Tiffany v. Costco

Rule of Law:

Summary judgment in trademark infringement and counterfeiting cases is inappropriate where there are genuine disputes of material fact regarding consumer confusion, the defendant's good faith, consumer sophistication, or the applicability of a fair use defense, even if some likelihood of confusion exists.

Facts:

• Tiffany, founded in 1837, is a major producer of fine jewelry, holding 97 trademarks related to its company name, including for the word “Tiffany” in connection with “Jewelry for Personal Wear.”
• In the late nineteenth century, Charles Lewis Tiffany developed and sold an engagement ring incorporating a particular style of six-prong diamond setting, which subsequently became known as a “Tiffany setting.”
• Costco operates membership-only warehouse stores selling various goods, including 'unbranded' diamond engagement rings with different setting styles, such as a bezel setting, cathedral setting, channel setting, and the 'Tiffany setting'.
• Costco identified its engagement rings using small, white point-of-sale signs that displayed information about the rings, sometimes using phrases like “Tiffany setting,” “Tiffany set,” or “Tiffany style,” and at other times only the word “Tiffany.”
• In November 2012, a Costco customer alerted Tiffany to engagement rings advertised as 'Tiffany' at a Costco store in Huntington Beach, California, leading Tiffany to engage an investigation service.
• Tiffany's investigators observed jewelry display cases at Costco with signs displaying the word 'TIFFANY' alongside other descriptive information for diamond rings.
• On December 10, 2012, Tiffany contacted Costco, asserting that the designation of rings as 'Tiffany' constituted misrepresentation, infringement, and counterfeiting.
• Costco voluntarily removed all uses of the word 'Tiffany' from its jewelry display case signs within one week of being contacted by Tiffany and subsequently sent a letter to customers who had purchased Tiffany-set rings, explaining its use of the term and reminding them of their return policy.

Procedural Posture:

• Tiffany commenced an action against Costco in the United States District Court for the Southern District of New York, alleging trademark infringement, dilution, counterfeiting, unfair competition, false and deceptive business practices, and false advertising.
• Costco argued that its use of 'Tiffany' was not infringement and raised a 'fair use' affirmative defense; it also filed a counterclaim to modify or partially cancel Tiffany's federal trademark registrations.
• Tiffany filed an unsuccessful summary judgment motion to dismiss Costco’s counterclaim during discovery.
• Following discovery, Tiffany again moved for summary judgment, seeking to dismiss Costco’s counterclaim and to hold Costco liable for trademark infringement and counterfeiting as a matter of law.
• Costco cross-moved for summary judgment, seeking dismissal of Tiffany’s counterfeiting and punitive damages claims.
• The district court issued an opinion and order granting Tiffany’s summary judgment motion in its entirety, concluding that Costco was liable for trademark infringement and counterfeiting as a matter of law, and that its fair use defense failed.
• The district court then held an advisory jury trial on the issue of Tiffany’s entitlement to recovery, where the jury awarded Tiffany $3.7 million in profits, $1.8 million for inadequate compensation, and $8.25 million in punitive damages.
• Making its own determination, the district court awarded Tiffany trebled profits of $11.1 million (based on the advisory jury’s award) and the jury’s $8.25 million in punitive damages, entering a final judgment and damages award of $21,010,438.35.
• Costco appealed the judgment to the Second Circuit.
• Costco requested that the district court amend its findings under Federal Rule of Civil Procedure 52(b), amend the judgment under Rule 59(e), and grant Costco judgment as a matter of law or, alternatively, a new trial under Rule 50(b).
• The Second Circuit stayed Costco’s appeal pending the district court’s resolution of Costco’s post-judgment motions.
• The district court denied each of Costco’s motions.
• The Second Circuit removed the stay on January 23, 2019, allowing the appeal to proceed.