Tiffany & Co. Wins Punitive Damages in New York Trademark Infringement Suit

Tiffany & Co. Wins Punitive Damages in New York Trademark Infringement Suit

Costco Wholesale Corp. will pay more than $13 million in damages for infringing trademarks held by Tiffany & Co. Relying on New York’s State laws governing unfair competition and deceptive acts, a federal jury awarded the jewelry company $8.25 million in punitive damages for willful and bad faith infringement.

Alleged Trademark Infringement

As we previously discussed on our Business Law News Blog, Tiffany & Co. (Tiffany) was contacted by a customer of Costco Wholesale Corp. (Costco) regarding the authenticity of rings sold by the wholesale retailer. According to Tiffany’s complaint, the customer saw a display of diamond rings at her local store with a sign that read “Platinum Tiffany.” A Costco employee also “referred to each of the rings as a Tiffany ring and said the store generally carries one of each item.”

After verifying that the rings were not authentic, Tiffany sent Costco a cease and desist letter and ultimately filed suit. Its complaint alleged trademark infringement, dilution, counterfeiting, unfair competition, injury to business reputation, false and deceptive business practices and false advertising.

“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 stated. Tiffany further alleged 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.

In defense of the trademark infringement suit, Costco argued that it used 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 highlighted that its rings were not sold in Tiffany’s signature blue box.

The federal court granted Tiffany summary judgement on the issue of trademark infringement, concluding that consumers were likely to be confused by the way Costco marketed the rings in its stores. The court also rejected the notion that Tiffany’s trademark had become a generic term to describe a ring setting. A jury awarded Tiffany $5.5 million in compensatory damages.

Punitive Damages Award

The federal statute governing trademark infringement (Lanham Act) does not authorize punitive damages in cases of willful trademark infringement. However, in this case, Tiffany was successful in obtaining a sizable award under state law.

New York General Business Law section 349 prohibits deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in the State of New York. The statute further provides that “the court may, in its discretion, increase the award of damages to an amount not to exceed three times the actual damages up to one thousand dollars if the court finds the defendant willfully or knowingly violated this section.” Similarly, New York General Business Law section 360(m) allows the court to enter “judgment for an amount not to exceed three times such profits and damages and/or reasonable attorneys’ fees of the prevailing party in such cases where the court finds the other party committed such wrongful acts with knowledge or in bad faith or otherwise as according to the circumstances of this case.”

In this case, Tiffany argued that Costco specifically directed vendors to make jewelry display boxes that resembled Tiffany boxes. It further provided evidence that Costco staff members knew that customers were confused about the authenticity of the rings, but failed to take steps to rectify it. Relying on the two state statues reference above, the jury seemingly agreed with Tiffany, as they hit Costco with $8.25 million in punitive damages, bringing the total damages award to $13.75 million.

Do you have any questions about this case? Would you like to discuss the matter further? If so, please contact me, Shane Birnbaum, at 201-806-3364.