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The Tiffany-Costco Trademark Dispute Highlights ‘Generic’ Debate

Tiffany & Co. and Costco Wholesale Corp. have settled their trademark dispute, putting an end to litigation that began more than eight years ago. The case addressed a thorny question for owners of notable brands: what happens when a brand name clashes with the use of an arguably generic term?

After Tiffany brought the intellectual property suit in 2013, Costco tried to argue that when it used the term “Tiffany” on point-of-sale signs at its stores to refer to certain diamond rings it was selling, the retailer was referring not to the Tiffany jewelry brand — which had nothing to do with the rings sold at Costco — but instead to the generic term “Tiffany setting,” which Costco said generally describes a pronged ring setting named for Tiffany’s founder, Charles Lewis Tiffany.

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Tiffany disputed this argument, saying that the name Tiffany wasn’t generic, and that the way Costco had labeled the products had not made it clear the term was used to describe just the ring settings.

“The sign just says, without embellishment, ‘Platinum Tiffany VS2, I 1.00.ct Round Brilliant Diamond Solitaire Ring,’” Tiffany argued in a filing in the case. “Given Tiffany’s renown for its diamonds and rings…why would anyone read the Tiffany reference in this sign as referring to a setting, as opposed to the diamond, the ring, or the Tiffany brand?”

The New York federal court overseeing the case had sided with Tiffany, and then sent the case to a jury trial on the damages award. The court ultimately granted a significant $21 million award to Tiffany, but in August of last year, the Second Circuit Appeals Court reversed the finding, ruling that the lower court’s judgment on the question of Costco’s liability was premature.

On Monday, Tiffany and Costco settled their dispute in a confidential resolution.

“The parties have amicably resolved their dispute,” David Bernstein, partner at Debevoise & Plimpton LLP and an attorney for Costco, said in a statement.

Bernstein didn’t comment on the terms of the case. An attorney for Tiffany declined to comment, and representatives for Costco and Tiffany could not immediately be reached for comment.

The years-old dispute has implications for brands looking to guard their names from becoming subsumed into some other generic usage in daily parlance, and shows how seriously Tiffany took the issue, intellectual property experts said.

“It’s not far-fetched for [Tiffany] to have brought this type of suit, and for the [lower court] judge to have seen this as an attempt to trade on the goodwill of Tiffany’s brand,” said Dionne Heard, a trademark and copyright attorney with Gerben Perrott PLLC. Heard wasn’t involved in the dispute and spoke generally.

“And the [appeals court’s ruling] was not necessarily a knock against Tiffany’s,” she added. “It just meant, ‘Hey maybe there’s something here that a jury might need to decide.’”

The length of the dispute also demonstrates the challenges for Costco of trying to make the case that a brand name also has a valid generic meaning — an endeavor that can involve gathering detailed evidence, including consumer surveys, to show whether an established brand name is understood by customers as having a broad generic meaning as opposed to identifying a specific brand.

In this dispute, Costco had been trying to argue that it used the term “Tiffany” as a generic descriptor of ring settings, a feature of the rings, rather than the rings themselves, according to court documents.

“When a trademark becomes so used in the English language that it becomes generic, that is considered a coffin for trademarks,” said David Perry, who co-chairs the intellectual property and technology practice group at Blank Rome LLP. Perry was also not involved in the case and spoke generally.

“It doesn’t surprise me that the case would plod on for years,” he added. “These tend to be very difficult issues and it’s not every day that a trademark is deemed to be generic, because that’s considered the death knell for a trademark.

“Tiffany was, essentially, I’m sure, leaving no stone unturned in its efforts to ensure that there should never be a decision that the Tiffany name is in any way some sort of generic term, even if it’s just for a setting,” he said.