6 MIN READ
From Pirate Joe’s to Fake Fashion: Would You Start a Pirate Business?
Are you a good pirate or a bad pirate?
Selling fake Rolex watches on the street is clearly illegal, and might land you in jail. Monetizing pirated videos on your YouTube channel, from the anonymity of a bedroom or coffee shop, might be safer, but it's still illegal.
But some profitable pirate businesses might be able to stay on the right side of the law.
Of course, you could be walking a fine line, so the question is: Would you consider trying any of the following pirate businesses?
1. Pirate Joe’s
Michael Hallatt calls his store in Vancouver, British Columbia, “Pirate Joe's,” and says it's an “unaffiliated unauthorized reseller of Trader Joe's products.”
It's extremely popular with fans of Trader Joe's products, but because there are no TJ’s stores in Canada, he buys his inventory — at retail — in the U.S. He adds labels with the necessary ingredient and nutrition information to comply with Canadian law.
To Trader Joe's, he is a pirate. When I first called, Hallatt was “undercover” on a shopping expedition in the U.S. and had to end the call to avoid detection. He later told me he was probably OK because, “My hair is longer and I let my beard grow big.” He regularly uses disguises.
But he can't take too many chances, so he also uses a crew of shoppers who load up on $300 to $500 in products at a time. In this way, he can sometimes purchase “$4,000 to $5,000 in inventory in an hour.” He pays shoppers based on how much they buy, and sometimes hires them using Craigslist ads.
Hallatt originally called his company “Transylvania Trading” and ran it from an old Romanian bakery. By the time TJ’s started sending private investigators, he decided it was time to let the name reflect the reality.
If they discover him shopping, Trader Joe’s will kick him out of their stores. Whether that's legal or not, and whether or not he can continue to sell TJ’s products, is a court matter now.
Trader Joe's sued Hallatt for, among other things, “unfair competition” — an odd charge considering he buys everything from the company's stores at retail prices. A judge dismissed the lawsuit, but Trader Joe’s appealed the decision, and it’s now up to the U.S. Court of Appeals for the Ninth Circuit.
Hallatt thinks there's a 60 to 70% chance of the decision being upheld, but in the long run, he feels the odds are “100% that we'll prevail if it's further litigated,” adding that what he's doing “is legal and it's not hurting Trader Joe's in any way.”
Meanwhile, Pirate Joe's is as busy as ever. Customers are happy to have their favorite Trader Joe's products, even if they do cost more by the time Hallatt purchases them at retail and marks them up for sale in Vancouver. So the pirate raids south of the border continue.
Want your own pirate retail business in up north? You might start by checking out a list of retailers who haven't yet come to Canada. But have an attorney ready to help you fend off the lawsuits.
2. Pirated Perfumes
You've probably seen more than one perfume knockoff. It looks like Chanel No. 5, but if you look closer, the bottle says something like, “If you like Chanel No. 5, you'll love this perfume.”
Whether these pirated perfumes are legal or not depends on just how close the makers come to deceiving the buyer.
When one seller of knockoff perfumes asked the lawyers at Avvo.com if he could put “Inspired by Calvin Klein,” on his bottles, opinions differed. One attorney said, “Yes, you can, and you may spend thousands or more trying to defend against trademark lawsuits.” Another added that “There is no ‘good’ way to infringe.”
But one lawyer said you can “replicate the scent of a non-patented, famous perfume,” sell it in any form you want and even put the brand name on the packaging of the imitation version, as long as you do it in accordance with trademark law. He, along with just about everyone who answered, recommended hiring a trademark attorney to make sure you do it right.
If you do decide to be a perfume pirate, and you're not afraid of being sued, you can find recipes for famous perfumes online.
3. Pirated Gold Mines
Jim Blanning was a “land pirate” in Pitkin County, Colorado.
He found mining claims held by corporations that had long since closed down (there were many of them!), then filed paperwork to form new corporations with the same name, reports Outside magazine. As he put it, this “resuscitated” the corporation so he could take control of the claim. He then sold the land his corporation “owned,” pocketing the cash.
Alas, this piracy was not quite legal, and ultimately Blanning was in trouble for many illegal activities, including bank robbery.
However, he also acquired some mining claims through less questionable channels. For example, he found heirs to old mining claims around Aspen and bought them out for a few hundred dollars each. He then sold the land for a profit.
A more ingenious strategy started with a careful reading of the 1872 Mining Act. The law says counties have to properly advertise sales of mining claims, and auction them off annually at a specified time. When Blanning found out some counties hadn’t properly followed the rules, he legally laid claim to the land involved.
If you want to look for your own opportunities to become a land pirate, you can find the text of the 1872 Mining Act online.
4. Fashion Piracy
No, you can't sell a fake Gucci handbag legally — at least, not if you use the logo and other trademarks. On the other hand, you might be able to make or sell a very similar product if you just leave out the trademark infringement.
It's all about the distinction between a counterfeit and a knockoff. Counterfeiting is illegal, but according to TheFashionLaw.com, “Knockoffs are distinct from counterfeits, and design piracy is not actually illegal.” At least, not in the U.S.
There’s some debate as where the line falls between legal and illegal. Some experts say if you make an imitation of a popular handbag or dress without using any logos or other trademarked designs, it's probably legal.
Others say even if you don’t use a logo or other trademarked feature, creating too much confusion in the consumer's mind could get you sued for trademark infringement.
Of course, being sued can be costly, even if you win the case. So there's your warning if you decide to become a fashion pirate.
Your Turn: Which, if any, of these pirate businesses would you consider trying? Have you heard of other pirate businesses?
Steve Gillman is the author of “101 Weird Ways to Make Money” and creator of EveryWayToMakeMoney.com. He's been a repo-man, walking stick carver, search engine evaluator, house flipper, tram driver, process server, mock juror, and roulette croupier, but of more than 100 ways he has made money, writing is his favorite (so far).