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Costco must pay the cost: Costco must pay Tiffany & Co its $19 million

Written by Fatima Amedu on 14 January 2019

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The wholesale giant Costco has failed in its attempt to reduced or reverse the damages of $19.4 million that it owes the designer jewellery retailer Tiffany & Co. Tiffany & Co filed a lawsuit against Costco for unlawfully using its trade mark to sell counterfeit engagement rings.

In 2017, Tiffany & Co was awarded $8.25 million in punitive damages and an $11.1 million in triple loss profit damages. The District Judge held that Costco acted in bad faith when it used the term “Tiffany” to display with these counterfeit engagement rings. 

The decision by the U.S District Court for the Southern District of New York requires Costco to pay an additional $6 million to cover Tiffany & Co’s legal costs as the appeal is moved along. The U.S. Court of Appeals for the Second Circuit had paused the case for more than a year whilst the district court’s ruling on Costco’s post-judgment motion.

As Tiffany & Co have a long-established reputation of creating luxurious and desired items of jewellery, it should come as no surprise that the Costco would have known that the brand name “Tiffany” would have aided in selling its counterfeit engagement rings. Nevertheless, Costo tried to argue that the Court had relied upon the eight-factor test for likelihood of confusion set out by Polaroid Corp v Polarad Electronics Corp in error. The following criteria needs to be assessed in regards to infringement:

(1) the similarity of the marks;

(2) the similarity of the goods;

(3) the relationship between the parties' channels of trade;

(4) the relationship between the parties' advertising;

(5) the classes of prospective purchasers;

(6) evidence of actual confusion;

(7) the defendant's intent in adopting its mark; and

(8) the strength of the plaintiff's mark.[1]

Costco tried to argue that the above criteria can only be used when the court is trying to discern whether the defendant infringed a mark, rather than counterfeiting a mark. The court dismissed this argument and stated that it was not trying to equate infringement with counterfeiting goods. Instead the court used the above eight-point criteria to assess the actions taken by Costco in the Tiffany & Co’s counterfeit claim. Additionally, Costco could not prove that Judge Swain had erred in her findings of counterfeiting by Costco.

The court decided to award Tiffany & Co damages equating to 50 percent of the profit margin that Costco had due to the low mark-ups on the infringing rings. Judge Swain argued that to only award Tiffany & Co the amount that Costco had made in selling the infringing rings as damages, would not take into account the low mark-ups that they had on their rings. Judge Swain decided that if Tiffany and & Co were awarded only the profits that Costco earned directly from the sale of the of the infringing rings it would not be sufficient.


[1] http://likelytocauseconfusion.com/likelihoodofconfusionfactors.html

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