Tiffany's NYCMatthew David Brozik blogged here about Tiffany v. Costco when Tiffany filed its complaint in early 2013 and then a few months later when Costco filed its scorched-earth counterclaims.  As Tiffany (yes!) Blofield reminds us, “The Reader’s Digest version of the case is that Tiffany and Company sued Costco for selling engagement rings infringing on its famous TIFFANY® trademark.”  Which is indeed well digested.

As Matthew pointed out, the counterclaim by Costco served up an interesting question here, i.e., whether or not “Tiffany” had become generic for a style of diamond ring.  But as he also noted, that was an interesting question, but not necessarily “the” question, because Tiffany responded, in its answer to Costco’s counterclaim, “that Costco’s signage did not indicate that the offending rings sold in Costco warehouses (not manufactured by Tiffany) had ‘Tiffany settings’ but rather appeared to describe each ring as a ‘TIFFANY… DIAMOND RING.'”

Ouch.  Well, here’s what happened, per Tiffany at the Duets Blog again:

Tiffany and Company was awarded nearly $16 million against Costco Wholesale Corp. (“Costco”). . . .

A federal jury with predominantly men (5 to 3 — so you cannot say it was Tiffany and Company groupies protecting their favorite store) awarded Tiffany and Company $7.5 million in damages, including statutory damages, because the conduct was willful (Costco knew they were infringing). Then, in Phase 2 of the trial, the jury slapped Costco with an $8.25 million award for punitive damages.

Not surprisingly, Costco was unhappy with the verdict and damages awarded. It plans to appeal to the Second Circuit. . . .

It might sound simple, but it wasn’t. 

Tiffany moved for early summary judgment, which was denied on the ground that while Tiffany’s trademark rights, in general, were prima facie solid as diamonds, they might not be forever.  That is because of the black-letter, but frequently forgotten, legal principle that the presumption of right that comes with an “incontestable registration” for a trademark will not withstand a well-pled defense of genericness — which is why, notwithstanding the in terrorem language of a thousand cease-and-desist letters, such a mark is not incontestable at all.

Indeed, as John Welch reminds us:

Thurgood Marshall US CourthouseBut I digress.

Anyway, genericness was indeed Costco’s defense. And that was the rub on the court’s denial of the first summary judgment motion by Tiffany (citations and quotation punctuation omitted):

The question of whether a mark is, or has become, generic is generally one of fact. . . . After a mark has been used continuously for up to five years, the mark becomes incontestable and, in such cases, registration “shall be conclusive evidence . . . of the registrant’s exclusive right to use the registered mark in commerce.”  Even a statutorily incontestable mark [Ouch! — RDC] can, however, be rendered invalid and cancelled if it has come to be “the generic name for the goods or services, or a portion thereof, for which it is registered  . . .”  Tiffany argues that, as a matter of law, the “Tiffany®” mark has not been genericized. . . .

[W]idespread use of a mark to describe a product or service, alone, is not enough to render a mark “generic.” Similarly, a term is not deemed generic merely st because it may have some significance to the public as the name of an article. . . .

The question of whether a mark is, or has become, generic is generally one of fact.  The types of evidence to be considered in determining whether a mark is generic include: (1) dictionary definitions; (2) generic use of the term by competitors and other persons in the trade; (3) plaintiff’s own generic use; (4) generic use in the media; and (5) consumer surveys. In support of its argument that “Tiffany” has acquired a generic meaning when used to refer to a type or style of ring setting, Costco offers excerpts from dictionary definitions of “tiffany” and “Tiffany setting,” a preliminary report by a lexicographer, evidence of generic use of the term “Tiffany setting” by jewelry manufacturers, retailers and consumers, and examples of the generic use of the term “tiffany setting” in publications. While none of the evidence is by any means conclusive of the proposition advanced by Costco it is, taken together and read in the light most favorable to Costco in this pre-discovery context, sufficient to frame a genuine factual dispute as to whether the terms “Tiffany” and/or “Tiffany Setting” have a primarily generic meaning in the minds of members of the general public in the context of ring settings.

Accordingly, Tiffany’s motion to dismiss the Counterclaim must be denied.

This was as good as it was going to get for Costco, however.  Because Tiffany renewed its summary judgment motion after discovery closed.  Despite a cross-motion of its own, in September of 2015 the air started getting very close for the big-box retailer (the opinion is reported at 127 F. Supp. 3d 241).

Currently pending before the Court are the parties’ cross-motions for summary judgment. Tiffany seeks summary judgment with respect to Costco’s liability for trademark infringement and counterfeiting, dismissal of Costco’s fair use affirmative defense and dismissal of Costco’s counterclaim that the “Tiffany” mark has become generic. Costco seeks summary judgment striking: Tiffany’s claims for an accounting of profits earned on the sales of various categories of goods; Tiffany’s punitive damages claim; any claims arising from certain sales that Costco alleges are time-barred; Tiffany’s claim for monetary recovery based on its trademark dilution claim; and Tiffany’s demand for a jury trial. . . .

Based on the evidence before it, the Court finds that Costco has proffered no evidence that raises a disputed issue of material fact with respect to any of the Polaroid factors. In light of this conclusion, the Court finds that Tiffany has demonstrated a likelihood of confusion and will grant Tiffany’s motion for summary judgment with respect to Costco’s liability for trademark infringement. . . .

Daniel Patrick Moynihan U.S. Courthouse, 500 Pearl StreetThe court then went to town on the Polaroid factors, including referring to devastating testimony by six customers showing actual confusion. Actual confusion, as we all know, is not necessary to prove a LIKELIHOOD OF CONFUSION. But it sure as hell helps when you’ve got it.

That was nothing, however, compared to this evidence of bad faith on Costco’s part:

Tiffany has marshaled several pieces of evidence that it contends demonstrate Costco’s bad faith and intent to deceive the relevant purchasing public. Tiffany has submitted an email from Jodi Ellis, a employee, in which she notes that she would like Costco’s jewelry boxes to have a more “Tiffany or upscale look.” Tiffany also cites the deposition of Jennifer Murphy, an inventory control specialist and jewelry buyer for Costco, in which she acknowledges that she received an email from a customer expressing confusion over the source of a Costco ring, but took no action to alleviate that confusion by making changes to the Costco’s jewelry case signage.  Tiffany argues that Murphy’s testimony is indicative of Costco’s blatant efforts to copy Tiffany designs. In her deposition, Murphy also admits to having seen an email from a fellow Costco employee in which the employee stated that she “love[d] how [the vendor] just puts [his own] tags on the Tiffany & Co. pieces,” sold to Costco, and Murphy admits that she took no action to put a stop to this practice. Tiffany also highlights a series of emails and photographs that demonstrate Costco’s explicit efforts to copy Tiffany’s designs by making references to Tiffany designs and sharing links to Tiffany’s website. Taken together, Tiffany alleges, this evidence indicates that Costco intended to deceive consumers with regard to the source of its jewelry, demonstrating Costco’s bad faith in adopting the Tiffany mark.

Despite Costco’s arguments to the contrary, the Court finds that, based on the record evidence, no rational finder of fact could conclude that Costco acted in good faith in adopting the Tiffany mark.

This is about as bad as it gets for any trademark infringement defendant.

Unless, that is, it’s also being sued for trademark counterfeiting:

The Court finds that, as a matter of law, Tiffany has established trademark counterfeiting on the part of Costco. The Court has already concluded that Tiffany has established actual confusion and that Coscto has utilized a word mark identical to the one that Tiffany has registered.

Furthermore, the Court has found that Costco was not acting in good faith when it adopted the Tiffany mark, which in turn establishes Costco’s intent to confuse customers as to the source of its rings. Thus, Costco’s use of the Tiffany mark may be considered “spurious” as a matter of law. . . .

Costco has failed to raise any issues of material fact with respect to these conclusions. The Court therefore grants Tiffany’s motion for summary judgment insofar as it seeks a finding of liability with respect to Costco’s trademark counterfeiting.


Wait — what about the genericness part?  Wasn’t that going to save Costco’s hide here?

No go — not when the party with the trademark, much less a famous one with an “incontestable” registration, has a genericness survey; and where, as here, the survey rocks.  Tiffany’s did, and Costco couldn’t knock it out.  So, again, Judge Swain:

The survey found that, when Tiffany was tested in isolation, approximately 9 out of 10 of likely consumers considered it to be a brand identifier. When it was seen in the context of point of sale signage like that used by Costco, nearly 4 out of 10 consumers said they believed it was being used as a brand name, and another 3 out of 10 said they thought it was both brand name and descriptive word.  From these results, [the surveymeister] Dr. Jacoby arrived at the conclusion that “regardless of whether used in isolation or shown the way it appeared on the tags affixed to diamond engagement rings sold by Costco, the term Tiffany is understood and used by the relevant consuming public not as a descriptive or generic term, but as a brand or source identifier.” Citing these conclusions, Tiffany urges that, as a matter of law, its mark cannot be considered generic. . . .

Costco offers no legal authority for the proposition that “Tiffany” can exist in [what its own experts maintain are] dual capacities – both a registered mark and a generic word. The Second Circuit has recognized a “dual usage” doctrine in trademark law, wherein a mark may begin as a proprietary word and gradually become generic as to some segments of the public. See, e.g., Harley Davidson, Inc. v. Grottanelli, 164 F.3d 806, 812 (2d Cir. 1999). However, Costco does not address this line of authority, nor does it make any relevant underlying factual demonstration, and the Court declines to explore this argument sua sponte. . . .

In light of the foregoing analysis, the Court grants Tiffany’s motion for partial summary judgment in its entirety.

Foley Square view
Costco did win some things, including a motion to exclude from “any” accounting of damages (“any” is what we lawyers say when we don’t want to admit that there will be “a”) the profits Costco earned by the sale of memberships and non-subject goods, which makes sense.

Costco also got a surprising dismissal of Tiffany’s federal dilution claim.  Dismissed? Really?  What could be famouser than a “Tiffany ring”?  Odd call here:

As amended by the Trademark Dilution Revision Act of 2006, The Lanham Act allows the owner of a mark “to be awarded monetary damages, attorneys’ fees, and costs . . . if 1) the mark that is likely to cause dilution by blurring or tarnishment was first used in commerce by the person against whom the injunction is sought after October 6, 2006 . . .” . . . [U]nder 15 U.S.C. § 1125(c)(5)(A), in order for a plaintiff to recover damages based on a dilution claim, the subject mark must have first been used in commerce after October 6, 2006. Throughout its briefing, Tiffany asserts that Tiffany mark was first used in commerce in 1868. The Court therefore holds that, as a matter of law, Tiffany cannot assert a damages claim based on dilution of its mark under the Lanham Act, and Costco’s summary judgment motion is granted insofar as it seeks dismissal of this claim.

This ruling is hard to understand.  The statute limits relief to cases where “the mark that is likely to cause dilution by blurring or tarnishment was first used in commerce by the person against whom the injunction is sought after October 6, 2006.” That is, damages and fees are limited to post-2006 users, not of the famous mark, but of the one found likely to cause dilution – i.e., the one “against whom the injunction is sought.” The defendant.

The purpose of that provision was to prevent retroactive claims against defendants, not to cut the most famous and oldest marks out of the benefits of the federal dilution law.  I scanned the PACER record for some indication that Tiffany raised this point with the Court after the ruling, but evidently it was just enjoying itself too much to bother (though it may be buried in there somewhere).

Anyway. So what was left to go to trial on, after all this?  Quite a bit, such as the determination of damages, willfulness and …

Well, it was bad for Costco. Presumably there was no way out, settlement-wise, at any step along the way.  I say “presumably,” but of course I have no idea.  But for a change I don’t see any room for second-guessing the lawyers here, assuming no one with a JD green-lighted this boneheaded move at Costco in the first place.

Surely, though, Tiffany had one coming.  A big one. And it got it here.

Originally posted 2016-10-28 14:41:48. Republished by Blog Post Promoter

By Ron Coleman

I write this blog.