Tiffany and Company (“Tiffany”) is a major producer of fine jewellery including diamond engagement rings and has a large number of trademarks registered in its name. During the nineteenth century, Tiffany developed and sold a six-pronged diamond ring which was registered under the mark “Tiffany”. Since that time, numerous advertisements, dictionaries, trade publications, and other documents have referred to diamond settings of that style as “Tiffany settings.”
Costco Wholesale Corporation (“Costco”) sells engagement rings with a variety of setting styles which include bezel setting, cathedral setting, channel setting and the so-called Tiffany setting. The word “tiffany” is used at the point of sale only to identify the ring with a particular style.
Tiffany filed a suit for trademark infringement and counterfeiting. The District Court of Manhattan, in its summary judgment, awarded damages to the tune of 21 Million USD. Costco appealed against the judgment and demanded a trial.
Tiffany alleged that the word Tiffany was not accompanied by the words “setting”, “style” or “set”. Tiffany also surveyed the customers of Costco and stated that 6 out of 3000 customers confused the rings with those of Tiffany. However, the sampling was considered to be de minimus evidence of confusion.
Costco argued that though Tiffany is a brand name, the word is also associated with a particular style of widely used pronged rings. The name of the manufacturer of these rings is clearly mentioned. Costco countered that it was unlikely to confuse consumers and even if it did, under the Lanham Act, Costco was entitled to use the term “in good faith only” to describe the style of its rings.
The issue at hand was whether Costco acted in good faith or adopted the mark only to exploit the goodwill and reputation of a senior user with the intent of sowing confusion amongst the consumers about the source of the products. Costco argued that the relevant population of customers who buy expensive diamond rings, like those of Tiffany, are sufficiently sophisticated and would understand the difference between a point of sale item and a branded item that comes packed in typically coloured and designed boxes. Costco gave sufficient evidence that “Tiffany” has a descriptive meaning independent of Tiffany’s brand and intended to invoke that descriptive meaning when it created its point-of-sale signs.
The Federal Appeals Court vacated the summary judgment of the District Court and sent the case for a trial.