Costco Claims to Sell Tiffany Rings – A Costly Mistake
Costco is set to pay Tiffany & Co. approximately $19 million to settle a case alleging the big-box retailer infringed upon its branding. While jewelers can use and advertise their rings having a “Tiffany setting”, Costco advertised their selection as “Tiffany” rings, rather than just rings with the setting. This was a costly mistake.
Basically, there are two options for fitting a stone into a setting – either by a beveled edge or by using prongs. A “Tiffany setting” involves using prongs to secure the stone. In 1886, the founder of Tiffany & Co. purchased a patent for this type of setting.
These days, the patent has expired, but jewelers all over the world still use “Tiffany setting” as a common phrase to depict that a stone is set between prongs. The company has no problem with this. It only becomes a costly problem when the word “setting” is removed.
On Valentine’s Day 2013, the jeweler discovered Costco’s campaign and filed a lawsuit. It discovered Costco sales personnel were referring to the rings as actual Tiffany rings and claimed, as a result, there were “hundreds if not thousands of people who mistakenly believe they purchased their engagement rings from Costco.” The lawsuit stated, “Tiffany has never sold nor would it ever sell its fine jewelry through an off-price warehouse retailer like Costco,” and with the exception of Tiffany’s limited collaboration with Net-a-Porter, Tiffany jewelry is available only at Tiffany stores. The court ultimately sided with the plaintiff.
Costco representatives said the removal of “setting” from its advertising was a mere clerical error and it did not intend to infringe upon the Tiffany trademark in order to mislead buyers or boost its sales. In a statement citing its plans to appeal the ruling, the retailer described the decision as “a product of multiple errors in pretrial, trial, and post-trial rulings.” However, Judge Laura Taylor Swain defended her position. “Costco’s upper management, in their testimony at trial and in their actions in the years prior to the trial, displayed at best a cavalier attitude toward Costco’s use of the Tiffany name,” she wrote. Furthermore, the salespeople “were not perturbed when customers who then realized that the rings were not actually manufactured by Tiffany expressed anger or upset.”
Judge Swain ruled that Costco’s error was a costly one. Tiffany is entitled to $11.1 million as profits for trademark infringement, plus interest, and $8.25 million in punitive damages. Damages were originally awarded by a jury in October. Swain also said Costco was permanently prohibited from using “Tiffany” as a stand-alone term when selling its products.
Tiffany & Co. representatives were pleased with the court’s decision. Luxury brands often file suit to preserve their status in the industry and prevent an onslaught of imitations. The company has long relied on its one-of-a-kind reputation. “Judge Swain’s decision validates the strength of the Tiffany trademark and the value of our brand, and most importantly, sends a clear and powerful message to Costco and others who infringe the Tiffany mark,” the company said in a statement.