Tiffany sues Costco over diamond rings
Luxury jeweller Tiffany has sued wholesaler Costco for allegedly selling thousands of counterfeit diamond rings while promoting them as branded products.
The suit, filed in the US District Court for the Southern District of New York on Thursday, complains about trademark infringement and counterfeiting. Tiffany wants an injunction, the profits from the rings sold and damages, tripled for wilful infringement.
Costco operates as a membership warehouse club, selling a wide range of merchandise at discounted rates. According to Tiffany, a customer in a Californian Costco store alerted the company to a suspected counterfeit diamond engagement ring in November 2012.
Tiffany investigated and now alleges that Costco had been selling a variety of fake rings but promoting them as genuine for “many years”, according to the suit. Costco has since removed any signs using Tiffany’s brand.
Counsel for Tiffany, Jeffrey Mitchell of Dickstein Shapiro LLP, said hundreds or even thousands of Costco members may have bought fake rings, adding that Costco knew that they were counterfeits.
“The Tiffany brand has been damaged, Costco members have been damaged, and Costco has profited from the sale of engagement rings by misrepresenting what they were,” he said.
Tiffany has sold high-end jewellery for more than 175 years and typically takes an aggressive approach to protecting its IP.
“What’s different here... is that customers might be more easily taken in since Costco members expect authentic brand name merchandise at discount prices at Costco,” Mitchell said. “Everyone knows that buying something on a street corner or over the Internet from an unknown source is risky. Until now, no one would have thought it could be risky to buy brand name merchandise from Costco as well.”
Luxury retailers strive to maintain exclusivity with consumers, meaning that preserving brand integrity becomes more important when they come unstuck against counterfeiters.
“Aside from the problem of the alleged counterfeiting, this [maintaining brand integrity] is the real issue for Tiffany here,” said Bridget Short, partner at Lathrop & Gage LLP in New York.
She said it was likely that Tiffany will be most concerned about its image being tarnished by a discount store selling allegedly fake goods, adding that the company was probably using the lawsuit as a form of publicity, sending a warning to prospective counterfeiters.
Susan Kayser, partner at Jones Day in New York, said if Costco did promote unauthorised goods as genuine Tiffany products, the company could have a strong case to recover substantial damages.
US law dictates that a judge can award $2 million damages for each unauthorised use of a mark, if that use was wilful.
Kayser said that the southern district court in New York, where Tiffany has filed the case, is known as being favourable to luxury brand owners, if they win their case.
“Judges in the southern district tend to be more generous about awarding high-end damages, as they see lots of these types of cases [with luxury brands] here. The judges are very familiar and take a strong stance towards IP infringement.”
She added: “What is interesting about the case is that it covers not only trademark infringement but counterfeiting too. Often, counterfeiters will be disreputable offshore companies. It’s unusual and therefore important that this case implicates a reputable company (Costco) with [alleged] counterfeiting.”
“The case will raise the public’s awareness about counterfeiting,” she said.
Costco could not be reached for comment.
