Darryl Dyck / Canadian Press via AP Pirate Joe's owner Michael Hallatt poses for a photograph at his store where he resells products from the U.S. specialty grocery store Trader Joe's, in Vancouver, B.C., on Aug. 21. While Trader Joe's was suing Hallatt, he removed the "P" from his store signage so it simply read "Irate Joe's."

For a man who calls himself "Pirate Joe," a legal victory this week allowing him to continue operating his business is as sweet as the Trader Joe's chocolate bars that he sells for a small profit in his Vancouver store.

Michael Hallatt, 53, has been stocking his 600-square-foot shop exclusively with Trader Joe's products and selling them to Canadians — who don't have Trader Joe's stores in their country — for nearly two years. The 1,200 items he offers fly off the shelves, but the Victoria, British Columbia, native's livelihood was threatened in May when Monrovia, Calif.-based grocer Trader Joe's slapped him with a lawsuit.

"We have this chalkboard sign out front," Hallatt said on Thursday, a day after the suit was dismissed. "We quickly changed it from 'Unauthorized and unafraid' to 'We won!'"

The suit, filed in federal court in Washington state, alleged federal trademark infringement, deceptive business practices, injury to business and reputation, false endorsement and false designation of origin, false advertising, federal trademark dilution, and unfair competition.

In August, Hallatt's lawyers filed a motion to dismiss the case. "There's really no damage. He's buying the product at full-price. Trader Joe's is getting paid fully for the product he's taking," said Nathan Alexander, a partner at a Seattle firm.

While U.S. district judge Marsha J. Pechman's decision dismisses the federal suit, it gives Trader Joe's the option of bringing state law claims forward within 10 days against Hallatt. Trader Joe's did not say whether they will pursue further legal action.

"We sell our products in our stores to our customers; and to maintain the goodwill and integrity of the Trader Joe’s brand, it is extremely important to us to protect and preserve the customer experience we have developed in our stores over the past 46 years," Trader Joe's said in a statement on Thursday. "While we are disappointed and disagree with the Court’s determination that it could not exercise jurisdiction over the defendant’s activities in Canada, we will continue to do everything in our power to protect our trademarks and the integrity of our products for our customers."

'My number one supplier hates my guts'

While Hallatt is relieved the lawsuit has been dropped, keeping Pirate Joe's running is no easy task. His tales of being arrested while dressed in a muumuu to avoid being recognized as he shops for staples and being questioned for hours by Border Patrol are proof.

Plus, "my number one supplier hates my guts. I still have a problematic business right now," he said.

Hallatt discovered his passion for Trader Joe's when he was living in Emeryville, Calif., before the birth of his 9-year-old daughter, working as a software engineer. "She's pretty much built out of Trader Joe's veggie green tamales," he said.

Hallatt has previous experience in the food industry: He founded a successful bagel joint in 1982, but was looking for something new to do since "gluten's out right now."

Inspired by a shopping trip where he was one of many Vancouverites at the Trader Joe's in Bellingham, Wash. — the closest store to Vancouver, where more than 40 percent of credit card transactions are from non-U.S. residents — Hallatt decided to simply sell the products at home in January 2012.

Soon, he was spending about $25,000 a month at Trader Joe's. He only buys nonperishable items and doesn't sell alcohol.

At first, Trader Joe's employees in Bellingham thought Pirate Joe's, which started out as "Transilvania Trading" in a former Romanian bakery's storefront, was "awesome," Hallatt said. They saw Hallatt's Vancouver outlet as a way to reduce the long lines in their own store.

But slowly, as Hallatt started making weekly trips and filling up his cart with cookies, chips, bean dip, and anything else that his fellow Canadians were "jonesin' for," he became an unfriendly face there. And in Seattle. And in Portland, Ore. And elsewhere along the West Coast. His photo is up in multiple stores with distinct orders not to allow him through the check-out counters.

Cross-dressing 'Pirate'

As suspicion within Trader Joe's stores grew over Hallatt, so did demand in Vancouver for him to bring back more of their items. Hallatt hired other people to do the shopping for him, but they weren't getting the right products. It was time to try something drastic.

Hallatt went into a thrift store in Bellingham he had frequented and announced, "Hey, I want to cross-dress." Minutes later, he was dressed in a large muumuu, a hat, a purse, and flip-flops with large flowers on them. But according to the thrift shop staff, the outfit wasn't complete.

"My toes looked terrible," Hallatt said.

He was instructed by the women at the thrift store to paint his toenails and shave his legs — immediately. Hallatt went to a Rite-Aid and bought the necessities to do as he was told.

He shaved in the mirror of the vehicle he uses to transport 500 bags of groceries each week — an unmarked, white stretch van. Then he painted his toes in the Rite-Aid parking lot. He was just about to slip the second flip-flop on when he was approached by three perplexed police officers.

"One said, 'You don't even look like a woman,'" he said. "I took the stuff off. I'd been spared the ultimate humiliation."

Free chocolate bars for all

He's hit other bumps in the road, too. The border agents know him well because of his weekly trips between the U.S. and Canada, but one time, they held him for hours in the dead of night after hearing a rumor that he was selling an undercover wine smuggling operation.

"Somewhere on a blog, someone made a comment that it doesn't seem right that I should be selling [Trader Joe's] Two-Buck Chuck for ten-buck Chuck. I don't sell wine, obviously. It's illegal."

Liquor laws are very restrictive in Canada, one reason Trader Joe's hasn't made inroads there, he said. The grocery chain applied for a trademark in Canada in 2010, but it hasn't been granted yet.

Now, instead of cross-dressing, Hallatt pays a group of 20 "couch surfers and students" to do his shopping for him.

Pirate Joe's has one full-time and one part-time employee and typically sells items at a two or three-dollar markup. Salad dressing, for example, costs $2.29 (USD) at Trader Joe's and will sell for $3.99 (Canadian) at Pirate Joe's. The store is not particularly profitable.

"I've never had more fun making less money in my life," Hallatt said.

He may still have challenges ahead, but for now, he is handing out chocolate bars and celebrating his legal victory in the best way he knows how: pirate-style.

"Woohoo! or perhaps, 'Arr!'" he said shortly after receiving news that the lawsuit had been dismissed.

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