Costco Gets Trademark Judgement Overturned, Defeating Tiffany And Co.

from the ring-the-bell dept

Readers here will be sick of this, but we're going to have to keep beating it into the general populace's head: trademark law is about preventing confusion as to the source of a good or service. The idea is to keep buyers from being fooled into buying stuff from one company or person while thinking they were buying it from another. That's basically it.

It's a lesson still to be learned, and one which a federal judge has imparted on famed jewelry maker Tiffany & Co. The backstory here is that back in 2013, on Valentine's Day of all days, Tiffany & Co. sued Costco over the latter's advertisement of "Tiffany" style rings.

U.S. District Judge Laura Taylor Swain said Tiffany deserves $11.1 million, plus interest, representing triple the lost profit from Costco's trademark infringement, plus the $8.25 million in punitive damages awarded by a jury last October.

The Manhattan judge also permanently barred Costco from selling anything that Tiffany did not make as "Tiffany" products, unless it uses modifiers suggesting that the products have, for example, a Tiffany "setting," "set" or "style."

The reason for that last bit is that Costco's argument against the judgement was that its references to "Tiffany" were about an iconic setting for engagement rings. Tiffany & Co. did indeed make that setting famous, but tons of non-Tiffany rings are sold with that style. In fact, it's become such a generic term in the industry after nearly 150 years of use that articles discussing the setting essentially note that there is no trademark concern to have here. From Forbes, for instance:

The formula was immensely successful. So much so that the term “Tiffany setting” has reached Kleenex status—it’s now used colloquially throughout the jewelry industry to describe any multi-pronged solitaire setting, Tiffany or no.

So, even if there were a trademark claim to be had here at one point in history, that ship has sailed. Except in the lawsuit against Costco, the court disagreed, leading to an appeal by Costco.

And with that appeal comes a reversal of the lower court's decision.

A federal appeals court Monday overturned a $21 million verdict against Costco Wholesale Corp. for trademark infringement over its marketing of diamond rings labeled as “Tiffany,” ruling that the lower court judge who had issued an initial ruling in the case had failed to adequately consider contrary evidence.

Costco’s evidence “was sufficient to raise a question as to whether potential buyers of Costco’s diamond engagement rings were actually confused by the appearance of the word “Tiffany” on Costco’s signs,” the ruling said.

Now, this was the overturning of a summary judgement by the lower court. In other words, this ruling is essentially stating that the lower court improperly kept this from going to a full trial, where Costco would be allowed to present evidence that its use was proper given the generic nature of the term, as well as evidence that there was little to no customer confusion to be had. And that evidence is quite good, actually.

Here again we go back to the beginning of this post, where we lay out that trademark law is supposed to be about keeping customers from being fooled as to the source of a good or service. Well, Costco decided to run a real life experiment on this of its use of the term "Tiffany."

It said after the complaint was filed, Costco sent a letter to all customers who had purchased the engagement rings with Tiffany settings and reminded them that its return policy entitled them to return their rings for a full refund at any time, but only 1.3% of its customers returned their rings.

Tiffany & Co. is already making noises about trying this case again, but hopefully it will instead simply bask in the glory that is a setting so popular that it's become generic. If not, I'd expect Costco to win out on the merits.

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Filed Under: genericide, rings, settings, tiffany setting, trademark
Companies: costco, tiffany


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  • identicon
    Pixelation, 18 Aug 2020 @ 9:51pm

    This story once again points to the issue with ownership culture. Patents, copyrights, trademarks make it so a company does not have to continue to compete, create and innovate to make money, after doing so once. Not that there isn't some value but that value gets killed off in the long term. I'm not an advocate for no patents, copyrights, trademarks but they should be extremely limited so people/companies are pushed to innovate.

    reply to this | link to this | view in chronology ]

  • identicon
    Glenn, 18 Aug 2020 @ 11:23pm

    OK... as long as they're not selling them in a little turquoise bag.

    reply to this | link to this | view in chronology ]

  • icon
    Scary Devil Monastery (profile), 19 Aug 2020 @ 12:15am

    Well, it's no wonder, really.

    "trademark law is about preventing confusion as to the source of a good or service. The idea is to keep buyers from being fooled into buying stuff from one company or person while thinking they were buying it from another. That's basically it. "

    This, right there, is what makes trademark law the only part of "Intellectual Property" worth the ink it's written in. If you need to investigate another entity's use of a trademark to see whether it conflicts with yours then odds are good it doesn't. Judges can apply the same common sense they would in any other case of identity theft.

    reply to this | link to this | view in chronology ]

  • identicon
    Kitsune106, 19 Aug 2020 @ 9:19am

    This is kinda... Odd

    Full disclaimer, I work for Costco. Service deli, rosterri chicken department. On one hand, glad that our product might still be saleable. But we do have low profit margins. And one items are net loss until a membership is in. We are also not exactly an normal store. As we have memberships to join.

    And the return thing, not surprising. And the jewelry Dept needs a manager or supervisor to attend so most likely any questions of if Tiffany is removed.

    Conflicted as company did waste money on lawyers....

    reply to this | link to this | view in chronology ]

    • icon
      Samuel Abram (profile), 19 Aug 2020 @ 10:07am

      Re: This is kinda... Odd

      I love Costco because the prices are ultra-reasonable and the fact they come in bulk mean they last a while. Costco is, in fact, my second favorite membership-driven grocery store to shop at after the Park Slope Food Coöp. Returning to the matter at hand, would say that Costco didn't waste money on lawyers considering that they won the appeals case.

      reply to this | link to this | view in chronology ]

      • identicon
        Kitsune106, 19 Aug 2020 @ 12:17pm

        Re: Re: This is kinda... Odd

        Fair. But still money that could do go other places inside. The fact we need to set aside money in first place ...

        reply to this | link to this | view in chronology ]

  • icon
    Paul Alan Levy (profile), 20 Aug 2020 @ 9:28am

    Jacob Jacoby as an expert

    As I read the Court of Appeals opinion, I found myself shocked ot learn that Tiffany had introduced an expert opinion by Jacob Jacoby. I rather thought that after the pair of opinions slamming his fundamentally dishonest his expert reports in Smith v. WalMart https://www.citizen.org/litigation/smith-v-wal-mart-stores-inc/ and Louis Vuitton v Dooney & Burke, https://www.courtlistener.com/opinion/1692273/malletier-v-dooney-bourke-inc/, he would have become unemployable as an expert.

    But certainly knowing that Tiffany had hired him as an expert predisposed me to assume that Tiffany knew it had problems and that only by hiring a dishonest expert could it prevail

    reply to this | link to this | view in chronology ]


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