Costco Ordered to Pay Damages in Tiffany Case

MajorsOct 03, 2016

Costco Ordered to Pay Damages in Tiffany Case

A federal jury in New York issued a $5.5 million partial verdict for unlawful profits but is still deciding on punitive damages.

The jury in Tiffany v. Costco awarded the jeweler $5.5 million damages for Costco’s sale of diamond engagement rings labeled as having a “Tiffany” setting that were not, in fact, made by Tiffany & Co.

New York--A federal jury in New York awarded Tiffany & Co. $5.5 million in damages last week in part one of a two-part verdict being handed down in its case against Costco Wholesale Corp.

Relatively speaking, it’s a tiny amount of money for a jewelry retailer that recorded $4.1 billion in global sales last year, and for a massive wholesale club that rang up more than $100 billion.

But it’s a big message for the jeweler that, like all retailers, is fighting for every consumer dollar in an increasingly competitive marketplace and that, perhaps, sees protecting its venerable 179-year-old brand as key to maintaining its edge.

It’s a case that’s been labeled a publicity stunt and called a “waste of time” but, in the end, ultimately has a two-prong effect for Tiffany.

Emily Miao, a partner at McDonnell Boehnen Hulbert & Berghoff LLP who specializes in intellectual property law, said the case sends a message to the jewelry industry about using the term “Tiffany setting.” That message is: Don’t use it.
RELATED CONTENT: What the Tiffany Ruling Means for the Jewelry Industry
Tiffany essentially had already won this case more than a year ago when U.S. District Judge Laura Taylor Swain not only granted Tiffany’s motions for summary judgment on claims of trademark infringement and trademark counterfeiting, but also threw out Costco’s counterclaim that “Tiffany setting” had become a generic term that could be applied to any engagement ring setting created in the same multiple slender-prong style as a Tiffany ring.

It could have ended there, but Miao said that Tiffany is “using this case to un-do what has happened to their (trade)mark.”

“Now they have a way to segue into changing the jewelry industry’s behavior by using the Costco case. It is a publicity stunt, in that sense,” she said.

The case also has kept Tiffany & Co. top-of-mind for consumers, particularly those deciding if, and where, they’d like to buy a Tiffany ring.

The jury handed down its verdict last Thursday in New York federal court, putting Costco’s profits from the sales of rings with a “Tiffany setting” at $3.7 million and adding $1.8 million for what it determined as benefits that Costco derived from the ring sales.

In a statement shared with National Jeweler on Friday, Costco said it is not commenting on the decision because the jury’s deliberations are continuing.

The partial verdict is nearly, but
not quite, the last step in a case that’s now more than three years old and started when Tiffany was made aware of the fact that Costco was selling engagement rings labeled as Tiffany in its stores.

As of Monday morning, the jury was still deliberating punitive damages in the case; punitive damages are those that serve to punish the offending party in a case.

Miao said the bar for awarding punitive damages is high in New York state, and she put Tiffany’s chance of recovering any more money at 50/50.

But, again, “money’s not really relevant here,” she said. “If it was, Tiffany would have settled a long time ago.”

“This is a good decision for Tiffany. This will help them sell more rings and jewelry. (Because), if you want a Tiffany ring, you’ve got to go to Tiffany to buy it.”
Michelle Graffis the editor-in-chief at National Jeweler, directing the publication’s coverage both online and in print.

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