Wall Street Journal
By Ann Zimmerman and Stuart Weinberg
Target Corp. heads to the Federal Court of Canada on Monday, hoping to win the exclusive right to use its name in Canada, just three months after the retailer unveiled a plan to expand into the country.
The Minneapolis-based discount-store chain is asking the court to impose a preliminary injunction against Canadian merchant Isaac Benitah and his company, Fairweather Ltd., which owns 15 stores across Canada called Target Apparel and has a logo similar to that of Target Corp.
"If the defendants are not restrained, the plaintiffs will lose the ability to control their reputation and goodwill in Canada," according to the filing by Target Corp.
The court hearing is the latest volley in a battle that Target Corp. and Mr. Benitah have been waging for close to a decade over who owns the rights to the Target name in Canada.
In mid-January, Target Corp. said it was entering Canada by purchasing the leases of as many as 220 Zellers stores from Hudson's Bay Co. for $1.8 billion. Target since has said it plans to open its first Canadian stores by 2013, and within seven years the company expects its Canadian franchise to produce about $6 billion in revenue.
Days after the announcement, Target Corp. filed a motion asking the Canadian Federal Court to prevent Mr. Benitah's company from opening more stores under the Target Apparel name. The filing alleged Mr. Benitah's use of the Target name on his stores is "deliberately calculated to deceive and confuse the public in Canada" and that customers familiar with Target's so-called cheap-chic brand who visit Mr. Benitah's stores will be "disappointed."
Mr. Benitah's company filed a counterclaim denying the allegations and asking for exclusive rights to the Target name. It also asked for $250 million damages from the U.S. retailer.
Target Corp. said it couldn't comment on pending litigation.
Mr. Benitah, who owns several Canadian retail chains with a total of 300 stores, didn't respond to requests for comment.
The battle took on particular urgency when Mr. Benitah started opening his brand of Target stores more rapidly this year. The stores feature the name Target in big block letters, with the word Apparel in much smaller lettering below. An advertisement announcing future store openings incorporated a bull's-eye design that resembles Target Corp.'s trademark; another made clear that Mr. Benitah was looking for more real estate to expand Target Apparel.
The Canadian Target Apparel stores are much smaller than Target stores in the U.S. and sell mainly men's, women's and youth apparel. Unlike Target's U.S. stores, Target Apparel generally lacks the well-known designer names who sell lower-price versions of their clothing and home furnishings, although it does carry a line from fashion designer Isaac Mizrahi, who was formerly associated with the U.S. chain.
More than 10% of Canadians have shopped at Target stores in the U.S. in the past year and 70% are cognizant of the brand, according to Target Corp. research conducted before the company said it planned to enter Canada.
Still, some Canadian customers said they were unaware that the Canadian and U.S. Targets aren't one and the same. "I didn't know it's different," said Joyce Chen, who was visiting a Toronto-based Target Apparel for the first time early last week.
While Ms. Chen praised the array of women's clothing and prices, another customer, Jo-Anne Sauve, wasn't impressed. "It's almost as if they're getting rid of product that they couldn't sell anywhere else," she said. Her husband, Bob Sauve, said the bathrooms looked old and should have been refurbished when the store was converted in March from a Designer Depot, part of another chain Mr. Benitah owns.
Mr. Benitah's company acquired the Target Apparel name in 2001 from a failing retailer, Dylex Ltd., but didn't use it immediately. Six months later, Target Corp. filed a challenge with the Canadian Registrar of Trademarks, arguing that the trademark should be invalidated for nonuse. The Registrar's office agreed with Target, but the Federal Court of Canada overturned the decision, because by then Mr. Benitah's company had begun manufacturing clothes under the Target Apparel label. That decision was upheld by the Federal Court of Appeal in 2007, but just covers the right to the name on apparel, not stores.
Last July, the U.S. retailer filed another challenge with the federal trademark authorities in Canada, arguing that because Mr. Benitah and his company hadn't used the name in three years, his right to it had expired under Canadian trademark law. Both companies also are now vying to trademark the Target name.
A decision in the federal court case isn't expected immediately.
