Target Corp.'s efforts to secure brand-name rights in Canada were slowed when a Canadian court dismissed its request to stop a Canadian competitor from using the Target name.
Target, the 1,750-store Minneapolis-based retailer, and Canadian women's clothing retailer Fairweather Ltd. of Toronto are suing each other for trademark infringement, and each had sought an injunction to prevent the other from using the Target name in Canada. Earlier this month, Target and Fairweather failed to reach a settlement of the lawsuits through mediation in Canada's Federal Court.
Target plans to open 100 to 150 full-sized Target stores in Canada beginning in 2013, its first expansion outside the United States. Target paid $1.85 billion to Canadian retailer Zellers for 220 store leases earlier this year.
The website www.canadian business.com reported that Justice Leonard Mandamin ruled on Thursday that Target had not proved that it would suffer irreparable harm during the months leading up to a late 2012 trial over the alleged trademark infringement, and dismissed Target's request for an injunction.
"I have not heard any evidence that Target will be prevented or delayed from opening Target stores in Canada," Justice Mandamin said in his ruling.
In a separate announcement, Target said Friday that it will transfer the lease rights for up to 39 of the 220 Zellers locations in Canada to Wal-Mart for an undisclosed amount. Target recently announced 105 locations it plans to open, with more locations to be announced in the fall.
Also Friday, Fitch Ratings downgraded Target's long-term debt to A- from A based on several concerns, including the cost of expansion into Canada.
The ratings agency said that before Target's Canadian stores begin to open in 2013, the retailer will have to build up its management team, its supply chain and its IT infrastructure while physically remodeling the stores.
"This will create a sizeable drag on earnings over the next two-three years before the stores are opened," Fitch said.
Fitch also cited Target's ongoing share repurchase activity as well as weak retail sales trends as reasons for the downgrade.
In its suit, filed last year, Target claimed that Fairweather had lost control of the Target brand name years ago through lack of use.
But Fairweather, which has a 15-store division called "Target Apparel," said that its parent company, the INC Group, has operated a Target Apparel store in Toronto for six years. Besides seeking to block Target from using the Target name in Canada, Fairweather is seeking $250 million in damages. In addition, the INC Group wants to retain the rights to the website targetapparel.com.
But the history of the Target brand name in Canada is tangled. INC said it has owned the Canadian rights to the Target name since acquiring assets from the now-defunct Dylex Ltd. in 2001. Dylex had registered the Target name in Canada in 1981.
But INC temporarily lost ownership of the Target trademark in Canada in 2005, after Target sought to have the trademark canceled. INC's trademark was eliminated, but later was reinstated by Canada's Federal Court of Appeal, setting the stage for the current legal confrontation.
Star Tribune staff writer David Phelps contributed to this report. Steve Alexander • 612-673-4553
