Back in 2015, the U.S. District Court for the Southern District of New York issued summary judgement in favor of plaintiff Tiffany and Co. (“Tiffany”) in its lawsuit against Costco Wholesale Corp. (“Costco”). The Second Circuit Court of Appeals recently vacated the district court’s grant of summary judgement, and consequently its $21 million verdict.
Tiffany holds 97 trademark registrations. Two registrations are of particular importance in this case. One is U.S. Trademark Registration No. 1,228,409 for the standard character word mark TIFFANY for “decorative art objects made of precious or semiprecious metals”. The other trademark of significance is U.S. Trademark Registration No. 133,063 for a stylized Tiffany mark for “jewelry for personal wear”.
At least as early as 2007, Costco was selling diamond rings in its stores with signage using the term “Tiffany” to describe diamond rings that were not Tiffany brand rings. Costco was using the term “Tiffany” on its signage without following the term with modifiers such as “setting” or “style” or “set”. Tiffany became aware of this use in 2012 after instances of consumer confusion. In 2013, they brought suit against Costco alleging trademark infringement and counterfeiting, among other claims.
Costco asserted a fair use defense and alleged that the Tiffany mark had become generic. Costco argued its standalone use of “Tiffany” was a shorthand reference to the jewelry industry’s “generic” usage of “Tiffany” as the name of a particular style of ring setting.
District Court Ruling for Tiffany
In 2015, the District Court granted summary judgement in favor of Tiffany, holding Costco liable for counterfeiting and trademark infringement. The Court also granted Tiffany’s motion to a jury trial on damages. In 2016, a jury handed down a unanimous verdict of $5.5 million for a just award of profits. The actual profits were $3.7 million. In addition, the jury awarded statutory damages in the amount of $2 million and punitive damages in the amount of $8.25 million.The Lanham Act does not award punitive damages for trademark infringement. However, in this case, state law permitted punitive damages in cases of willful intent or bad faith.
In 2017, in reviewing the jury award, the Court found that Tiffany was entitled to recover $11.1 million as trebled profits for trademark infringement in lieu of statutory damages. The Court also found they were entitled to the $8.25 million in punitive damages as well as reasonable attorney’s fees. The total damage award, including pre-judgement interest, was a little over $21 million. The Court also enjoined Costco from using the mark TIFFANY as a standalone term on any of its advertisements or sale of any of its products not manufactured by Tiffany & Co.
Court of Appeals
Costco appealed to the U.S. Court of Appeals for the Second Circuit. The Court of Appeals found that Costco raised a question of material fact as to its liability for trademark infringement and counterfeiting. The Appeals Court found that reasonable jurors could find that Costco acted in good faith and that discriminating consumers would not be confused as to Costco rings being endorsed by Tiffany. The Court of Appeals also found that Costco is entitled to present its defense of fair use to a jury. Accordingly, the Court of Appeals remanded the case back to the District Court for a trial. It will be interesting to see if after trial, who prevails. Regardless of who wins, one thing for sure, I see another appeal in the future.