Tiffany Awarded $8.25M In Punitive Damages For Costco’s Sale Of Counterfeit Rings

On October 5, 2016, a Manhattan civil jury awarded Tiffany $8.25 million in punitive damages for Costco Wholesale Corp.’s sale of rings falsely identified as brand-name “Tiffany” rings. This ruling came on the heels of the jury’s earlier award of $5.5 million in compensatory damages for Costco’ unlawful profits dating back to 2007.

The case arose out of Costco’s marketing and display of non-Tiffany-brand solitaire diamond rings proximate to signage reading “Platinum Tiffany” and “Round Diamond Ring,” or “Platinum Tiffany” and “Round Brilliant Solitaire Ring.” Tiffany alleged that Costco did not use the “Tiffany” trademarks in its online advertising, making it difficult to detect its activities through Tiffany’s normal trademark policing procedures. Upon learning of Costco’s in-store activities in December 2012, Tiffany immediately objected and subsequently filed suit in February 2013.

The District Court granted Tiffany’s motion for summary judgment for infringement and counterfeiting in September 2015, holding that Tiffany would be permitted to seek an accounting as a result of Costco’s willful infringement. The Court also found Tiffany could seek punitive damages under New York unfair competition laws because Tiffany had proffered sufficient evidence upon which a finder of fact could conclude Costco’s conduct constituted “gross, wanton or willful fraud.” The Court rejected Costco’s fair use defense that “Tiffany” was descriptive for a particular type of pronged diamond and no longer functioned as a trademark for a particular source because Tiffany had submitted evidence showing Costco’s bad faith. Specifically, Costco had been requesting that its vendors copy Tiffany products, that Costco employees knew of the vendors’ efforts to do so, and took no action to stop it.

On September 29, 2016, the jury estimated Costco’s profits at $3.7 million, but finding that sum inadequate to compensate Tiffany, added a further $1.8 million. With the jury’s additional award of $2 million in statutory damages, Costco is now on the hook for $15.75 million in total damages. Costco is expected to appeal.

The case is Tiffany & Co. v. Costco Wholesale Corp., No. 1:13-cv-01041 (S.D.N.Y.).