9 January 2019Trademarks

Costco loses bid to reverse $19m win for Tiffany & Co

Wholesale company Costco has lost a bid to reverse or reduce a $19.4 million judgment against it in a lawsuit filed by jewellery retailer Tiffany & Co for unlawfully using its trademark on engagement rings.

A district judge for the US District Court for the Southern District of New York ruled on Monday, January 7, that the court did not err in calculating its judgment in August 2017. The latest decision means Costco must now pay Tiffany & Co an additional $6 million to cover the retailer’s legal costs.

“We are gratified that Laura Swain has reiterated what she has said repeatedly now, and what a jury also found, that Costco’s use of the world-famous Tiffany mark to sell its own jewellery was totally improper,” Jeffrey Mitchell, a litigator representing Tiffany & Co, told Bloomberg.

In August 2017, Tiffany & Co won $8.25 million in punitive damages plus $11.1 million in lost profits, which had been tripled, after US District Judge Laura Swain ruled that Costco had acted in bad faith by using the Tiffany & Co trademark on display signs next to rings which were sold at a lower price, to attract customers.

In its original complaint, Tiffany & Co said: “Costco counterfeited the Tiffany trademarks for the sole purpose of misleading its members and creating a false impression about the rings.”

In her latest judgment, Swain said that Costco failed to show that the court had incorrectly calculated the award and erroneously applied the “correct legal standard” to determine whether the rings were counterfeit.

Costco had argued that the court relied on the eight-factor test for likelihood of confusion set out by Polaroid Corp v Polaroid Electronics Corp. It said the test is only relevant in determining whether a company has infringed, rather than counterfeited, a mark.

In her ruling, Swain said the test did not equate counterfeiting and infringement, rather it was used to help analyse elements of the counterfeiting claim.

Swain also rejected Costco’s argument that the court should alter the award. The court stated that it calculated lost profits based on the profit margin range of an average jewellery store.

In her judgment, Swain said reconsideration was “not a tool to relitigate arguments and issues already considered by the court”.

“The standard for granting a motion for reconsideration is strict and such a motion will be denied unless Costco can point to controlling decisions or facts that the court overlooked,” she added. “The defendant cites no law that the court overlooked in its judgment, but nonetheless disagrees with the court’s analysis.”

Costco appealed against the initial ruling from August 2017 to the US Court of Appeals for the Second Circuit, but that appeals court had paused the case for a year pending a decision by the district court on Costco’s post-judgment motion.

“Costco looks forward to vindicating its rights in the appeal,” David Bernstein, counsel for Costco, told Bloomberg.

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More on this story

15 August 2017   Wholesaler Costco has been told it must pay an initial sum of $8.2 million to jewellery company Tiffany for unlawfully using its trademark on rings.
3 October 2016   Wholesaler Costco should pay luxury jeweller Tiffany $5.5 million in compensation for selling thousands of counterfeit diamond rings.
25 July 2019   Jewellery retailer Tiffany & Co has asked an appeals court to uphold a $19.4 million ruling against Costco, after a jury found the wholesale company had infringed its trademark.