Target Built a Digital Oasis for New Parents. Now Comes the Lawsuit

(Bloomberg) -- Soon-to-be parents wanting to scout stores for the most stylish cribs, diaper-changing tables and rockers to accent their newborns’ bedrooms were stymied in May 2020.

At the time, pandemic-induced restrictions had made it impossible for shoppers to see and touch anything. Meanwhile, Target Corp., like most retailers, was struggling to get a read on shifting shopping patterns. More of the Minnesota-based company’s sales were coming from lower-margin food and household essentials than from the endless aisles of home decor America’s hippest retail chain had gotten consumers hooked on over the last decade.

It was in that “adapt-or-die” moment when Target infringed a closely held Israeli firm’s copyrights by launching an online feature that allows shoppers to design a virtual nursery room, according to a federal lawsuit filed last week. The tool allows shoppers to drag and drop 3D renderings of furniture and other actual products that can then be clicked for purchase.

Design with Friends Inc. says Target engineers in locales from Minneapolis to Bangalore, India, built a knockoff version of the tool through their “systematic mining” of its website “over the course of many months.” Target, the suit says, wanted “to arrive at warp speed” so it could “protect and expand revenues as the pandemic and lock-downs raged on.”

After Target’s tool went live in May 2020, the suit says, furniture sales that had “plummeted” reversed course, “shifting 35% of all nursery industry sales to online sales, a paradigm shift which is forecasted to continue even after post-pandemic life.” The retailer’s comparable sales in the second quarter that year rose 24%, the fastest pace in the company’s 58-year history.

Now DWF wants all of Target’s profits attributable to infringement, and cash damages in an amount to be proved at trial, according to a complaint filed last Tuesday in Wilmington, Delaware. The suit says Target “did not, and does not, have any license, authorization, permission or consent to reproduce or distribute” DWF’s tool.

A spokesperson for Target declined to comment on the suit.  

Moving Target

DWF partners with companies that want customized versions of its design tool for their websites. It also draws revenue from “the ultimate click-through purchase of products” by shoppers using its own design tool, akin to the affiliate links some bloggers and product-review sites use. Those affiliate retailers have included Amazon, Walmart, Houzz, Etsy and, according to both the suit and DWF’s website, Target.

The startup says it began an investigation in June 2020, after a board member emailed an executive “at a popular home goods retailer” and mentioned DWF’s tool. The executive replied, asking, “Do they power Target?”

DWF’s entire development team had worked full time to design and develop its planner, the suit says. A mobile and desktop version launched in 2018, with engineers steadily tweaking the latter “well into 2019.”

Dozens of Target employees using company email accounts and IP addresses related to Target had been using DWF’s tool since at least the fall of 2019, logging “hundreds of hours of session time” and conducting stress tests “to figure out its capabilities,” DWF claims. From October 2019 through the launch of Target’s tool, the suit says, Target employees “were particularly active,” with “large spikes in activity related to product specification of the Target nursery product, product development and prelaunch testing.”

After Target was alerted of the DWF allegations in July 2020, the $112 billion company acknowledged its employees had accessed DWF’s site but kept monitoring it anyway, the suit says, adding more design improvements as DWF’s tool evolved. 

Trailing Behind 

DWF said virtual nurseries were going to be the company’s gateway to a much larger play. After its planner launched, it would “then expand its functionality to allow for creating the furniture layout of an entire home, including outdoor spaces and also non-home spaces such as dormitories.”

But Target was one beat ahead. The suit says the company already had copied DWF’s “design, layout, wording, animations” and then added a design tool focusing on college dorms in January and one focusing on outdoor spaces in March.

Both iterations, DWF says, violate its copyrights.

The company wants court orders to block Target’s unauthorized use of the copyrighted tool and require that the retailer remove it from all promotional materials. It also wants damages for breach of contract stemming from Target’s alleged conduct that violates DWF’s terms of use.

The case is Design with Friends Inc. v. Target Corp., 21-cv-1376, U.S. District Court, District of Delaware (Wilmington).

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