August 25th, 2017Trademark infringement can really hurt – Costco hit with $19 Million judgement

Written by Georgi Korobanov, Associate and Patent Attorney at Gearhart Law

On August 14, 2017 Judge Swain, a New York Federal Judge, ruled on the latest chapter in the Tiffany’s vs Costco dispute that has been going on since 2012, ordering Costco to pay $11.1 million in profits and $8.25 million in punitive damages for infringing the Tiffany mark. The issue arose from a Costco customer notifying Tiffany that she was surprised to see Costco selling Tiffany rings. Tiffany Co.  typically needs no introduction, the company has been around since 1837 and has heavily invested in the advertising. Tiffany markets itself as an arbiter of taste and style, and brands their goods as luxurious, specializing in jewelry, sterling silver, china, crystal, stationery, and other extravagant goods. The company has close to 100 separate trademarks related to just  the “Tiffany” name and specifically the word Tiffany related to but not limited to jewelry made in whole or in part of precious metals. Costco on the other hand, the second largest retailer in the world after Walmart, has a sales model focusing on selling products at low prices, at very high volume, not something that screams luxury and exclusivity.

It turned out that Costco indeed labeled rings sold in their stores as a Tiffany ring. There were no quotes around the description, nothing stating this was a Tiffany-like product, nothing that would have alerted potential customers to the difference. Tiffany secured a commitment that Costco would remove all references to Tiffany in its displays, but a lawsuit over damages and profits still ensued.

Without making too many assumptions about Costco’s business practices, it’s safe to say the marketing department did not vet this particular campaign with Intellectual Property attorneys in Legal. Had counselors been given to a chance to do simple but necessary trademark search, they would have discovered that one of the aforementioned registered marks  is specifically a solitaire diamond set with six prongs registered as a “Tiffany®  Setting”, and would have strongly recommended against using the name “Tiffany” to explicitly describe the rings . From documents submitted at trial it was evident that Costco was making explicit efforts to copy and emulate Tiffany’s designs, and made no effort to alert potential customers to the possible confusion. Costco was found to have willfully infringed the Tiffany trademark. The willfulness of the infringement allowed Judge Swain to treble the punitive damages. Although the resulting damages might not be relatively large sum to a giant like Costco, the credibility fallout will hopefully force them to retool some of their marketing strategies.

When it comes to trademarks, patents or any other Intellectual Property one should at the very least consult with a professional about performing a search to ensure no potential rights would be infringed as part of their due diligence in introducing a product to market. A thorough search and analysis done by an IP attorney is a much more cost effective and assured way to bring your product to market than simply hoping there’s no lawsuit down the road.

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