Will Tiffany Regret Suing Costco?

, The Litigation Daily

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Did Tiffany & Co. make a strategic blunder by suing Costco Wholesale Corp. for using the Tiffany name in marketing materials? In light of a federal court ruling last week, the high-end jewelry store chain may wish it had never made such a fuss.

In a well-publicized trademark fight between the two companies, Tiffany is now at risk of losing its trademark on the term "Tiffany setting." U.S. District Judge Laura Taylor Swain in Manhattan on January 17 held that a jury could reasonably find that the term is generic and the trademark invalid. The ruling denied Tiffany's request for summary judgment on the trademark's validity.

"It wouldn't be good for Tiffany to have a verdict out there that [the term] 'Tiffany setting' is generic," said Michael Risch, a professor at Villanova University School of Law. "It makes it a lot more difficult to throw your weight around."

Tiffany sued Costco last Valentine's Day, which is one of Tiffany's biggest shopping days. The jeweler alleged that Costco duped customers into thinking they were getting a Tiffany product by displaying signs in its stores that described rings with the word "Tiffany." In a press release, Tiffany accused Costco of selling "counterfeit" rings. Jeffrey Mitchell of Dickstein Shapiro represents Tiffany, and did not return requests for comment.

Costco's lawyer, James Dabney of Fried, Frank, Harris, Shriver & Jacobson, argued that his client didn't mislead customers. In a motion for summary judgment, he maintained that the signs simply explained that the rings featured a "Tiffany setting," which is a popular ring style. Fried Frank also submitted a report from a lexicographer, who concluded that "'Tiffany' and 'Tiffany setting' have "entered the English language as descriptive terms for a type of jewelry setting, in the same way that the word 'Phillips' has entered the English language as a descriptive term for a screwdriver."

At least one trademark litigator questioned Tiffany's litigation strategy back in March. "This case might have repercussions that the jewelry company should have anticipated—but apparently did not," New York University School of Law acting assistant professor Charles Colman told the jewelry trade publication JCK. "When cases are brought for reasons having more to do with business than law, they have a way of backfiring."

Although Tiffany's trademark infringement and unfair competition claims are still alive, Villanova's Risch points out that Tiffany can't hope for much in the way of damages. Costco has changed its in-store displays and it sold only 2,500 of the supposedly infringing rings. "Tiffany was very aggressive about what appeared to be a pretty minor mistake by Costco in labeling," he said. "Now Tiffany seems to have more to lose."

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