2011 FC 758 (June 23, 2011)
Overview
The Federal Court dismissed, with costs, the plaintiffs' motion for an interlocutory injunction to restrain the defendants, pending final disposition of the action, from operating retail stores in Canada in association with the trademark TARGET APPAREL. This case illustrates the heavy onus on the moving party to establish that irreparable harm will be suffered if an injunction is not granted. Fairweather Ltd. and Les Ailes de la Mode Incorporées were successfully represented by Mark K. Evans, Mark G. Biernacki and Geneviève M. Prévost of our Toronto office.
Abstract
The Federal Court refused to grant the plaintiffs' motion for an interlocutory injunction that would have restrained the defendants from operating retail stores in Canada in association with the trademark TARGET APPAREL. The Court found that the plaintiffs had failed to prove, on a balance of probabilities, that they would suffer irreparable harm if an injunction was not granted. The Court also found that the balance of convenience favoured the defendants.
Case summary
Facts. The plaintiffs own and operate the large chain of TARGET department stores in the United States and are in the process of entering the Canadian marketplace, having announced their intention to begin opening TARGET department stores in Canada in 2013. On January 13, 2011, the plaintiffs announced that they had entered into an agreement to purchase the leasehold interest in up to 220 Zellers locations and planned to convert 100 to 150 of these locations to TARGET stores.
The defendants are related companies that own and operate numerous retail clothing sores in Canada, including the FAIRWEATHER chain of stores, the INTERNATIONAL CLOTHIERS chain of stores, as well as LES AILES department stores that operates only in Quebec. In 2001, the defendants acquired the registered trademark TARGET APAREL when they acquired the assets of Dylex Limited. The trademark was registered by Dylex Limited in 1981 and covers various items of men's clothing. In 2003, the defendants opened their first TARGET APPAREL niche discount clothing store
Prior to commencing this action against the defendants, the plaintiffs commenced cancellation proceedings against the TARGET APPAREL registration pursuant to section 45 of the Trademarks Act. The cancellation proceedings concluded in 2007 when the Federal Court of Appeal upheld the decision of the Federal Court maintaining the registration.
Following the decision of the Federal Court of Appeal, the defendants began opening additional TARGET APPAREL retail stores, and they now own and operate approximately 15 TARGET APPAREL retail locations.
The plaintiffs commenced this action by Statement of Claim filed on November 17, 2010, for passing off and seeking a permanent injunction against the defendants' use of the trademark TARGET APPAREL in association with retail store services. The defendants counterclaimed for infringement of its registered trademark TARGET APPAREL.
On January 17, 2011, the plaintiffs brought a motion for an interlocutory injunction.
A trial on the merits has been scheduled for November 2012.
Analysis. The Court applied the test for interlocutory injunctions that originated in the House of Lords decision in American Cyanamid, which was adopted by the Supreme Court of Canada in RJR-MacDonald. This test involves the three following questions:
- Is there a serious issue to be tried?
- Would the applicant suffer irreparable harm if the injunction is refused?
- In whose favour does the balance of convenience lie?
As noted by the Court, the test is conjunctive and the plaintiffs' must succeed on all questions.
While the Court held that there was a serious issue to be tried, the Court noted, with respect to the plaintiffs' survey evidence, that the percentage of allegedly confused respondents was lower than the "15% of people who," according to the admission of the plaintiffs' expert, "think Elvis is still alive." The Court was also not persuaded that the customer confusion allegedly demonstrated by the surveys 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."
The Court also held that the plaintiffs had failed to establish that they would suffer irreparable harm if the injunction was not granted. Citing the Centre Ice case for the principle that there must be clear evidence to support a finding of irreparable harm, the Court found that the expert evidence put forward by the plaintiffs in support of their theory that the defendants' use of TARGET APPAREL would harm their "brand promise" failed to establish that irreparable harm to that "brand promise" would result. The Court stated that the marketing theory about "sincere" and "exciting" brand personalities relied upon by the plaintiffs' expert evidence was difficult to assess. In finding that the plaintiffs' had failed to establish that they would suffer irreparable harm, the Court also stated that the plaintiffs' practice of licensing third party businesses in Canada to use the TARGET name undercuts their submission that they are harmed by the perception that the defendants' TARGET APPAREL stores are somehow linked with the plaintiffs.
While not required to do so, the Court went on to consider the third question, namely, in whose favour does the balance of convenience lie? In finding that the balance of convenience favoured the defendants, the Court noted, amongst its reasons, that there was no evidence that the plaintiffs would be prevented or delayed from opening their TARGET stores in Canada. In addition, the Court noted that requiring the defendants to change their signage would involve more than a simple matter of cost since the re-branding of stores would indicate instability to their customers.
Conclusion
This decision highlights the requirements to obtain pre-trial injunctive relief in the Federal Court, and that such extraordinary relief should only be sought in exceptional circumstances.
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