NEW YORK—A federal appeals court on Monday overturned Tiffany & Co’s $21 million judgment against Costco Wholesale Corp over the warehouse club chain’s sale of generic diamond engagement rings bearing the “Tiffany” name.
The United States Court of Appeals for the Second Circuit in Manhattan said a lower court judge erred in finding Costco liable for selling the rings, which Costco said had a pronged setting known as a “Tiffany” setting, leaving jurors to decide only how much Tiffany should recover.
In the 3-0 decision, Circuit Judge Debra Ann Livingston said reasonable jurors could find that Costco’s use of “Tiffany” was unlikely to confuse customers or make them think Tiffany endorsed the rings.
She also said jurors could find that Costco acted in good faith, and that “discriminating” Costco customers would be smart enough to know that Tiffany “had nothing to do with Costco’s diamond engagement rings.”
The trademark infringement and counterfeiting case was returned to U.S. District Judge Laura Taylor Swain in Manhattan for a new trial.
Swain had in 2015 ruled for Tiffany on liability issues, including that Costco’s conduct was willful. The award had included $8.25 million in punitive damages, $11.1 million representing triple Tiffany’s lost profit, and interest.
Tiffany said it expects to prevail in a retrial. “We have no qualms about trying this case again,” general counsel Leigh Harlan said in a statement.
Costco and its lawyers did not immediately respond to requests for comment.
Tiffany had sued Costco on Valentine’s Day in 2013, to protect the now 183-year-old company’s brand and cachet as one of the world’s best-known luxury retailers.
In response, Costco said “Tiffany” had become a generic term and, citing a century of documents, was widely understood to describe a type of pronged diamond setting.
Costco also said it removed “Tiffany” from store signs within one week after Tiffany complained.
An estimated 3,349 customers bought Tiffany-set rings at Costco during the relevant period, court papers show.
The case is Tiffany and Co et al v Costco Wholesale Corp, 2nd U.S. Circuit Court of Appeals, No. 17-2798.
By Jonathan Stempel