Legal

Federal Judge Rules Costco Owes Tiffany $19.4M For Selling Fake Engagement Rings

A federal judge has decided that Costco owes Tiffany & Co. $19.4 million in damages over the warehouse club chain’s illegal sale of counterfeit diamond engagement rings bearing the “Tiffany” name.

According to Reuters, although the case concerned only about 2,500 rings, U.S. District Judge Laura Taylor Swain said Tiffany & Co. deserves $11.1 million, plus interest, representing triple the lost profit from Costco’s trademark infringement, plus the $8.25 million in punitive damages awarded by a jury last October.

In addition, Costco has been permanently barred from selling anything that Tiffany did not make as “Tiffany” products, unless it uses modifiers suggesting that the products have, for example, a Tiffany “setting,” “set” or “style.”

Tiffany sued Costco in 2013 on Valentine’s Day to protect its brand and cachet as one of the world’s best-known luxury retailers.

Costco said it intends to appeal, calling the decision “a product of multiple errors” by Swain. The company had argued that ~$780,000 was the maximum it owed, stating that Tiffany’s trademarks sought to prevent others from using the word “Tiffany”as a generic description of a type of ring setting.

“This was not a case about counterfeiting in the common understanding of that word — Costco was not selling imitation Tiffany & Co. rings,” Costco said.

The judge in the case rejected that argument, noting that Costco had instructed vendors to copy Tiffany designs and did not tell its employees to correct customers who clearly thought they were buying rings by Tiffany & Co. Instead, salespeople at Costco “described such rings as ‘Tiffany’ rings in response to customer inquiries and were not perturbed when customers, who then realized that the rings were not actually manufactured by Tiffany, expressed anger or [were] upset,” Swain wrote.

Costco’s upper management, meanwhile, “displayed, at best, a cavalier attitude toward Costco’s use of the Tiffany name in conjunction with ring sales and marketing,” the judge added.

In a statement, Leigh Harlan, Tiffany’s general counsel, said the decision “sends a clear and powerful message” to anyone seeking to infringe the New York-based company’s trademark.

“We brought this case because we felt a responsibility to protect the value of our customers’ purchases and to ensure that Costco’s customers were not misled,” she said.

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