Costco Ordered to Pay Tiffany Millions Over Ring Claims

By Corinne Ramey Features Dow Jones Newswires

A Manhattan federal judge ruled warehouse retailer Costco Wholesale Corp. must pay Tiffany & Co. more than $19 million for selling what it marketed as "Tiffany" engagement rings.

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The ruling stems from a 2013 trademark-infringement lawsuit, in which the New York City-based jeweler sued Costco, arguing the retailer sold counterfeit versions of the Tiffany rings. Costco had argued the word "Tiffany" was a generic term.

In her ruling, U.S. District Judge Laura Taylor Swain said Costco could no longer use the word "Tiffany" as a stand-alone term.

Judge Swain said Costco salespeople described the jewelry as Tiffany rings, and "were not perturbed" by angry customers who realized the rings were not manufactured by Tiffany. Additionally, "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 in conjunction with ring sales and marketing," Judge Swain wrote in her ruling, issued Monday.

A lawyer representing Tiffany, whose flagship store is on Manhattan's Fifth Avenue, called the ruling "a long, hard-fought battle to vindicate Tiffany's rights."

"Judge Swain's decision sends a powerful message to Costco and others that the Tiffany trademark is not something to be trifled with," the lawyer, Jeffrey Mitchell, said in a written statement.

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Costco said in a statement that it intends to appeal, and "respectfully submits that the ruling is a product of multiple errors in pretrial, trial, and post-trial rulings."

According to the 2013 complaint, a woman shopping at a Costco warehouse in 2012 in Huntington Beach, Calif., complained to Tiffany "that she was disappointed to observe that Costco was offering for sale what were promoted on in-store signs as Tiffany diamond engagement rings."

Signs on the Costco jewelry display case advertised Tiffany rings, priced at $3,199.99 and $6,399.99, the complaint said.

Tiffany said it confronted Costco, which claimed it had removed the word Tiffany from its signs. The suit said Costco had been using Tiffany trademarks on its signs since the early- to mid-2000s, and that the rings weren't made by, licensed or authorized by Tiffany.

"Costco thereby falsely led its members to believe it was a source, presumably outside Tiffany's normal channels of distribution, for authentic Tiffany engagement rings, but at reduced prices," the complaint says. "There are now hundreds if not thousands of people who mistakenly believe they purchased and own a Tiffany engagement ring from Costco."

In legal filings, Costco had argued it was using the word "Tiffany" as a generic term for "ring settings comprising multiple slender prongs extending upward from a base to hold a single gemstone."

Costco, which sells household goods to card holders who pay membership fees, also sells some luxury goods, including wine and jewelry. In 2010, the U.S. Supreme Court deadlocked on whether the retailer could be held liable for copyright infringement for reselling Swiss watches.

Write to Corinne Ramey at Corinne.Ramey@wsj.com

(END) Dow Jones Newswires

August 15, 2017 13:06 ET (17:06 GMT)