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Shoppers emerge from a Target store in BostonCHITOSE SUZUKI

U.S. discounter Target Corp. has lost the first round in its battle to stop a Canadian rival from using its name.

The Federal Court of Canada on Thursday upheld the right of merchant Isaac Benitah and his company, Fairweather Ltd., to run its own Target clothing stores. Mr. Benitah calls his outlets Target Apparel, and they feature a logo that is similar to the U.S. chain's bull's eye logo.

"Target has not proved on the balance of probabilities … that it will incur irreparable harm," the court said, turning down Target's request for an injunction to stop Mr. Benitah from using the name.

The battle is to go to trial at the end of 2012, when Mr. Benitah will seek his own injunction to ban Target from selling clothing in Canada, arguing it infringes his trademark rights.

By 2013, Target plans to start opening stores here, after sealing a deal in January to buy up to 220 store leases from Zellers and convert the outlets to its own Target banner.

Target spokeswoman Amy Reilly said the retailer is disappointed that the Court declined to issue an order immediately requiring Fairweather to remove its Target Apparel signs before the trial.

But she said the company is confident it will prevail at the trial, noting that the court agreed with Target that there is "confusion between the two ventures."