Costco Continues To Sue Tiffany & Co. After Loosing $25.25 Million Over "Counterfeit Rings"
Costo continues to sue Tiffany & Co. over claims of "counterfeit rings", after already losing an accumulative $25.25 million throughout multiple trials in the past 7 years.
Everyone knows the famous Tiffany light blue box packaged in satin ribbon, most likely containing thousands of dollars worth of diamonds sitting on a thin silver band. Tiffany, a high-end jewelry store ranked on the same level as Cartier, Bulgari, and Chopard, is mainly known for its rings; more specifically their diamond engagement rings. “In 2013 Tiffany had heard that Costco an “American multinational corporation which operates a chain of membership-only warehouse clubs” (Costco), had been selling counterfeit Tiffany rings and making thousands of dollars in profit. After hearing the news Tiffanys immediately “filed a complaint against Costco in the U.S. District Court in New York, saying it learned from a customer that Costco was selling "Tiffany" rings. "Unbeknownst to Tiffany, Costco had apparently been selling different styles of rings for many years that it has falsely identified on in-store signage as 'Tiffany,' (CNN). In the lawsuit, Tiffany accused Costo of “trademark infringement, counterfeiting, and unfair business practices, among other causes of action, and sought tens of millions of dollars in damages.” (TFL). Photos and testimonials from different individuals found that the rings from Costco were being sold for somewhere on the scale of $4,000 to $6,000 a ring, and were advertised with the word “Tiffany”, on signs across Costco stores around America.
After the file of the complaint was sent, Judge
Laura Taylor Swain of the U.S. District Court for the Southern District of New York granted Tiffany’s motion for summary judgment. In the trial, Costco's defense was that the word ‘Tiffany’ was never trademarked by the company Tiffany & Co. themselves, (only the blue packaging and the name Tiffany & Co. itself was trademarked) however, Costco argues that they were not in the wrong and had no intention of counterfeiting the Tiffany & Co brand. They were, as they stated, “using the word tiffany to describe the certain style of ring that they were selling” (TFL). At the end of the trial, the court found Costco guilty of all charges and held a jury trial to determine how much Tiffany would earn based on the sales of Costco's Counterfeit rings.
On September 29, 2016, a jury of New Yorker residents returned a verdict awarding $5.5 million in damages to Tiffany to compensate for the profits that Costco had made from selling the rings (TFL). However, a month later 8.5 million dollars in punitive damages were added to the 5.5 million in profit damages. This totaled to a “damages bill of nearly $14 million subject to the judge’s post-verdict approval for Costco to pay”(TFL). Additionally, in 2017, Judge Swain did not believe that $14 million in damages was enough, she increased it to 19 million dollars in profit damages, plus another 8.5 million dollars as a punitive damages fee.
Unhappy with over 20 million dollars in damages, Costco filed an appeal with the U.S. Court of Appeals for the Second Circuit in September of 2017. Their main argument was that their reason for using the word ‘Tiffany’ was due to the shape of the ring itself and that a counterfeit claim was not suitable for this case. This was due to the fact that for a product to be determined as a counterfeit the product, it must be “identical to or substantially indistinguishable from (the object it is being claimed to be counterfeiting)” (TFL). “The rings that were sold at Costco had no link to Tiffany at all other than the word of the branding itself which was due to the shape of the ring” argued Costco. Additionally, the rings were not given in blue Tiffany packaging, were not signed for in Tiffany papers, and did not copy the exact style of any Tiffany ring.
2 years later in 2019, Tiffany responded with a 73-page brief countering the fact that Costco should have known how powerful the name ‘Tiffany’ is (although not trademarked) and should not have used the word itself to brand any of the rings as it could lead to a deception of the customers. Tiffany's legal counsel also argued that Costco had no evidence to state that the Tiffany name is not world-renowned enough therefore raitonalising that they used the name tifanny in good faith and that they had other options for naming that specific ring style. (TFL).
Unfortunately for Costco, after the evidence was presented, Judge Swain did not only disagree with the evidence that Costco presented, but decided to add even more of a total onto Costco's million-dollar tab to now cover Tiffany's legal fees as well. By the end of the case, Judge Swain charged Costco $25.25 million in damages in which they owe Tiffany & Co. for trademark infringement, counterfeiting, and unfair business practices, among other causes of action. (TFL)
In January of 2019, Browne George Ross LLP litigator Jeffrey Mitchell stated “We are gratified that Judge Swain reiterated what she has said repeatedly now, and what a jury also found, that Costco’s use of the world-famous Tiffany mark to sell its own jewelry was totally improper,” Browne George Ross LLP litigator Jeffrey Mitchell (Bloomberg Law).
Even after its $25 million loss in damages, Costco still wishes to continue this fight and filed for another appeal which is now scheduled for later in 2020 (or 2021 due to
COVID-19) where the case will be judged by a 3-judge panel for the Second Circuit.