Tiffany Sues Costco Over Alleged Knockoff Engagement Rings

Feb. 15, 2013 — -- Famed jeweler Tiffany and Company is suing warehouse store giant Costco, claiming it sold knockoff engagement rings falsely labeled as "Tiffany."

Tiffany alleged trademark infringement, counterfeiting, deceptive business practice, and false advertising. It's also suing for injury to business reputation, saying a customer informed them in November that she was "disappointed" that she saw Tiffany diamond engagement rings at a Costco store in Huntington Beach, Calif.

Costco, based in Issaquah, Wash., and Tiffany & Co., the holding company for principal subsidiary Tiffany and Company based in New York City, did not return requests seeking comment.

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Tiffany filed the lawsuit in U.S. District Court in New York on Thursday.

Jeffrey Mitchell, attorney for Tiffany, said hundreds if not thousands of Costco members may have mistakenly believed they were buying Tiffany rings.

"One of the reasons to file the lawsuit is to get all the information about what was going on at Costco, how long and why," he said. "The lawsuit will hopefully answer those questions.

When asked if Costco customers who may have been duped will ask for a refund, Mitchell said, "That's between Costco and its customers how they will deal with that."

Costco has been the subject of lawsuits by retail companies, including Calvin Klein, for allegedly hurting higher-end brand names by selling products at low prices.

Leigh Ann Lindquist, attorney with Sughrue Mion, PLLC, a law firm that is not involved in this dispute, said Tiffany wants to maintain control over its name and products.

"It wants consumers to come to its store or website to purchase product which are known for their quality," she said. "Going to a Tiffany store is an experience and walking away with a blue box with a Tiffany ring is something special that Tiffany created."

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The lawsuit filed on Thursday provided alleged examples of products Costco touted as "Tiffany."These included an engagement ring alongside signage that read "Platinum Tiffany 0/72 VS2, 1 Round Diamond Ring" that was on sale for $3,199.99.

Another product was labeled "Platinum Tiffany VS2.1 1.00CT Round Brilliant Solitaire Ring," on sale for $6,399.99, according to the complaint.

"The Costco salesperson also referred to each of the rings as a 'Tiffany ring,' and said the store generally carries one of each item," according to the complaint. "Neither of the rings identified in the Huntington Beach store as 'Tiffany' was, in fact, a Tiffany ring, nor was it manufactured by, approved by, licensed by, or otherwise in any way properly associated with Tiffany."

"Unbeknownst to Tiffany, Costco had apparently been selling different styles of rings for many years that it has falsely identified on in-store signage as 'Tiffany'" and "in warehouse stores around the United States," the lawsuit stated.

Monica Riva Talley, an attorney who specializes in trademark law with Sterne, Kessler, Goldstein & Fox and is not involved in this legal dispute, said it can be difficult for consumers today to distinguish between authentic branded merchandise and counterfeit products, due in part to the vast array of retail outlets through which both types of merchandise travel.

"Most consumers realize that the designer handbags displayed at the local flea market are knock-offs, but it becomes more of a problem for brand owners when counterfeit products are sold – knowingly or not -- through reputable outlets," she said.

Talley said counterfeiting is a $600 billion a year problem fueled, in part, by consumer demand.

"Consumers need to be aware of the pervasive nature of counterfeiting, and keep in mind the old adage that 'if the deal is too good to be true, it probably is'," she said.

Though Tiffany & Co. reported disappointing holiday sales last month, the company is nearly synonymous with the market for high-end engagement rings.

The company reported sales in the Americas region increased 3 percent to $516 million during the two month period that ended Dec. 31. Global sales were $992 million, an increase of 4 percent.

In December, Costco Whole Corporation reported first quarter earnings of $416 million, compared to $320 million in the same quarter the previous year.