As a fashion company, you know the importance of branding and trademarks, and likely engaged counsel before selecting and using your trademark. You should continually monitor the marketplace (both online and off) for unauthorized uses of your mark and similar marks. This will strengthen and protect your trademark, thereby enhancing its value. However, you also need to be vigilant against unintended trademark infringement by your own company. Each season, your company likely produces a line of styles—and each of these styles must be identified, usually with a name. To avoid liability and the potential for litigation, each style name should be cleared before your line is released. Otherwise, you could be unintentionally infringing another company’s trademarks, or a celebrity’s right of publicity1—and the result can be very costly. A lawsuit recently filed by Tiffany & Co. against Costco illustrates the point.

Tiffany & Co. sued Costco –on February 14, of all days—alleging the big-box discount retailer had infringed its famous trademark by selling “Tiffany” engagement rings.2 Tiffany & Co. alleges that Costco used the name “Tiffany” on in-store signs advertising diamond engagement rings. For example, the jewelry case at the Huntington Beach Costco allegedly displayed a ring next to a sign reading: “Platinum Tiffany VS2.1, 1.00CT Round Brilliant Solitaire Ring – 6399.99,” and salespeople referred to the rings as “Tiffany” rings. This, the jewelry company alleges, infringes their trademark.

Because Costco sells other brand-name jewelry and watches by companies such as Cartier and Chanel alongside its own house brand, Tiffany alleges some customers would naturally think that these “Tiffany” diamond engagement rings were genuine Tiffany & Co. merchandise. Indeed, Tiffany & Co. alleges that Costco willfully attempted to evade detection of its trademark infringement by using the name “Tiffany” in its retail locations only, and not in its online jewelry shop. Tiffany & Co. also stated claims for unfair competition, counterfeiting, and “dilution” of the famous Tiffany trademark.

The jewelry company, known for its high-end goods, elegant retail locations, and robin’s egg blue boxes, naturally is concerned with protecting its trademarks—which the company has used since 1868. These trademarks are extraordinarily valuable, and Tiffany & Co. protects its brand by selling its jewelry only in Tiffany retail stores, and never at discount through what it describes as “off-price retail establishments” such as Costco.

Tiffany & Co. is demanding statutory damages in the amount of $2,000,000 per infringement, and is also seeking an injunction which would force Costco to inform all purchasers of rings advertised as “Tiffany” the goods they purchased were not Tiffany & Co. products. If successful, such a requirement could prove very expensive for Costco.

For its part, the warehouse-retailer has not denied its use of the word “Tiffany” to sell diamond rings. In an internal letter, Costco’s President & CEO reportedly explained that “Tiffany” “was intended to describe a setting style used in those rings.”3 In other words, Costco claims it was using “Tiffany” as a style name—and now faces huge liability because its style name allegedly caused customer confusion.