Costco Facing IP Lawsuit Over Tiffany Rings

Although the signature little blue box may have been missing, Tiffany and Co. has filed a lawsuit against Costco Wholesale Corp. for selling “counterfeit” engagement rings. The federal lawsuit, currently pending in New York, alleges trademark infringement, dilution, counterfeiting, unfair competition, injury to business reputation, false and deceptive business practices and false advertising.

According to Tiffany’s complaint, the jeweler found out about the rings through a Costco customer. She saw a display of diamond rings at her local store with a sign that read “Platinum Tiffany.” A Costco staff member also “referred to each of the rings as a Tiffany ring and said the store generally carries one of each item.” The customer contacted Tiffany to find out if the rings were genuine.

They were not. “Neither of the rings identified in the Huntington Beach store as ‘Tiffany’ was, in fact, a Tiffany ring, nor was it manufactured by, approved by, licensed by, or otherwise in any way properly associated with Tiffany,” the complaint states. After first sending a cease-and-desist letter to Costco, Tiffany filed suit. It contends that Costco has been using the Tiffany trademark to sell diamond engagement rings for several years and avoided using the Tiffany name in online advertising in order to avoid detection.

Meanwhile, Costco maintains that it is using the word “Tiffany” in the generic context to describe the style and setting of the ring, which it maintains includes “multiple slender prongs extending upward from a base to hold a single gemstone.” The retailer also notes that its rings do not feature the engraved brand name or come in a blue box. Costco also filed a counterclaim alleging that Tiffany filed the suit strictly to limit competition, citing its lower cost for the same quality diamond.

This case highlights the ongoing tension between luxury designers and retailers that sell similar products at discounted prices. Costco previously prevailed in an IP infringement lawsuit over Omega SA luxury watches obtained through the “grey market” under the first sale doctrine. However, the outcome of this case may be less certain, particularly if Tiffany can provide further evidence of customer confusion.

If you have any questions about this case or would like to discuss the legal issues involved, please contact me, Michael Cifelli, or the Scarinci Hollenbeck attorney with whom you work.