Tiffany & Co. Victory Loses Its Luster On Appeal

Tiffany & Co. was born when then 25 year old Charles Lewis Tiffany borrowed $1,000 from his father to start a “stationary and fancy goods” store on Broadway in New York City in 1837.  By the turn of the Century, Tiffany had become “America’s premier silversmith and purveyor of jewels and timepieces” with branches in the world’s most fashionable cities, London, Paris and Geneva.  In 1878 Tiffany bought one of the world’s largest fancy yellow diamonds, a stone weighing over 128 carats with 82 facets which became known as the Tiffany Diamond.  Soon thereafter, in 1886 Tiffany introduced the world to the Tiffany setting, an engagement ring with the stone set in a raised claw setting “designed to highlight brilliant-cut diamonds by lifting the stone off the band into the light.”  The design became so successful that according to Forbes, “the term ‘Tiffany setting’ has reached Kleenex status – it’s now used colloquially throughout the jewelry industry to describe any multi-pronged solitaire setting, Tiffany or no.”  And therein lies the problem.  

Costco opened in 1976 under the name “Price Club” in a converted airplane hangar in San Diego, California.  Rather than purveying fancy goods, Costco is a warehouse club known for selling everything from oversize quantities of food products to clothing and furniture as well as watches and jewelry.  From its early days, Costco has relied on low profit margins and high sales volume.  The formula worked.  By October 2018, the company had a market capitalization valued at over $95.7 billion, more than five times that of Tiffany.   

When Costco stores had the temerity to place signage labelled “Tiffany” next to unbranded diamond engagement rings displayed in glass cases inside their warehouses, Tiffany & Co. took notice.  According to Costco, in December 2012 it voluntarily removed all of the signs after it received complaints from Tiffany.  This was not good enough for Tiffany which filed a trademark infringement and counterfeiting suit on Valentines Day 2013.  Tiffany thought the litigation was all wrapped up and tied with a bow when the district court entered summary judgment on liability in its favor in 2015 and a jury awarded an $8.25 million punitive damage award, which the trial judge later increased to $21 million.  However, on August 17, 2020, the Second Circuit vacated the judgment concluding that the district court should not have granted summary judgment before Costco had a chance to present its case.  As a result, the case is now remanded back to the district court for trial.  Costco thus has a new opportunity to prove that unlike diamonds, judicial decisions are not forever.