Diamonds are a Girl’s Best Friend, But not Costco’s

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By: Rubeena Sachdev

One fine day, Costco began selling rings and entitled them “Tiffany.” That’s it. These rings were sold at a relatively modest price and naturally, consumers went into a frenzy. Another fine day, a California Costco customer complained that Costco was selling Tiffany & Co. engagement rings. This ultimately lead to a lawsuit filed by Tiffany & Co. on Valentines Day in 2013. Tiffany & Co. argues that the consumers thought they were buying their company’s high-quality product at a significantly lower price and Costco took advantage of this.

The essence of this case is based on trademark infringement and genericism. Costco’s argument, which defends their labeling of the rings was that the “Tiffany” is referring to the generic style of the ring and not Tiffany & Co. However compelling their argument may have been, the federal judge presiding over the case, Judge Laura Taylor Swain, was not convinced. Judge Swain ruled that Costco dropped any modifiers following the “Tiffany” indicating that the rings were not from the Tiffany & Co. brand but a replica of the style. Modifiers to the description would have put customers on notice that the ring they are about to purchase is not actually a ring from Tiffany & Co. In her opinion, Judge Swain ruled that Costco used Tiffany & Co.’s trademark to attract customers and as a marketing ploy.

Acquired genericism, Costco’s main argument, is a trademark law concept that applies to products that have become generic due to popularity and significance in identification; examples include Kleenex or Murphy Beds. Kleenex is the term now commonly used to refer to any tissue paper and Murphy Beds is the term now commonly used to refer to a fold up wall bed. This is a fairly compelling argument, however, Costco customers testified that they believed they were getting an actual Tiffany & Co.’s ring versus a generic “Tiffany” style ring. This belief is detrimental to and rebuts Costco’s genericism argument because it shows that the customers did not regard the ring as a “Tiffany” style but as an actual “Tiffany” ring. Further, Judge Swain rules that Costco was suggesting that the rings were of the Tiffany & Co. brand, by not including a description or modifier on the type of style the ring was. Instead, Costco simply used “Tiffany.” Therefore, Costco were not acting in good faith and infringed upon Tiffany & Co.’s trademark rights.

Costco made profits of about $3.7 million dollars from the sale of 2,500 rings. As a result, Judge Swain ruled that Costco must pay Tiffany & Co. $19.4 million dollars for profits Costco gained and punitive damages and forbade Costco from selling such rings without added description of “style” or “setting” following “Tiffany.” This case revolves not only around key principles of trademark law but also trademark infringement and the protection that it offers to those who’s rights have been infringed upon.

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