Costco to pay Tiffany $26 million in trademark lawsuit

Tiffany invented a type of ring setting which shows more of the gem by setting the stone in a metal claw extending from the ring's band.
Tiffany invented a type of ring setting which shows more of the gem by setting the stone in a metal claw extending from the ring's band.PHOTO: CARLTON DAVIS

NEW YORK • Tiffany & Co does not want anyone to take the shine off its jewellery.

Recently, a federal judge in the United States ordered warehouse club Costco to pay the storied jewellery company more than US$19 million (S$26 million) for selling about 2,500 diamond rings falsely identified on store signs as Tiffany rings.

The management "displayed at best a cavalier attitude towards Costco's use of the Tiffany name in conjunction with ring sales and marketing", District Judge Laura Taylor Swain wrote in her opinion.

Her decision followed a jury verdict which found that Costco had received a profit of US$3.7 million from using the Tiffany brand.

The jury rejected Costco's argument that the word Tiffany - with reference to a ring's setting - had become a generic term.

The judge ruled that Costco should pay Tiffany US$11.1 million plus interest, which is three times Tiffany's lost profit from Costco's actions, plus US$8.25 million in punitive damages.

Tiffany said in a statement to CNN that the ruling "validates the strength of the Tiffany trademark and the value of our brand and, most importantly, sends a clear and powerful message to Costco and others who infringe the Tiffany mark".

"We brought this case because we felt a responsibility to protect the value of our customers' purchases," the company added.

Following the ruling, Costco said it would appeal, calling the decision a "product of multiple errors" on the part of the judge.

"This was not a case about counterfeiting in the common understanding of that word - Costco was not selling imitation Tiffany & Co rings," the company said.

The diamond rings "in question were not stamped or otherwise marked with the Tiffany & Co name (but rather were stamped with the name of the company that manufactured them); they were accompanied by appraisal documents that did not mention Tiffany & Co, and with sales receipts that did not say Tiffany or Tiffany & Co.

"Notably, Tiffany & Co did not claim in the lawsuit that it lost a single sale to Costco as a result of any sign. From a purchaser list of approximately 2,500, Tiffany identified fewer than 10 who said they had misunderstood Costco's signage."

Costco argued that Tiffany is a commonly used term to describe a particular type of ring setting.

Tiffany was founded in 1837 and quickly became one of the world's leading jewellers.

One of its early achievements was inventing a new type of ring setting in 1886.

In an attempt to show more of the gem, it set the stone in a metal claw extending from the ring's band.

Before this, diamonds were set in a full shallow cup of metal, obscuring most of the stone, according to Forbes.

The setting was extremely successful and immediately attracted imitators.

By now, as Forbes wrote, "the term 'Tiffany setting' has reached Kleenex status - it's now used colloquially throughout the jewellery industry to describe any multi- pronged solitaire setting, Tiffany or not".

Judge Swain wrote that Costco "provided credible evidence" of the practice of using the terms "Tiffany setting" and "Tiffany style" generically throughout the jewellery industry.

The problem is Costco used the word Tiffany only when describing the rings in its signage, suggesting they were made by the jeweller rather than an imitation of its famous design.

Tiffany first filed a complaint in the US District Court in New York against the membership-only wholesale retailer on Valentine's Day in 2013, after learning the company was selling off-brand engagement rings labelled as Tiffany in several stores.


A version of this article appeared in the print edition of The Straits Times on August 24, 2017, with the headline 'Costco to pay Tiffany $26 million in trademark lawsuit'. Print Edition | Subscribe