Costco infringed Tiffany & Co. trademarks by labeling diamond engagement rings “Tiffany” and must face a jury, who will determine damages, U.S. District Judge Laura Taylor Swain in Manhattan ruled Tuesday.
Costco argued that “Tiffany” has become a common description of the solitaire setting invented by Charles Lewis Tiffany in the mid-19th century.
But Costco may have overplayed its hand by prominently using the word “Tiffany” in jewelry displays and in talking to customers.
Costco's argument is not that far-fetched: A “Tiffany” setting is now known the world over as a type of ring setting, and is used like the word “Kleenex” by people inside and outside the industry.
But Costco may have gone too far with its use of the word, to the point of letting — or even encouraging — customers to believe they were buying Tiffany rings.
It’s worth noting that while several news reports described the rings sold by Costco as “counterfeit diamond rings,” that is not necessarily the case. Costco sells diamond rings, sometimes at prices higher than those found at traditional jewelry stores. Rather, it’s Costco’s use of the word “Tiffany” that is at issue.
The retailer has already taken steps to address this issue, agreeing with a request by Tiffany to stop using its name. And Costco sent a letter to customers clarifying that the rings weren’t “Tiffany & Co.” rings, offering refunds if they were disappointed.
Costco has run into trouble over counterfeit and “gray market” goods in the past. It’s an issue that dogs every marketplace and discount store — including Amazon, TJX Cos., Alibaba, and others — that sells merchandise designed to resemble or ape designer goods.
The owners of the brand know that their power is diluted when others sell discounted goods at lower quality; their reputation for quality and their ability to charge more both suffer.
That begs the question — will that happen to Gap, J. Crew, and others who undercut their own brands at factory stores, selling discount merchandise of lower quality?