Tiffany v Costco: When a Famous Brand Name Is Also a Style of Ring

By Imaduddin

Photo: NicholasDeloitteMedia / Pixabay

Can a famous brand stop a retailer from using its name to describe a style of product? That was the question in an eight-year fight between Tiffany & Co., the New York jeweller, and Costco Wholesale, the US warehouse club. It produced a multimillion-dollar judgment, a reversal on appeal, and finally a quiet settlement.

The signs at the jewellery counter

According to the US Court of Appeals for the Second Circuit, Tiffany sued Costco in 2013 over point-of-sale signs at Costco jewellery counters. The signs used the word "Tiffany" next to diamond engagement rings that had nothing to do with Tiffany & Co. Costco did not dispute that Tiffany owned a valid registration for the word. Its defence was that "Tiffany" also has a second, widely understood meaning in the jewellery trade: a particular pronged setting that holds a single diamond, which many jewellers sell.

A $21 million judgment

The district court in Manhattan sided with Tiffany on summary judgment, finding that no reasonable jury could accept Costco's arguments and that Costco's conduct amounted to counterfeiting. After a trial on damages in 2016, a jury awarded $3.7 million in profits, a further $1.8 million, and $8.25 million in punitive damages. The judge trebled the profits award, and the final judgment, entered on 25 August 2017, came to $21,010,438.35 including interest, according to the appeals court's summary.

The appeal

On 17 August 2020, a three-judge panel of the Second Circuit vacated the judgment. Writing for the panel, Circuit Judge Debra Ann Livingston said the case should not have been decided without a trial. In the court's view, Costco had raised real factual questions: whether shoppers were likely to be confused, and whether Costco was using "Tiffany" in good faith only to describe a setting style, which US law can permit as descriptive fair use. As Reuters reported, the court suggested that a jury could find Costco's customers sophisticated enough to understand that Tiffany had nothing to do with the rings. The case went back for trial.

There was no second trial. According to Reuters, the two companies settled on 19 July 2021 and the case was dismissed. The terms were not made public.

Why the case matters

The dispute sits on the line between protecting a famous name and keeping descriptive words free for others. Brand owners whose names have become shorthand for a style, a cut or a technique face a real risk: the more a term is used descriptively, the stronger the fair-use defence, and in extreme cases the closer a mark comes to becoming generic.

The Indonesian angle

Under Article 20 of Law No. 20 of 2016 on Marks and Geographical Indications, a mark cannot be registered if it is the same as, relates to, or merely names the goods or services applied for (Article 20(b)), or if it is a common name or public symbol (Article 20(f)). Article 22 also allows anyone to apply for a mark that uses a registered mark which has become generic, as long as other words are added to make it distinctive. Brand owners should police descriptive use of their marks by retailers and in marketplaces, and keep evidence that the public links the word to them.

Sources

• US Court of Appeals for the Second Circuit, Tiffany & Co. v. Costco Wholesale Corp., No. 17-2798 (17 August 2020) (GovInfo, PDF)
• Reuters, "U.S. appeals court voids Tiffany's judgment against Costco over fake 'Tiffany' rings" (17 August 2020)
• Reuters, "Tiffany, Costco settle 8-year lawsuit over fake 'Tiffany' rings" (19 July 2021)
• JDIH BPK, Law No. 20 of 2016 on Marks and Geographical Indications (statute text and status, in Indonesian)