organic extra-virgin coconut oil: Bought $5.99, sold $8.99

Lavender dryer bags: Bought $3.99, sold $5.99

Gluten-free granola, fruit & nut: Bought $3.49, sold $5.99

* $1 US = $1.0338 Canadian

Source: San Francisco Chronicle

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VANCOUVER, B.C. — Michael Hallatt has spent more than $350,000 at Trader Joe’s in less than two years. But the popular grocery chain doesn’t ever want to see him again.

“I’m their best customer,” he said with a mix of pride and indignation.

Every week, the Vancouver resident drives his panel van across the border to buy a few thousand dollars’ worth of merchandise at Trader Joe’s stores in the United States. He then turns around and resells the goods at his own shop, Pirate Joe’s, in Canada for a profit.

Despite the obvious affection Hallatt and his customers have for the eclectic grocer, he finds himself the subject of a lawsuit filed in May by the California company, which has no presence in Canada. The suit seeks to shut down the store he owns in Vancouver that is devoted to one thing: reselling Trader Joe’s products.

His response: removing the “P” from his front window, turning Pirate Joe’s into Irate Joe’s. His cross-border shopping trips continue, even though more and more Trader Joe’s markets are posting his picture.

“Almost all the stores in the Pacific Northwest have asked me to leave,” said Hallatt, 53, a British Columbia native who lived in the Bay Area from 1996 to 2004, lured by the dot-com boom. “This is a little bit David versus Goliath and a little bit Occupy Grocery.”

The lawsuit, filed in federal court in Washington state, alleges federal trademark infringement; unfair competition, false endorsement and false designation of origin; false advertising; federal trademark dilution; injury to business and reputation; and deceptive business practices. This month, Hallatt’s Seattle lawyers filed a motion to dismiss.

“Trader Joe’s thinks Canadians are too ignorant not to tell the difference between the empire and my little shop on Fourth Avenue,” said Hallatt, whose store is in Vancouver’s thriving Kitsilano neighborhood. Even so, he’s not taking any chances. A sign on the sidewalk proclaims: “Unauthorized. Unaffiliated. Unafraid.”

Hallatt says he doesn’t know what law he’s breaking. He says he saw an opportunity to make some money, and Trader Joe’s is profiting as well, and compares his operation to a music store that resells CDs.

Where it began

Hallatt became a Trader Joe’s fan when he was working in Emeryville for the search engine then known as Ask Jeeves. When he fell in love with a woman from Vancouver, he returned to his hometown and opened Transilvania Trading in January 2012 to sell Trader Joe’s products. Late last year, he changed the name to Pirate Joe’s and moved to his current location.

“I love this,” said Brook Halford of nearby Burnaby, who’d just spent $110 shopping with her mother-in-law and 2-year-old son, Grayson. “And my boy is addicted to the Crushers (fruit snacks). He doesn’t like the other brands.”

Given the cost of gas, goods, duty, rent and salaries for employees and “shopping helpers,” Hallatt said he is “barely” getting by. He offers 1,000 products and does not carry fresh or frozen foods. Markups are usually $2 or $3, and keeping items in stock is a perennial problem.

“You know your business model is shaky when your supplier hates you. It’s a little bit risky, a little bit cheeky. But I’m Irish, so I like that sort of thing,” said Barry Hogan, 26, an immigrant from Dublin who works for Hallatt.

Records indicate that Trader Joe’s has obtained a Canadian trademark, which it applied for in October 2010. When asked about the lawsuit and plans for Canada, Alison Mochizuki, Trader Joe’s director of public relations, said, “Unfortunately, we don’t comment on pending litigation.”

Weekly shopping trips

Hallatt usually spends $4,000 to $5,000 in cash during his weekly shopping trips. He used to go mainly to Bellingham, where more than 40 percent of credit-card transactions are with non-U.S. residents, according to the suit.

But being in Trader Joe’s cross hairs has driven him south, into Seattle, Portland, even California. He said San Francisco is his dream territory.

“You’ve just got to have unlimited temerity,” Hallatt said.

Trader Joe’s products are resold in the Pirate Joe’s market in Vancouver. There are no Trader Joe’s stores in Canada.

But the gray-market game is challenging.

The chocolate Hallatt bought at an L.A. Trader Joe’s melted during a heat wave. Chicken-jerky dog treats were confiscated at the border because a special permit was required. And his unmarked white van, which can hold well over 100 bags of groceries, often invites suspicion.

Once, to avoid being recognized, he decided to cross-dress. He was putting on a leopard muumuu, earrings and flowered flip-flops in a Rite-Aid parking lot when somebody called the police, figuring he was going to rob the store.

“My nail polish was not even dry when three cops showed up,” Hallatt recalled.

Can such an enterprise survive much longer, especially in light of the lawsuit by the German-owned chain, which has roughly 400 stores in the United States?

“I don’t think Trader Joe’s really has a chance, suing here in the U.S.,” said lawyer Greg Owen, a trademark, copyright and unfair-competition expert with Owen, Wickersham & Erickson, an intellectual-property firm in San Francisco.

Perishable items

If Trader Joe’s had sued in Canada, or if Pirate Joe’s were operating in the United States, the claim might be more viable, said Owen, who reviewed the lawsuit and motion to dismiss. He added, however, that the first-sale doctrine, which Hallatt is fond of citing and which lets people resell what they’ve bought, is more nebulous when perishable items are involved.

“On the flip side, Trader Joe’s is certainly benefiting from Hallatt purchasing the products,” Owen said. “They’re making money off him.”

Material from The Associated Press is included in this report.

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