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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. Image credit: The Fashion Law
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. Image credit: The Fashion Law

US court overturns judgment in $29 million Tiffany & Co. counterfeit case

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.

Leigh Harlan, Tiffany senior vice president, secretary and general counsel
Leigh Harlan, Tiffany senior vice president, secretary and general counsel
"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"
Leigh Harlan, Tiffany & Co.

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.

History of the case

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.

 

More reading:
Tiffany & Co.’s lengthy Costco dispute reaches finish line
Tiffany & Co. received millions in Costco dispute
Tiffany & Co. claims win in Costco trademark battle
Tiffany vs Costco – round 3
Tiffany and Costco battle continues
Leaked email could affect Tiffany case
Tiffany & Co. sues supermarket chain
 











Thomas Sabo
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