It is unusual to hear the brands Tiffany & Co. and Costco mentioned in the same sentence, but we’ve been hearing it a lot over the past few years. It began in 2012, when a customer shopping at Costco noticed that their jewelry display had rings that were marketed using the term “Tiffany,” as in, “Tiffany Setting.” These rings were not part of the Tiffany brand, nor did they have the company’s permission to use the terminology. The jewelry giant filed suit on February 14, 2013, and as of October 2016, we finally have a resolution.
In the Southern District Court of New York, after the judge granted summary judgment in favor of Tiffany, the jury a awarded the jeweler punitive damages in the amount of $8.25M, bringing the total award to $13.75M. This is not your typical trademark infringement case. While in is possible, generally violations of the Lanham Act do not lead to the recovery of punitive damages—it takes a finding of bad faith, as the court found here.
Bad faith evidence is also an important factor in likelihood of consumer confusion—the standard for finding infringement. For example, Tiffany presented evidence that a Costco employee had emailed the store to request that the jewelry display be styled to look more upscale, i.e., more like Tiffany, and that employees working in the store knew of actual customer confusion as to the source of the jewelry but did not make an effort to correct them. So clearly, both actual confusion (very important evidence for a finding of infringement) and bad faith intent were present.
Costco actually argued that no infringement occurred because the Tiffany mark had become generic; now merely describing a style of ring setting. The court, however, directed the jury to look to the primary significance of the mark to customers. To be a generic descriptor, but not a brand identifier, the mark would have to have little to no significance to customers. The found Costco had presented no evidence of this occurring.
This should serve as a warning to other companies who may be using trademarks they believe to be generic, or who think they can fly under the infringement radar. The old retail mantra is the customer is always right—it appears customers were right to be confused by Costco.