A federal judge has ruled against Costco (NASDAQ:COST) in a case that accused the company of illegally using the Tiffany & Co. (NYSE:TIF) brand in conjunction with ring sales and marketing. The judge ruled that Costco must pay the storied jewelry company more than $19 million for selling about 2,500 falsely identified diamond rings. Tiffany first filed a complaint against Costco in U.S. District Court in New York on Valentine’s Day in 2013 after learning of the practice in November 2012.
The ruling that Costco should pay Tiffany $11.1 million plus interest is three times Tiffany’s lost profit from Costco’s actions. A 2015 jury verdict found that Costco had made a profit of $3.7 million falsely using the Tiffany brand. Another $8.25 million was added to the judgement for punitive damages.
In her opinion, U.S. District Judge of the Southern District of New York Laura Taylor Swain wrote that Costco’s management “displayed at best a cavalier attitude toward Costco’s use of the Tiffany name.” Tiffany, founded in 1837, is one of the world’s leading jewelers. As part of the judgement, Costco is barred from using “Tiffany” as a stand-alone word to describe any products not connected to the famous jewelry brand.
Costco attempted to argue that the word “Tiffany,” with reference to a ring’s setting, had become a generic term. Costco said the diamond rings “in question were not stamped or otherwise marked with the Tiffany & Co. name.”
The judge did agree that Costco “provided credible evidence” of the practice of using the terms “Tiffany setting” and “Tiffany style” generically throughout the jewelry industry. However, Costco did not use the words “style” or “setting” in conjunction with the name “Tiffany” in its signage. That could suggest the rings were made by the jeweler.
Tiffany said that the ruling “validates the strength of the Tiffany trademark and the value of our brand.” The company added that “most importantly, [it] sends a clear and powerful message to Costco and others who infringe the Tiffany mark.” The company said, “It is critically important that the Tiffany name not be used to sell any engagement ring that is not our own.”
Costco said in a statement that the decision was the “product of multiple errors” on the part of the judge and vowed to appeal the ruling.