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