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Sept. 10 — Costco Wholesale Corp. acted in bad faith when it used the word “Tiffany” to describe a particular ring setting, the U.S. District Court for the Southern District of New York ruled Sept. 8.
Costco said that its Tiffany Setting rings—engagement rings with a solitaire diamond set with six prongs—were named for a generic type of ring within the jewelry industry. But the court held that “Tiffany” is not a generic term for a particular ring setting.
The court determined infringement by asking whether Costco's use of Tiffany's registered mark had created a likelihood of confusion.
One of the factors in the likelihood of confusion analysis was whether the mark had been used in good faith.
The court determined that “no rational finder of fact could conclude that Costco acted in good faith in adopting the Tiffany mark” because of Tiffany & Co.'s “compelling evidence” that “Costco was concurrently requesting that its vendors copy Tiffany products, that Costco employees were aware of vendors' efforts to do so, and that Costco employees took no action to put a stop to this.”
Costco argued that it had used the word “Tiffany” generically to “describe a particular type of pronged diamond setting on the unbranded rings that it sells,” not to take advantage of the goodwill associated with Tiffany.
Costco supported this argument with evidence that within the diamond ring industry, “the word Tiffany is routinely used in its dictionary definition sense to refer to a type or style of pronged ring setting.”
The court, however, did not conclude, as Costco argued, that Costco jewelry buyers “used the word ‘Tiffany' in a generic sense when communicating with vendors, while at the same time asking those vendors to copy Tiffany & Co. designs, and that signage incorporating the word ‘Tiffany' on the resulting merchandise was nothing more than clerical duplication of a generic reference from an invoice,” the court said.
In addition, while the court said that the Second Circuit has recognized a “dual usage” doctrine under which a mark may begin as proprietary and gradually become generic, Costco didn't address this doctrine or note any facts relevant to it.
Based on this and other factors, the court found Costco liable for Lanham Act trademark infringement and counterfeiting, granting Tiffany summary judgment on those issues. Costco must stop using the mark, and will owe damages based on profits from the sale of the Tiffany Setting rings.
Costco may also owe punitive damages after it failed to have Tiffany's claim under New York state law—awarding punitive damages for “gross, wanton or willful fraud or other morally culpable conduct to an extreme degree”—dismissed.
Judge Laura Taylor Swain wrote the opinion.
Tiffany was represented by Jeffrey A. Mitchell of Dickstein Shapiro LLP, New York. Costco was represented by James Wilson Dabney of Fried Frank Harris Shriver & Jacobson LLP, New York.
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