There’s No Place Like Tiffany, Except When Tiffany is at Costco
Valentine’s Day, February 14, 2013: a day full of love, romance, and for some lucky couples, diamond rings. Many smiling loved ones proudly proposed to their significant others with “Tiffany” rings, but not all of those diamond rings came in iconic robin egg blue packaging. February 14, 2013 wasn’t just a regular Valentine’s Day, but the start of a seven-year trademark infringement battle between Tiffany & Co. and big-box retail giant Costco Wholesale Corporation—one that is still on-going. The latest victor in the trademark battle over “Tiffany” rings? Costco.
In a recent decision, the Second Circuit Court of Appeals vacated a lower court judgement granting $21 million in damages to Tiffany & Co. and remanded the case for trial.[1] Tiffany & Co. alleged, among other things, that Costco was liable for trademark infringement from Costco’s use of point-of-sale signs containing the word “Tiffany” for otherwise unbranded diamond rings.[2] Costco fired back, arguing that the use of the word “Tiffany” was for descriptive purposes and constituted fair use.[3] The lower court granted summary judgement in favor of Tiffany & Co. after finding no genuine issues of fact and determining that Costco’s fair use defense failed as a matter of law.[4] The Second Circuit disagreed, concluding that Costco raised questions of material fact pertaining to whether Costco’s use of the word “Tiffany” caused confusion, and that Costco was entitled to present its fair use defense.[5]
Under the Lanham Act, a party can assert a fair use defense to avoid liability for trademark infringement.[6] To present a fair use defense, Costco must show it used the word “Tiffany” to refer to diamond rings in a way “(1) other than as a mark, (2) [but] in a descriptive sense, and (3) in good faith.”[7] Costco maintained in its appeal that it used the word “Tiffany” in good faith to describe engagement rings with a diamond in a six-prong setting, and presented evidence that this style was otherwise known as a “Tiffany” ring, “Tiffany” setting or “Tiffany”-style ring.[8] Costco further argued that this descriptive meaning was separate from the Tiffany & Co. brand, thus constituting a fair use of the trademark.[9] The Second Circuit emphasized in the opinion that it is possible for a single term to be trademarked in an industry while also serving a descriptive purpose in the same industry, and left for the fact finder to decide at trial, among other things, whether “Tiffany” is a descriptive term.[10]
On remand, the descriptive use argument will be an important issue to watch. Tiffany & Co. will look to prove to the fact finder that “Tiffany” is an iconic mark that Costco took advantage of to confuse consumers, and not simply a descriptive term in this instance. Other big-box retailers and brands across the industry will be paying close attention to this trademark infringement battle as well. A ruling in favor of Costco in the coming trial could have larger ramifications on the fair use of trademarks to sell products, and provide a roadmap for companies to utilize the “Tiffany” description in the future. The stage is set for another battle as the trademark infringement claim between Tiffany & Co. and Costco continues on.
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