The Price of Fame: Tiffany Settles 8-Year Lawsuit With Costco Over Use of Company Name in Ring Displays

Ge·ne·ri·cide: When a brand name or trademark is transformed through popular usage into a common noun.

What do the terms Taser, Escalator, and Aspirin have in common? They were once protected marks that have become generic.

The term “Tiffany” likely has joined their ranks at least with regards to the name of a particular diamond ring setting. The Second Circuit Court of Appeals recently made clear that Tiffany’s 73 trademarks — many registered in connection with jewelry — will not protect it against others using “Tiffany” when that term has become commonly used to describe a particular six-prong diamond ring setting. Thus, anyone — even a discount retailer like Costco — can use it to describe that particular ring setting.

On Valentine’s Day 2013, Tiffany and Co. sued Costco, alleging that Costco was infringing the Tiffany trademark by using it to market a certain style of diamond engagement ring. On Aug. 17, 2020, the Second Circuit threw out a million-dollar judgment against Costco, remanding the case for trial. The court noted that the term “Tiffany” could identify the source of goods but could also describe a certain ring setting. In other words, a “Tiffany setting” became the generic term for a specific six-prong solitaire diamond or engagement ring. Therefore, “Tiffany setting” could be used by anyone to describe such a product. After the Second Circuit remanded the case for trial, the parties settled on July 19, 2021, and filed a dismissal with prejudice, meaning Tiffany cannot bring the lawsuit again.

In its decision remanding the case, the Second Circuit said a jury could reasonably find that “Tiffany” is descriptive of the six-prong setting at issue. Evidence showed that “Tiffany” has been used to describe that ring setting since the 1800s. The court said while Costco cannot pass off its products as Tiffany’s, it can sell an identical product and market it without implying that “Tiffany actually produced or endorsed the jewelry at issue.” Thus, Costco can sell engagement ring setting styles known as “Tiffany settings” but can't pass off such goods as if they originate from or are affiliated with Tiffany and Co. The court also found that Costco acted in good faith to sell the Tiffany-style jewelry because Costco didn't use the Tiffany logo and provided its customers with Costco-branded receipts, which further minimized any likelihood of confusion.

The court found that Costco submitted enough evidence to raise a question as to whether potential buyers of Costco's diamond engagement rings were actually confused by the appearance of the word “Tiffany” on Costco's point-of-purchase displays and other marketing materials. To prevail in a trademark infringement action, a plaintiff must establish “a probability of confusion ... affecting numerous ordinary prudent purchasers,” as opposed to showing a mere possibility of confusion. Costco argued that the testimony Tiffany relied upon of six of Costco’s customers — out of the 3,349 Costco customers who purchased the disputed goods during the relevant period — was insufficient to resolve the issue in Tiffany’s favor.

The court also criticized the survey Tiffany performed to show a likelihood of confusion, because the survey wasn't tailored to a real-life purchasing situation at Costco. Specifically, the survey didn't target people presently buying diamond rings, and the court said the pool of survey participants was flawed. The judges reasoned that diamond ring purchasers are the “most discriminating” and make such purchases “carefully and deliberately.” Therefore, it's likely that diamond ring buyers would discern that the Tiffany name used to market the Costco rings has nothing to do with Tiffany and Co., but simply describes the ring style. The survey participants were also only shown a single ring using the name “Tiffany,” as opposed to many types of rings, including, among them, the Tiffany setting style.

Once a term becomes generic, such as “Tiffany” for use in describing a specific diamond ring setting, it's difficult for a company to reverse course and successfully assert trademark rights in that term. But in certain circumstances, reversing course isn't impossible. Xerox, Rollerblade, and Clorox have successfully conducted widespread ad campaigns urging consumers against misuse of the marks to either prevent them from becoming generic or to resuscitate them from the generic heap. For example, Xerox urged consumers to use the verb “photocopy” rather than “Xerox” by running ads with tag lines like "When you use 'Xerox' the way you use 'aspirin,' we get a headache." The effective use of such ad campaigns can adjust consumer thinking to recognize (or re-recognize) a trademark and not a generic term.

Edward M. Weisz is the co-chair of the Patent Prosecution Practice at Cozen O’Connor, a full-service law firm. Keren Goldberger is an IP associate at Cozen O'Connor.