Costco wins appeal in lengthy trademark war with Tiffany

After wars of legal wrangling, a US appeals court has overturned an earlier ruling that retailer Costco sold counterfeit versions of Tiffany & Co’s diamond rings, and should pay millions of dollars in damages.

The latest round in the long-running dispute – which dates back to 2013 – has found that the US District Court for the Southern District of New York erred in granting Tiffany’s motion for summary judgment, which prevented a jury from deciding on key elements of the case at trial.

The dispute has centred on the term 'Tiffany', and whether it should be considered a generic description for a type of diamond setting commonly used for engagement rings and popularised by the jewelry company, or an enforceable trademark.

In 2015, the lower court found that Costco was liable for trademark infringement and counterfeiting after rejecting Costco's counterclaim that Tiffany is a generic term for a specific type of ring setting.

The following year, a jury said Costco should pay $5.5m in compensatory damages and $8.25m in punitive damages to Tiffany, way more than the $781,000 Costco offered in reparation after the first verdict. That figures was then increased the compensatory portion of the award to $11.1m.

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Costco insists that it made only around $781,000 in profit from the sale of around 2,500 rings before the trademark lawsuit kicked off.

In a 3-0 decision on appeal, Circuit Judge Debra Ann Livingston said reasonable jurors could find that Costco’s use of “Tiffany” was unlikely to confuse customers – or indeed make them think Tiffany endorsed the rings.

She also said that it was possible jurors could find that Costco acted in good faith in describing the rings it was selling as having a Tiffany setting, as it thought this was a generic term, and removed the items in question within a week of Tiffany’s complaint.

“Although a jury could reasonably draw the conclusion that Costco’s interest in emulating Tiffany’s designs spilled over into an intent to mislead buyers as to the origins of its own jewelry, it could also reasonably conclude that Costco intended to borrow ‘certain successful features [from Tiffany’s] product’ without implying that Tiffany actually produced or endorsed the jewelry at issue,” says the latest judgment.

The upshot of the latest development is that the case is now handed back to the US District Court for the Southern District of New York for a new trial, which should be decided by a jury. Both companies have said they expect to win the retrial.

The case is Tiffany and Co et al v Costco Wholesale Corp, 2nd U.S. Circuit Court of Appeals, No. 17-2798.