Date: 20110623
Docket: T-1902-10
Citation: 2011
FC 758
Ottawa, Ontario, June 23, 2011
PRESENT: The Honourable Mr. Justice Mandamin
BETWEEN:
|
|
TARGET BRANDS, INC. AND
TARGET CORPORATION
|
|
|
|
Plaintiffs
|
|
and
|
|
|
FAIRWEATHER LTD.,
INTERNATIONAL CLOTHIERS INC. AND LES AILES DE LA MODE INCORPOREES
|
|
|
|
Defendants
|
|
|
|
|
REASONS FOR ORDER AND ORDER
[1]
The
Plaintiffs apply for an interlocutory injunction to restrain the Defendants,
pending final disposition of this action, from operating a retail store in
association with a trade-mark or trade name comprising TARGET or a bull’s-eye
design, and from displaying, advertising or using the word TARGET or a bull’s-eye
design to direct public attention to the Defendants’ business as to cause
confusion between the Defendants’ business and the Plaintiffs’ business.
[2]
The Plaintiffs (Target) are
a large chain of retail department stores operating in the United States (US) selling
a wide range of merchandise. Target Corporation uses trade-marks owned by
Target Brands, Inc. which include TARGET and the red bulls-eye design. TARGET
and the red bull’s-eye design were first used by their predecessor in
association with their store located in Minnesota in
1962. Target is in the process of entering the Canadian marketplace, having announced
its intention to open Target stores in Canada in
2013.
[3]
The Defendants (referring to
themselves as INC) are related companies that sell private label clothing and
accessories to mid-to-low income customers. They are comprised of Fairweather,
which sells female apparel and accessories, International Clothiers, which
sells men’s apparel and accessories, and Les Ailes de la Mode, which only
operates in Quebec. INC acquired the registered trade-mark TARGET
APPAREL when it purchased the assets of Dylex Limited. INC has opened a chain
of clothing apparel stores under the Target Apparel name.
[4]
Target commenced
an action against INC seeking damages as well as a permanent injunction from
using the trade name TARGET or the bull’s-eye mark. INC counterclaimed against
Target for infringement of its registered trade-mark TARGET APPAREL. The trial of these matters is scheduled to be heard in
2012.
[5]
For
reasons that follow I am dismissing Target’s application for an interlocutory
injunction against INC.
Facts
Target
[6]
Target does business in the United States of America. This is its first expansion outside of the US.
It is a very large retail store chain operating 1,740 stores in 49 states. Its
total yearly sales revenue exceeds $65 billion in US dollars. Target stores
average about 133,300 square feet of retail space and sell a wide range of
general merchandise as well as providing a number of services. Target claims
its stores have a reputation for consistent appearance and layout, store
cleanliness, helpful employees, product collaboration, innovation, product
exclusivity and certain higher-end products.
[7]
Target is
known by its US trade name TARGET which is
accompanied by a red bull’s-eye logo mark. Target uses the trade name TARGET
and the bull’s-eye logo in conjunction with each other as well as separately. Target
heavily invests in advertising to keep the TARGET name and logo mark in the
minds of customers to differentiate its brand from its competitors.
[8]
Currently, Target does not
have any stores located in Canada and will not ship purchases to Canada, although
it issues credit cards to Canadians shopping in their US stores.
Target maintains that its trade-mark has been well known in Canada since at least the 1990s due to
Canadians visiting to the US stores and due to advertising that crosses the
US/Canada border.
[9]
On January 13, 2011, Target
announced that it has entered into an agreement to purchase the leasehold
interests in up to 220 sites in Canada owned by Zellers Inc. Target plans to
open 100 to 150 Target stores in Canada in 2013 and 2014.
TARGET APPAREL Trade-mark
[10]
Dylex Limited (Dylex) filed
for a trade-mark, TARGET APPAREL, in relation to wares, specifically “men’s
clothing, namely suits, pants, jackets and coats” on October 27, 1980. This
trade-mark was registered on July 31, 1981 and renewed by Dylex on July 31,
1996. In August 2001, Dylex encountered financial difficulty, was placed into
receivership and subsequently became bankrupt.
INC
[11]
In 2001, INC purchased the Dylex’s
Fairweather-related assets which included 70 stores and the registered
trade-mark, TARGET APPAREL. The change in title was registered on April 4,
2002. In 2003, INC opened a Target Apparel discount clothing store on Orfus Road in Toronto. This store regularly advertised clothing
sales in Toronto newspapers. The store operated from that
location from 2003 to 2011, when it relocated immediately across the street.
[12]
INC claims it planned for a
new clothing store platform in larger stores catering to families in order to
compete with an increase in US and European clothing retailers entering Canada. To this end, in November 2007, INC commenced discussions to acquire
the DESIGNER DEPOT clothing store chain from The Bay. These stores were acquired
to be used for Target Apparel stores.
[13]
After
delays due to obtaining landlord and civic approvals, refixturing, ordering,
manufacturing and installing signage, a chain of Target Apparel stores were rolled out as a new market niche of family
discount clothing stores in Nova Scotia in September 2009, in British Columbia
in August 2010, and in 12 other locations thereafter. The signage for many of the
stores uses the word ‘Target’ in larger letters than the accompanying word ‘Apparel’
with red as a predominant colour. A red Canadian maple leaf inscribed within a
circle accompanies the words Target
Apparel.
Litigation
[14]
In 2002 Target’s
counsel initiated proceedings under
section 45 of the Trade-Marks Act to cancel INC’s trade-mark registration
for TARGET APPAREL. The Registrar of Trade-marks issued a notice on April 2002
requiring INC to show use of the trade-mark registration in Canada. INC filed an affidavit on its use of the trade-mark in response to the
section 45 notice. However, the Registrar of Trade-marks held that the evidence
was insufficient to show use. INC appealed the Registrar’s decision and the
Federal Court reversed that decision on October 19, 2006. Target’s counsel
appealed to the Federal Court of Appeal which affirmed the Federal Court
decision on November 26, 2007.
[15]
Target claims they only became aware of INC’s use of Target
Apparel as a store name in June 2010. Its counsel sent a letter to INC
objecting to the use of the TARGET trade name on August 3, 2010.
[16]
Through its counsel, Target
commenced a new section 45 proceeding to cancel the trade-mark registration
TARGET APPAREL. The Registrar of Trade-marks has issued another notice to INC under
section 45 of the Trade-marks Act on July 30, 2010. This
proceeding is currently underway.
[17]
Target filed its statement of claim on November 17,
2010 seeking damages and a permanent injunction against INC’s use of the TARGET
trade mark. Target concurrently brought this motion for an interlocutory
injunction against INC.
INC filed its statement of defence
and counterclaim on January 17, 2011 which it amended on March 9, 2011. Target
filed an amended statement of claim on February 16, 2011 and, on March 16,
2011, its reply and defence to the INC defence and counterclaim. The trial of
this matter is scheduled for November 2012.
Relevant Legislation
[18]
Trade-marks
Act R.S.C., 1985, c. T-13 (Trade-marks Act):
|
7. No person shall
b) direct public attention to his wares,
services or business in such a way as to cause or be likely to cause
confusion in Canada, at the time he commenced so to direct attention to them,
between his wares, services or business and the wares, services or business
of another;
|
7. Nul ne peut :
b) appeler l’attention du public sur ses
marchandises, ses services ou son entreprise de manière à causer ou à
vraisemblablement causer de la confusion au Canada, lorsqu’il a commencé à y
appeler ainsi l’attention, entre ses marchandises, ses services ou son
entreprise et ceux d’un autre;
|
Issues
[19]
The issue
to be decided on this motion is whether Target should be granted the
interlocutory injunction against INC that they seek.
The Law
[20]
The test
for applications for interlocutory injunctions originated in the House of Lords
decision in American Cyanamid Co v Ethicon Ltd, [1975] AC 396 (American
Cyanamid). It was adopted by the Supreme Court of Canada in RJR-MacDonald
Inc v Canada (Attorney General), [1994] 1 S.C.R. 311 (RJR-MacDonald).
This test involves the following questions:
1.
Is there a
serious question to be tried?
2.
Would the
applicant suffer irreparable harm if the injunction is refused? And
3.
In whose
favour does the balance of convenience lie?
[21]
The test
is conjunctive and the applicant must succeed on all questions. These factors
relate to each other and are not separate distinct categories: Turbo Resources
Ltd v Petro Canada Inc, [1989] 2 FC 451, 24 CPR (3d) 1 (FCA) at 20 (Turbo
Resources).
[22]
In
assessing whether there is a serious issue to be tried only a preliminary
assessment is made of the merits of the claim. The threshold for a serious
issue is a low one, essentially requiring the claim not be frivolous or
vexatious: RJR-MacDonald at para 44. A motion judge should only go
beyond a preliminary investigation if an interlocutory injunction would effect
a final determination of the claim or when the constitutionality of a
challenged legislation can be decided on a pure question of law: Turbo
Resources at 21; RJR-Macdonald at para 55.
[23]
Irreparable
harm is harm that cannot be compensated by way of an award of damages or
otherwise cured. ‘Irreparable’ refers to the nature of harm incurred rather
than its magnitude. It is necessary there be clear evidence to support a
finding of irreparable harm: Centre Ice Ltd v National Hockey League, [1993]
71 F.T.R. 5, 53 C.P.R. (3d) 34 at para 45. Irreparable harm may include an
instance where the successful party cannot recover damages from the other party:
RJR-MacDonald at para 59. The irreparable harm
component of the injunctive tripartite test was described in the Supreme Court
of Canada decision in RJR-MacDonald at paras 58 and 59, as
follows:
At
this stage the only issue to be decided is whether a refusal to grant relief
could so adversely affect the applicants’ own interests that the harm could not
be remedied if the eventual decision on the merits does not accord with the
result of the interlocutory application.
“Irreparable” refers
to the nature of the harm suffered rather than its magnitude. It is harm which
either cannot be quantified in monetary terms or which cannot be cured, usually
because one party cannot collect damages from the other. Examples of the former
include instances where one party will be put out of business by the court’s
decision (R.L. Crain Inc. v. Hendry (1988), 48 D.L.R. (4th) 228 (Sask.
Q.B.)); where one party will suffer permanent market loss or irrevocable damage
to its business reputation (American Cyanamid, supra); or where a
permanent loss of natural resources will be the result when a challenged
activity is not enjoined (MacMillan Bloedel Ltd. v. Mullin, [1985] 3
W.W.R. 577 (B.C.C.A.)). The fact that one party may be impecunious does not
automatically determine the application in favour of the other party who will
not ultimately be able to collect damages, although it may be a relevant
consideration (Hubbard v. Pitt, [1976] Q.B. 142 (C.A.)).
[24]
The Federal Court of Appeal described the requirements that
must be met to establish irreparable harm. In Haché v Canada, 2006 FCA 424 at para 11, the Court
stated,:
The moving parties
must demonstrate, on a balance of probabilities, that the harm that they would
suffer is irreparable: Halford v. Seed Hawk Inc., 2006 FCA 167 at
paragraph 12. Mere assertions do not suffice. Irreparable harm cannot be
inferred. It must be established by clear and compelling evidence: A.
Lassonde Inc. v. Island Oasis Canada Inc., [2001] 2 F.C. 568 at paragraph
20.
[25]
The third
question to be considered, the balance of convenience, was described as “a
determination of which of the two parties will suffer the greater harm from the
granting or refusal of an interlocutory injunction, pending decision of the
merits”: RJR-MacDonald at para 62. Preserving the status quo may be a
consideration where everything else is equal; however, it is of limited value
in private law cases: RJR-MacDonald at para 75.
[26]
This interlocutory injunction application
engages consideration of the factors to be established in a passing-off action.
Section 7 (b) of the Trade-marks Act provides that no person shall
direct attention to his business in such away to cause or likely to cause
confusion with another’s business. According to Kirkbi AG v Ritvik Holdings
Inc, 2005 SCC 65 at paras 66-69 (Kirkbi AG), the three necessary
components of passing off are:
(a)
goodwill
(b)
deception of the public due to a misrepresentation (i.e. confusion)
(c)
actual or potential damage to the plaintiff
These questions of
goodwill, confusion, and harm underlie and permeate the issues arising in this
application for an interlocutory injunction.
Analysis
Serious Issue
[27]
Target is
in the process of setting up TARGET stores in Canada. It has long operated under its trade
name TARGET and its iconic logo, a red bull’s-eye. It is a major retail store
chain which is known to many Canadians who shop in the US. On the other hand, INC has launched a
Canadian niche market chain of discount clothing stores under the name Target Apparel. INC holds the registered trade-mark TARGET
APPAREL for men’s clothing wares.
[28]
Although
they do not agree on either the reliability or the significance of the survey
data by the other party, both Target and INC agree the surveys indicate some
degree of confusion presently exists in the minds of Canadian shoppers who were
surveyed about TARGET and Target
Apparel stores.
[29]
Target is
concerned that INC is passing off its Target Apparel
venture on Target’s name and that its reputation and brand promise will be
harmed. Although it has not commenced sales in Canada, Target has led evidence by its experts
who opine that the TARGET brand will be harmed.
[30]
Passing
off can be claimed by a plaintiff which only does business in the US and not in
Canada where it has a reputation in Canada and the public associates it with
the services provided by the defendant: Orkin Exterminating Co Inc v Pestco
Co of Canada Ltd et al (1985), 50 OR (2d) 726, 5 CPR (3d) 433 (CA) (Orkin).
While Target has yet to commence retailing in Canada, there is evidence that
supports it having a reputation in Canada
for its wares, if not for its services.
[31]
On the
other hand, INC has led evidence that its Target Apparel stores are part of its plans developed for positioning
itself in a market niche to cope with international competitors. It disputes Target’s
survey and expert evidence about the degree of confusion among consumers or
harm to the TARGET brand.
[32]
INC submits that the exception in NWL Ltd v
Woods, [1979] 1 WLR 1294 (Woods) applies to the present
matter. The Woods exception was summarized by the Supreme Court of
Canada in RJR-MacDonald at para 51 as an exception to the general rule
that a judge should not engage in an extensive review of the merits, the
exception being “when the result of interlocutory motion will in effect amount
to a final determination of the action.”
[33]
INC submits the granting of an interlocutory
injunction would effectively give Target judgment without a trial: if the
injunction is granted and INC is required to change its Target Apparel sign, it will never go back to using the Target Apparel store name, due to the difficulties
of store signage changes. As such, INC argues that the Woods exception
applies and Target should be required to make out a strong prima facie
case.
[34]
I do not agree with INC’s submission that
granting the interlocutory injunction would have the practical effect of
putting an end to the action. The difficulties of restoring the Target Apparel store name after the granting of an
interlocutory injunction does not amount to a final determination of the issues
at trial. As such, the general rule applies and Target does not have to make
out a strong prima facie case; instead, it must meet the lower threshold
by demonstrating a serious issue.
[35]
Without
going into the evidence concerning the issue of passing off in any more than in
a preliminary way, I think there is little doubt that the low threshold for
demonstrating a serious issue has been met by the evidence in this case, which
involves two sizeable business entities with similar business trade names where
both sell a similar product, clothing. I am satisfied Target’s evidence is
sufficient to raise an issue whether INC’s Target Apparel’s store launch would deceive customers into thinking the
stores are affiliated with Target and would harm Target’s reputation. In
coming to this conclusion, I need not decide if the evidence favours one party
or the other, only that it supports finding a non-frivolous issue.
Irreparable Harm
[36]
As
outlined by the Supreme Court in Kirkbi AG, the three necessary
components for passing off are the existence of goodwill, confusion, and actual
or potential damage to the plaintiff.
Goodwill
[37]
Target
submits TARGET stores are well known in Canada because of its extensive advertising and
because many Canadians shop in the United States. Many Canadians have Target accounts and credit cards. Target
submits it has developed significant goodwill among Canadian shoppers in Canada.
[38]
INC
submits that Target has yet to conduct retail business in Canada and relies on Boutique
Limité Inc v Limco Investments, Inc (1998), 232 NR 190 (FCA) (Boutique
Limité Inc) for the proposition that advertising and issuing credit cards
are not use of retail services in Canada.
[39]
Boutique
Limité Inc involved an issue related to trade-mark registration under
section 45 of the Trade-marks Act and not statutory passing off under
section 7(b) of that Act. It was decided on the basis of the evidence
before the Registrar and before the Court. In my view Boutique Limité Inc
does not preclude Target’s claim of goodwill in Canada nor negate the evidence submitted in
support of that claim. Furthermore, Orkin demonstrates that in certain
circumstances a plaintiff can have a claim of passing off even when it only
does business in the US and not in Canada.
[40]
INC does
not dispute that Target has established goodwill in Canada but rather argues that Target has not
yet commenced actual retail business activity in Canada. I am prepared to accept, based on the
test in Orkin and Target’s evidence about its Canadian customers, that
Target has a degree of goodwill in Canada.
Threshold for Irreparable Harm
[41]
The
Federal Court of Appeal has held that there is a high threshold to proof of
irreparable harm. In Millennium Charitable Foundation v Canada (Minister of National
Revenue),
2008 FCA 414 (Millennium Charitable Foundation), the Court wrote at para
25:
For these
reasons, I conclude that the Foundation has failed to demonstrate, on a balance
of probabilities, that it will suffer irreparable harm if the requested order
is not granted. As a result of the Foundation's failure to establish this
element of the RJR-MacDonald test, the application must be dismissed.
Confusion
[42]
Target
submits that its survey evidence confirmed by expert interpretation supports
the conclusion that INC`s Target
Apparel stores is
creating a high level of confusion in the minds of surveyed Canadians.
[43]
INC
disputes the validity of Target’s telephone survey by Dr. Corbin, submitting
that the survey did not measure the extent to which Canadians recognized TARGET
in combination with the bull’s-eye logo or other visual contextual cues like
store size, appearance and layout. It similarly challenges Target’s mall
intercept surveys by Dr. Ford as not clearly showing respondents the size,
layout or internal appearance of a Target
Apparel store,
the type and price of products or the disclaimers now in Target Apparel stores. INC submits its own survey
conducted by Mr. Klein found the apparent confusion as between 7 - 14% and stated:
“This is considerably lower than in the Plaintiff’s survey and is also below
the ‘15% of people’ who, according to Corbin. ‘…think Elvis is still
alive.’”
[44]
INC
submits that its survey of Target
Apparel shoppers
by Mr. Klein clearly showed that over 80% of Target Apparel shoppers, after being shown a picture of a real Target
store and told that it sold a variety of merchandise, said they were likely to
visit a Target store once they opened in Canada.
[45]
From a
review of the parties’ survey evidence on confusion it is apparent that there
would be some confusion between the two ventures. More to the point is the
question of whether the present confusion is indicative of actual harm to
Target.
[46]
In Mattel,
Inc v 3894207 Canada Inc 2006 SCC 22 at para 57 (Mattel) the Supreme
Court of Canada agreed that the average consumer is owed a certain amount of
credit in assessing the likelihood of confusion and that “one must not proceed
on the assumption that the prospective customers or members of the public
generally are completely devoid of intelligence or of normal powers of
recollection or are totally unaware or uniformed as to what goes on around
them.”
[47]
Keeping
this directive in mind and INC’s survey evidence that the majority of Target Apparel shoppers who were shown a picture of a
Target store indicated they would shop at Target, I am not persuaded that the
customer confusion demonstrated by these early surveys in Target’s evidence would
continue in the face of the real observable differences that would accompany a
comparison of a 32,000 square feet Target
Apparel discount
clothing store with a 133,000 square feet full featured retail Target department
store that is four times larger.
Brand Promise
[48]
The main
thrust of Target’s submissions on irreparable harm turns on harm to Target’s ‘brand
promise’. It submits that damage to “brand meaning” or “brand equity” and
goodwill may be established through the opinion of a marketing expert in
sufficient degree to establish irreparable harm: Imax Corp v Showmax, Inc, [2000]
182 FTR 180 at paras 73, 82-83. Target also submits that goodwill and market
share once lost may be impossible to regain resulting in irreparable harm: BGM
Holdings Ltd v Jim Gauthier Chev Cadillac Ltd, 2010 MBQB 213 at para 50.
[49]
Target
cites from Business Depot Ltd v Canadian Office Depot Inc, [1993] 63 FTR
271, 49 CPR (3d) 230 at 237:
As with most cases of this nature, the
harm suffered by the plaintiff should the defendants be allowed to use the name
“OFFICE DEPOT” in Ontario is difficult to assess.
Clearly, there will be loss of market share as customers go to the defendants’
store believing it to be the plaintiff’s and then remain Office Depot
customers. It is virtually impossible to ascertain how many customers will
adopt this mistaken assumption or how much market share the plaintiff will lose
as a result, but I am persuaded that the loss during the interim period until
trial would have wide-ranging effects that could not be easily be quantified in
damages.
[50]
Target
submits its brand name is one of the most valuable brands in retailing. The
Target brand has a specific “brand promise” which differentiates Target from
its competitors. Its expert witness, Dr. Thompson, deposed that “brand” means
the distinctive and noticeable characteristics that identify a business and
include the name and trade-mark. A brand promise relates to the consistency,
product assortment, quality, style, status, price, value, or other factors that
may attract and retain a loyal customer base. “Brand equity” means the value of
a brand which results from successful delivery of the brand promise.
[51]
Target
submits its evidence shows Target’s brand promise includes neat clean stores,
well stocked with a breadth of product assortment not found elsewhere, and
helpful knowledgeable employees. These qualities among others, Target submits,
establish Target’s brand as a “sincere brand”. Dr. Thompson cited a report by the
Association for Consumer Research (ACR) to show that transgressions to a
“sincere” brand cause irreparable harm.
[52]
The ACR
report commented on a 2004 study at Stanford
University by Professor Jennifer Aaker (the Aaker study) and others:
Their results showed that while, over
time, the sincere brand indeed enjoyed stronger consumer-related brand
relationships than the exciting brand, the transgression event did remarkable
damage to consumer’s relationships with the sincere brand.
Surprisingly, consumers’ relationships
with the sincere brand relationship exhibited no signs of recovery despite
apologies and attempts to make amends.
In sharp contrast, consumers’
relationships with the exciting brand slowly deteriorated over time in the
absence of transgressions, and, in the event of transgression and recovery, the
relationship with the exciting brand surprisingly strengthened and improved.
[53]
Target
submits that INC’s Target Apparel stores break the Target brand
promise as Target Apparel stores sell a more limited range
of goods (apparel including unsold remainder items from Fairweathers and
International Clothiers stores), differ significantly in store design, layout,
product assortment and service, and vary from store to store. Target submits
once consumers associate a store with a poor shopping experience or with a
particular category of goods rather than many categories, it is difficult if
not impossible to change those perceptions which would have a significant
impact on consumer shopping behaviour for years to come.
[54]
Target
submits that the Dr. Thompson’s evidence establishes the Target Apparel stores will damage Target’s “sincere” brand
and that the longer the Target
Apparel stores
continue with the use of the misleading name, the more ingrained will be
customers’ sense that Target has abandoned its brand promise in Canada.
[55]
Target
submits that the result of the Target brand promise being derailed in Canada will be a loss of brand
equity, and it will be impossible to identify the scope of the damage, which
involves possible future actions not taken.
[56]
INC attacks
Target’s contention that its brand will suffer irreparable harm based on Dr.
Thompson’s theory that Target is a “sincere” brand. It submits that Dr.
Thompson’s theory is speculative, flawed and contrary to Target’s own evidence
which INC interprets as showing the traits of an “exciting” brand. It
challenges Dr. Thompson’s expertise, pointing out he is an economist who had
never been retained to provide advice with respect to brand perceptions or whether
a brand is “sincere” or “exciting”.
[57]
INC
provided a copy of the 2004 Aaker study and contended it was a preliminary
academic experiment conducted with 69 individuals who reviewed a website
involving a fictional digital photography service over a two month period. This
experiment manipulated variables to apparently create a brand “personality”
that was either “sincere” or “exciting”. INC stressed that the Aaker study itself
set out many “caveats” concerning the experiment and called for further
research on the topic as the lead author, Professor Aaker wrote:
Caveats and Calls for Future Research
…
This method, however, is not without its
limitations, which include a restrictive sample size, noise stemming from the
study environment, and limits to generalizability associated with the
exploitation of two personality types within a single product category.
Further, although our beta test cover story allowed ecological validity
advantages, relationships were nonetheless artificially construed and came to
an end at the two month mark. Indeed, based on the magnitude of means obtained
on selected relationship strength measures, some may debate the degree to which
relationships were created at all. The constrained timespan of the study raises
questions regarding the sustainability of observed effects as well. A study
design that more explicitly recognizes the staged, complex, and cumulative
process of relationship evolution across a time horizon is suggested,
particularly in light of the diagnostic value of self-connection and intimacy
measures. Internal validity can also be strengthened through attempts to
disentangle the communication of the transgression from the transgression act
itself and direct consideration of transgression versus recovery components of
the service failure.
[58]
I consider
Target’s submission on irreparable harm is advanced on the basis of a marketing
theory about “sincere” and “exciting” brand personalities to be difficult to
assess. I have reviewed Dr. Thompson’s affidavit, cross-examination and
re-examination on affidavit. He acknowledges not having himself conducted
brand personality research. He refers only to the Aaker study which he
describes as the gold standard on what happens when there is a violation of a
brand promise. However, he is imprecise about Professor Aaker’s cautions.
[59]
Dr. Thompson’s
evidence does not answer Professor Aaker’s caveats on generalizability of the
personality types (sincere and exciting) and the sustainability of transgression
impacts. Without more, I am unable to bridge the chasm between a two month
internet study with 69 individuals about a fictional internet photographic
service that loses their online photo albums and a trade name marketing clash
between two major business enterprises.
[60]
Where
expert evidence is provided by affidavit and is challenged in the course of the
proceedings, it seems to me that assessment of such expert evidence is best left
for the fullness of a trial where review of qualifications and in-court
testimony, direct, cross-examination and redirect, are present.
[61]
In result,
I find that Target has not proven on the balance of probabilities that it would
suffer irreparable harm to its brand promise on the expert affidavit evidence
as presented.
Licensing
[62]
INC
contends that another difficulty with Target’s submissions on “brand promise”
is that while it decries INC’s Target
Apparel stores’
breach of its high standards, it has granted licences to retailers in Canada
that do not match up to Target’s stated brand promise. Those enterprises are
small Canadian businesses which used TARGET as part of their business name.
They were confronted by Target and in some cases entered into an agreement
where they acknowledged Target’s primacy to the name and were given licence to
continue with use of the name. These businesses include, for instance, Target Food
Stores & Gas Ltd., which operates two small convenience stores now licensed
by Target Brands Inc. However, given the differences in scope and scale between
Target and this and other modest businesses, I do not see any significant
degree of confusion arising between Target and these much smaller businesses.
[63]
I do not
find the INC submission that Target has breached its brand promise by licensing
or tolerating small businesses using the name TARGET to be particularly
telling. On the other hand, Target’s practice of licensing businesses using
the TARGET name undercuts its submission that it is harmed by the perception
that Target Apparel stores are somehow linked with Target.
[64]
Target
submits that INC’s use of its trade-mark may cause it to suffer loss of control
over its mark because of its absence from the market: Target Event
Production Ltd v Cheung, 2010 FCA 255 at para 28. Target says this supports
its claim for having a strong case for the damage portion of the passing off
test.
[65]
In my view
the issue of control over trade-marks covering the word “Target” is a matter
that must be left for trial.
Inability to Pay Damages
[66]
Target further
submits that where there is insufficient evidence to demonstrate that the defendants
would be able to pay a damages award, then irreparable harm has been shown: Canadian
Fracmaster Ltd v Trojan Wellhead Services Ltd (1992), 40 CPR (3d) 402 (FCTD)
at 404 (Canadian Fracmaster Ltd). Target submits that INC’s witness, Mr.
Harrington, formed his opinion on INC’s ability to pay based on a balance sheet
review and not on an audited balance sheet, thus failing on the ground set out
in Canadian Fracmaster Ltd.
[67]
INC has
placed on record its undertaking to maintain complete and accurate records
including an accounting of its sales. Such records would be significant in any
assessment of any damage awards.
[68]
I am not
persuaded by Target’s submission that INC has failed to demonstrate its capacity
to pay a damage award, should the case go against it. Target disputes INC’s
claim that any damages would be quantifiable and instead argues that it would
be impossible to identify the scope of damages. Taking the evidence of INC as a
whole, it is clear that INC is a substantial business venture with the capacity
to launch a nationwide clothing store venture. The question of the quantum of
damages is far from being determined and I should think that the onus remains
with Target.
[69]
To
demonstrate INC would be unable to pay an award of damages, I would expect Target
to put a real number on the likely quantum of damages, and then rebut INC’s
evidence concerning capacity to pay that amount.
[70]
In this
proceeding, Target has not yet commenced its proposed business operation in Canada. It has announced it will
open its first store in Canada in 2013. In Target’s
statement of claim it is seeking a permanent injunction. The trial is scheduled
for November 2012. Target commenced its application for an interlocutory
injunction in November 2010. The interlocutory injunction is intended to apply
until a permanent injunction is either granted or refused after the trial of
the matter in 2012. In other words, the time of trial is not long off.
[71]
Summarizing
thus far, the level of confusion among prospective customers is a matter of
debate, the expert opinions bear closer examination and assessment, and the
time to trial is relatively short. When I consider the evidence as a whole,
given to foregoing discussion, I come to the conclusion that Target has not
proved on the balance of probabilities that it will suffer irreparable harm
during the intervening months until a decision is rendered in the trial of this
matter.
[72]
In coming
to this conclusion, I am mindful Target submits it is particularly vulnerable
because it will not open any Canadian stores until 2013. However to me, this
consideration is more a question which relates to the balance of convenience.
Balance of Convenience
[73]
Although in
Millennium Charitable Foundation, the Federal Court of Appeal held that
the finding of a failure to prove irreparable harm made it unnecessary to
consider the balance of convenience, Target submits that the balance of
convenience is “paramount” as it is the component which ensures flexibility in
the application of equitable principles in diverse factual situations. David
Hunt Farms Ltd v Canada (Minister of Agriculture), [1994] 2 FC 625 (CA) at paras
22–24.
[74]
Flexibility
is to be achieved under the American Cyanamid test by having regard to
the exercise of the trial judge’s discretion. In Turbo Resources, the
Federal Court of Appeal referred to American Cyanamid several times in
the course of the decision including at para 33:
The other
considerations identified by Lord Diplock in that case are, as I have
indicated, to be weighed together rather than in consecutive order. That
appears to have been done by the learned Law Lord himself in arriving at his
conclusion that the balance of convenience lay with the plaintiff. Relating
this to the summary of factors outlined above, the balance of convenience
should accordingly be sought for throughout.
[75]
In
examining the balance of convenience, I am cognizant that Target will not open
any stores until after the trial scheduled for November 2012, while INC has
already opened its stores across Canada.
Target’s claim of vulnerability relates to an allegation of an adverse impact
on Target’s brand promise which I have found to be not proven on the balance of
probabilities. Nevertheless, this allegation will be addressed at trial in
advance of any Target store openings and, in any event, Target is not required
to undo or alter any plans before trial.
[76]
The
outcome of this lawsuit and corresponding counterclaim aside, I have not heard
any evidence that Target will be prevented or delayed from opening Target
stores in Canada. This is especially so since
a Target news story entered as part of Target’s evidence proclaims it sees “no
delays, no change in tactics, or timetables” in its plans to open 100 to 150
stores in 2013 and 2014.
[77]
The
granting of an interlocutory injunction in favour of Target would mean that INC
would have to remove and replace its signage for all stores which would, on its
evidence involve significant negotiations with various landlords. Target
contends this is not of major significance and it is in position to pay any
damages that might arise should INC succeed at trial. INC submits if it were
obligated to change signage, it would not go back to the Target Apparel name afterwards.
[78]
It seems
to me that the changing of signage would involve more than a simple matter of
cost since the changing of signs away from and later back to the Target Apparel name appear to indicate instability to its
customers and the consequences for INC would be more than a matter of mere
expense.
[79]
Target has
submitted that a court may assess the balance of convenience as it existed at a
point in time prior to the hearing of the motion. One of the factors to
consider in determining the point in time at which to assess the balance of
convenience is the parties’ conduct prior to the hearing of the motion. Target
submits a court may consider whether the defendants proceeded “with eyes wide
open” and elected to take the risk of doing so: Carbo Ceramics Inc v China
Ceramics Proppant Ltd, 2004 FCA 283 at paras 4 and 9. Target is submitting that
INC took the risk in deciding to open the Target Apparel stores.
[80]
Looking
back upon the chain of events, INC acquired the TARGET APPAREL trade-mark for
wares when it bought Dylex’s assets in 2001. It opened the store on Orfus Road in 2003. Target challenged
the validity of the trade-mark in 2003 and that litigation concluded with the
Federal Court of Appeal decision in favour of the validity of the TARGET
APPAREL trade-mark in 2007. INC began its negotiations to acquire the Designer
Depot stores from the Bay in 2007, and began opening Target Apparel stores commencing in Nova Scotia in 2009. Target announced it was going
to enter the Canadian market in 2011.
[81]
I note
that INC did not begin significant expansion with the Target Apparel stores until after the Federal Court of Appeal decision in
its favour. Target had not yet announced its expansion into Canada. I do not take INC’s
decision to be the sort of risk that invites the Court’s disapproval.
[82]
INC has
taken precautionary steps in the face of Target’s claims. It has backed away,
though not entirely, from a close copy of the Target name; it has inscribed a red
maple leaf in a circle rather than use a red bull’s-eye; it has posted a
disclaimer to the effect it is not Target; and has undertaken to maintain
records of its sales while the litigation is pending.
[83]
In result,
I conclude that the balance of convenience in respect of an interlocutory
injunction, or the balance of inconvenience as it might alternatively be
described, lies with INC rather than Target.
Conclusion
[84]
I find
that Target has identified a serious issue that meets the low threshold set out
in RJR MacDonald. However, Target has not proved on the balance of
probabilities in this motion for an interlocutory injunction that it will incur
irreparable harm. Lastly, I conclude the balance of convenience favours INC.
[85]
The motion
for an interlocutory injunction does not succeed and is dismissed.
ORDER
THIS COURT ORDERS that:
1
The motion
for an interlocutory injunction is dismissed;
2
Costs are
awarded in favour of the Defendant INC.
“Leonard
S. Mandamin”
Email this Content