Skip to content Does Costco's Advertising Ring True? Costco Claims that "Tiffany" is a Generic Trademark


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May 2013

Does Costco's Advertising Ring True? Costco Claims that "Tiffany" is a Generic Trademark

Happy Valentine’s Day, Costco. That was the ironic message sent when Tiffany and Co. filed suit against Costco Wholesale Corp. in the US District Court of the Southern District of New York on February 14, 2013. The suit alleges that the warehouse retail giant’s sold and advertised counterfeit Tiffany engagement rings. Costco, however, responded on March 8, 2013, filing a counterclaim asserting that the “Tiffany” trademark is generic and is thus without force.

The dispute dates back to November 2012 when—as Tiffany’s Complaint alleges—a shopper noticed that the Huntington Beach, California Costco store had Tiffany rings for sale. The point of sale display listed for sale a “Platinum Tiffany .70 VS2 Round Diamond Ring” and a “Platinum Tiffany VS2 1.00Ct Round Brilliant Solitaire Ring” and each was referred to by the salesperson as a “Tiffany ring. Tiffany’s gripe, of course, was that neither of these rings was a genuine Tiffany ring, made, manufactured, approved, or licensed by Tiffany. When confronted by Tiffany, Costco removed all mention of “Tiffany” from its in-store displays.

But Tiffany had by now discovered that Costco had been using the “Tiffany” trademark to sell its own diamond rings for a number of years. Tiffany also learned that Costco had refrained from advertising the identical rings on its website using the “Tiffany” trademark, which Tiffany believed to evidence Costco’s efforts to avoid Tiffany’s trademark policing efforts. The present suit followed.

In the face of Tiffany’s claims of trademark infringement, unfair competition, trademark dilution, and counterfeiting, Costco attempted to pull the rug out from under Tiffany, asserting that the “Tiffany” trademarks are generic. A finding that Tiffany’s world-famous marks are generic would likely defeat all of Tiffany’s counts against Costco. But does Costco really believe that the “Tiffany” marks are generic? A review of their use of the mark might suggest that they do not.

A trademark is considered generic when it is synonymous with the goods or services on which it is used. This consideration typically is made at one of two stages of a trademark’s life: when a trademark is being initially contemplated (or an application for its protection is sought); and once a trademark has been established and becomes successful. In the first instance, if the asserted trademark is the generic term for the goods or services with which it will be used, it is really no trademark at all; it is stillborn. In the second instance, the trademark performed its function for a time—that is, to identify the good or service as emanating from a particular source—but eventually came to be synonymous with the goods or services themselves. In this instance, the trademark loses its potency (competitors may freely use it) and it is said to have died of genericide.

History is rife with examples of once-potent trademarks that, through market dominance and excessive shorthand use by consumers, have become generic, the name of the good. Escalator, zipper, dumpster, trampoline, cellophane, and aspirin are but a few examples. Costco would have “Tiffany” added to this list.

In support of its campaign, Costco provided substantial evidence—including dictionary and industry reference material entries—demonstrating that the jewelry and gemological industry refers to a certain setting of a solitary round diamond by several slender prongs, holding the diamond high above the band as a “Tiffany” setting. Whether or not such evidence will successfully show that “Tiffany” has indeed become a generic term for a diamond setting will depend on many factors. That conclusion might, however, be moot.

There is little doubt—and indeed Costco does not attempt to question—that “Tiffany” is not generic as to entire pieces of jewelry, even diamond rings. Thus if Costco succeeds in having “Tiffany” deemed generic as to settings, Costco will still not be exonerated if it did not limit its use only to the setting. In other words, the difference between advertising “Tiffany platinum engagement ring” and “Tiffany-set platinum engagement ring” could well be the difference between trademark infringement or not.

As mentioned above, when one uses a trademark generically, the trademark is used as the name of the good—the entire good and only that good. Where the generic trademark is a portion or component of a larger whole, one is not speaking generically to refer to the entire good under the generic trademark.

Take the example of Lambo doors. First made famous on Lamborghini sports cars, doors opening vertically around a forward-mounted pivot (correctly termed jack knife or scissor doors) have become widely known as Lamborghini or Lambo doors. While there was never a trademark for “Lambo door” (although the USPTO database shows a few failed attempts), its widespread usage by various manufacturers and consumers has likely rendered it generic for such doors.

But it should remain obvious that one would infringe the “Lamborghini” trademark to refer to a Mazda car with jack knife doors as a “Lamborghini car,” “Lambo car,” or even “Lambo Mazda.” To avoid liability, one would need to restrict the use of the generic term to the generic good. Here, that would mean “Mazda with Lambo doors,” “Lambo door Mazda,” or even “Lambo door sportscar.” How does this use compare with Costco’s use of the allegedly-generic “Tiffany” mark?

Costco’s challenged point of sale advertising listed two rings: “Platinum Tiffany .70 VS2 Round Diamond Ring” and “Platinum Tiffany VS2 1.00Ct Round Brilliant Solitaire Ring.” This is conspicuously devoid of any restriction of “Tiffany” only to the setting. If Costco truly believed that Tiffany were generic for a setting, one might expect to see instead “Tiffany setting,” “Tiffany set,” “Setting: Tiffany” etc. But then, what is meant by “Platinum,” “VS2,” “1.00Ct,” “Round,” and “Brilliant”? Should we expect Costco’s advertisement to read “Platinum Band, Tiffany Setting, VS2 Clarity, 1.00Ct Weight, Round Shape, Brilliant Cut, Solitaire Ring” or as follows:

Band              Setting         Clarity            Weight           Shape             Cut                No.
Sterling          Tiffany            VS2               1.00 ct           Round         Brilliant          Solitaire

Costco might argue, and perhaps rightly so, that such an advertising paradigm would be unduly burdensome and unappealing to consumers. Perhaps more importantly, or so the argument would go, such explanation is unnecessary; consumers already understand to what each of these characteristics refers. Anyone shopping for a diamond ring knows what 1.00ct and VS2 mean.

A problem with such an argument, is that “Sterling” “VS2” “ct” etc. are not trademarks in this context and would never lead a consumer to speculate that Costco is offering a Sterling- or VS2-brand diamond ring. Thus, the fame of Tiffany’s mark and, perhaps more importantly, that no one doubts that the “Tiffany” trademark is alive and well with respect to diamond rings (as opposed to merely settings for them) is critical in whether or not such an advertising shorthand can ever be non-infringing.

Accordingly, Costco’s success depends not solely on the assertion that “Tiffany” is generic for a diamond setting. While that is a necessary first step, Costco will need to show that it used the generic term only as to the generic goods not as to the entire ring. Conversely, Costco could be found liable whether or not “Tiffany” is generic for a setting. We may see, therefore, the Southern Distinct of New York taking a pass on declaring a world-renown mark (partially) generic, and instead making a fact-specific ruling that Costco’s use was infringing regardless of the genericness issue.

This analysis will likely involve comparing the Tiffany-related advertisings with those of Costco’s house-brand and non-branded rings and other similar goods. An interesting question that might make or break Costco’s case is whether advertising or point of sale material for a diamond ring requires mention of the setting. If a consumer can peer through a glass and see the diamond held in a Tiffany-style setting (whereas arguably none of the other characteristics can be easily discerned on sight), the court may draw serious concern over Costco’s choice to conspicuously include such reference, especially while choosing not to do so for the same items on its website.

No matter the resolution of this case, there are many lessons therein. Learn from Tiffany that every time intellectual property rights are wielded against another party, the very footing and value of those rights may be fatally challenged. Learn, too, from Costco that even with the best interests at heart, advertising using a third party’s trademark can be risky and costly.

Intellectual Property

Intellectual Property