On October 5, 2016, a Southern District of New York jury ordered Costco Wholesale Corp. (“Costco”) to pay Tiffany & Co. (“Tiffany”) an additional $8.25 million in punitive damages for selling “Tiffany” engagement rings that had no affiliation to the jewelry maker’s well-known rings. The award came days after the jury awarded Tiffany $5.5 million in compensatory damages following a trial on damages that started on September 19, 2016.

Tiffany first came to know of Costco’s allegedly infringing activity in November 2012, when a customer alerted Tiffany that it had observed Costco rings that it believed were being advertised as “Tiffany” rings. Tiffany initiated the lawsuit in February 2013, which was followed by Costco’s counterclaim alleging that the “Tiffany” mark was generic. In September 2015, Judge Laura Swain ruled on the parties’ cross motions for summary judgment, granting Tiffany’s motion for summary judgment with respect to Costco’s liability for trademark infringement and counterfeiting, and denying Costco’s counterclaim that the “Tiffany” mark had become generic.

In finding a likelihood of confusion, the court noted the testimony of several Costco customers who were actually confused, as well as Tiffany’s expert, who concluded that “more than two out of five prospective purchasers of diamond engagement rings at Costco were likely confused into believing that Tiffany & Co. was the source of the rings.” Despite Costco’s argument that “Tiffany” appears in the dictionary as a descriptive term, the court had also rejected Costco’s genericism argument, noting that “Costco has proffered no affirmative evidence that raises a material issue of fact with respect to the issue of whether the primary significance of the Tiffany mark to the relevant public is as a generic descriptor or a brand identifier.”

Although only 2,500 of these rings were reportedly sold (with a majority of these customers offered refunds), and although Costco had argued at trial that the maximum damages figure was $781,000, the total award (compensatory and punitive) against Costco is now $13.75 million. The jury’s punitive damages finding was likely due in part to the court’s previous finding that emails “were sent from Costco jewelry buyers asking vendors to copy Tiffany designs, as well as testimony indicating that Costco employees were aware of customer confusion but did nothing to remedy it.”

Tiffany & Co. v. Costco Wholesale Corp., No. 1:13-cv-01041-LTS-DCF (S.D.N.Y. October 5, 2016).