Jeweller - September 2020

US court overturns judgment in $29 million Tiffany &
Co. counterfeit case against Costco supermarket
The seven-year counterfeit dispute between Tiffany & Co. and discount supermarket chain Costco will be retried after a judgment
against Costco was overturned on appeal. Image: Two rings sold by Costco with the ‘Tiffany’ descriptor, The Fashion Law
The US Court of Appeals for the Second Circuit has
overturned a judgment against discount supermarket
chain Costco over its use of the Tiffany & Co.
trademark, which would have seen it liable to pay
$US21 million ($AU29 milion) in damages.
The dispute – which has proceeded through US courts
for more than seven years – centres on a collection
of six-prong diamond engagement rings sold by
Costco with the descriptor “Tiffany” on the tags and
in-store signage. It is estimated that 3,349 customers
purchased the rings from Costco, netting it $US3.7
million in profits; it sold a 1-carat platinum solitaire
ring with VS clarity for $US6,399.99, while a similar
ring on the Tiffany & Co. website retails for $US13,400.
Costco twice appealed a summary judgment in Tiffany
& Co.’s favour, handed down by Judge Laura Taylor
Swain of the US District Court for the Southern District
of New York, resulting in the case being referred to the
Second Circuit.
In its appeal filing, Costco argued that the rings
did not meet the standard for counterfeiting as
they bore “non-Tiffany trademarks”, were not
sold in Tiffany-branded packaging, and were not
accompanied by Tiffany & Co. paperwork.
In a 3-0 decision handed down on 17 August 2020,
the Second Circuit upheld Costco’s appeal, ruling
that the lower court had erred in making a summary
judgment in Tiffany’s favour and that the case must
be retried by a jury.
The judgment stated, “A jury could reasonably
conclude that consumers of diamond engagement
rings would know or learn that ‘Tiffany’ describes a
style of setting not unique to rings manufactured by
Tiffany, and [could] recognize [sic] that Costco used the
term only in that descriptive sense.”
The court also held that reasonable consumers would
determine that the rings were not manufactured by
Tiffany & Co. based on factors such as price, place of
purchase, and packaging.
Leigh Harlan, senior vice-president, secretary
and general counsel Tiffany & Co., said, “We are
disappointed in the Court’s ruling, which finds that a
jury, rather than the judge, should have decided the
question of liability in the first trial.
“We continue to believe that the District Court was
correct in its findings, and that the jury’s finding on
damages, which resulted in a $21 million award
for Tiffany & Co., is a clear indicator of the strength
of the Tiffany brand, and of the jury’s outrage over
Costco’s actions.
She added that company had “no qualms about trying
this case again” and said Tiffany & Co. “remained
confident” a jury would find in its favour. At the time
of publication, representatives for Costco had not
commented publicly on the Court’s decision.
In its initial filing against Costco in 2013, Tiffany & Co.
argued that the Costco rings constituted trademark
infringement and counterfeiting, as it was possible
customers were misled to believe that the rings
were indeed manufactured by Tiffany & Co. It also
contended that Costco had instructed its jewellery
suppliers to copy Tiffany & Co. ring designs.
Costco countered that the descriptor “Tiffany” simply
referred to the six-prong setting of the rings and that
“Tiffany setting” could be considered a generic term in
the jewellery industry.
Judge Swain ruled in Tiffany’s favour in 2015,
stating, “Based on the record evidence, and despite
[its] arguments to the contrary, no rational finder of
fact could conclude that Costco acted in good faith
in adopting the Tiffany mark.”
A jury later awarded Tiffany & Co. $US13.75 million,
representing lost profits and punitive damages.
Judge Swain later dismissed a Costco appeal in
2017, increasing the amount owed to Tiffany & Co.
to $US21 million.