It all started in 2012 when a consumer informed Tiffany of the sale, in a Costco store, of engagement rings presented as creations of the famous jeweler. More specifically, the sale offer included the following features:
- “639911 / PLATINUM TIFFANY / .70 VS2, I ROUND / DIAMOND RING / 3199.99”
- “605880 / PLATINUM TIFFANY VS2, I / 1.00CT ROUND BRILLIANT / DIAMOND SOLITAIRE RING / 6399.99.”
Investigations followed, which led to the withdrawal of the disputed jewels. Several months later, Costco informed buyers that the engagement ring they had acquired was not a Tiffany creation, adding that it only had the settings of a Tiffany ring. Only 1.3% of buyers opted for a refund. In this context, on February 14, 2013, Tiffany sued Costco before the U.S. District Court for the Southern District of New York on various grounds, including trademark infringement.
In its defense, Costco argued that the use of the word “Tiffany” did not constitute an infringement of the trademark “Tiffany”. In support of its position, Costco relied on the 15 U.S.C. §1115 (b) (4) exclusivity exception (law.cornell.edu). Also, Costco also filed a counterclaim seeking to modify or partially cancel any federal trademark registrations that might prevent retailers from using the word “Tiffany” to indicate that a ring has a Tiffany setting.
In 2015, this counterclaim was dismissed, and Costco was ordered to compensate Tiffany ($21 million).
Before the appellate court, Costco relied primarily on Polaroid and, more specifically, on the confusion of likelihood criteria. More specifically, Costco’s defense was based on the following argument: the term “Tiffany” was used in good faith, other than as a trademark, and a descriptive sense. The Court of Appeal followed its reasoning and considered that Costco’s intention could have been limited to borrowing, in good faith, by way of reference, unprotected settings of Tiffany’s creations. According to the Court, “a reasonable jury could conclude that Costco did not intend to mislead its customers and that signs bearing the word “Tiffany” were the product of a good-faith attempt to communicate to its customers the setting style of certain rings that it sold.”
Fair use: the exception to trademark rights triumphs!
“Tiffany’s argument fundamentally misunderstands our caselaw. There is nothing inherently absurd about a single word’s being both a source identifier and a descriptive term within the same product class. See Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976) (“[T]he same term may be put to different uses with respect to a single product.” (citing 15 U.S.C. § 1115(b)(4))).”
Consequently, the Court of Appeal for the second circuit vacated the judgment of the district court and remanded the case for trial.
For a foreign observer, the court’s decision is unexpected. One can be skeptical about the Polaroid case law’s effectiveness in the fight against counterfeiting, particularly in the digital environment.
Source: Tiffany and Co et al v. Costco Wholesale Corp , 2nd Circuit Court of Appeals, # 17-2798.
