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Avoiding Trademark Infringement

Earlier this month, Costco Warehouse was ordered to pay $8.5 million in punitive damages to Tiffany & Co for trademark infringement.  This is in addition to $5.5 million in compensatory damages that the jury had awarded only a few days previously.[1]

Costco’s litigation troubles arose out of a dispute about Costco’s use of the word “Tiffany” in its jewelry sales.  A Costco customer contacted Tiffany in November 2012 explaining that “she had observed rings at a Huntington Beach, California Costco that she believed were being advertised as Tiffany rings.”[2]  After Costco and Tiffany tried unsuccessfully to resolve their dispute without court action, Tiffany sued Costco in the Southern District of New York for trademark infringement.  Not quite four years later, Tiffany has a jury verdict in the amount of $14 million.

How could Costco have avoided this result?

First, a little background.  A trademark consists of “any word, name, symbol, or device or combination thereof” that is used to distinguish a unique product from the products sold and produced by others.[3] Trademarks can be registered and receive protection insofar as they are distinctive.  The more distinctive a mark, the more protection the courts will give it.  The five types of marks (listed from least distinctive to most distinctive) are: generic, descriptive, suggestive, arbitrary, and fanciful.

Generic marks simply describe a type of product or service.[4] They can never be trademarked and receive no protection. For example, the word apple cannot be trademarked to describe a brand of apples.

Descriptive trademarks describe an aspect of the goods or services.[5] To be protected, they must achieve a secondary meaning. Sharp is an example of a descriptive trademark—this term is normally used to describe a crisp image but is now associated directly with a certain television manufacturer. Descriptive marks are relatively difficult to trademark and many trademark disputes focus on the question of whether a mark is descriptive or suggestive.

Suggestive trademarks allude to a quality or characteristic of the good or service,[6] requiring a little thought to connect the trademark with the nature of the goods (like the Greyhound bus line, Jaguar vehicles, or Citibank).  Though suggestive marks provide more sure protection than descriptive marks, they can be difficult to market and defend if the correlation between the suggestive word and the product is not sufficiently clear to the consumer.

Arbitrary trademarks are words with a common meaning that is unrelated to the goods or services.[7]  Apple is a great example of an arbitrary mark, as people do not generally associate apples with computers. These types of marks are relatively easy to protect but can make marketing more difficult.

Fanciful trademarks are comprised of unknown or made up words that are created or used specifically to refer to a product or brand.[8]  Kleenex is a good example.  Although fanciful terms can always be trademarked, when successfully branded they face the danger of losing their trademark status if they become the commonplace term for a certain product (as has happened with such marks as yoyo, aspirin, zipper and others).

With that said, one of Costco’s problems in this case was that it tried to persuade the court that Tiffany’s mark was not distinctive enough to deserve any legal protections.  Costco argued that even though the Tiffany name is famous, it was not a trademark with respect to the specific types of rings that Costco sold because, like kleenex or aspirin, it had become a generic synonym for those types of rings.  The court, however, said that the Tiffany mark is clearly not generic because the primary significance of the mark to the general public is as a brand identifier.  In this connection the court noted that “Tiffany ‘claims the largest share of the female mind in the U.S.’ with respect to name recognition in jewelry brands” and when respondents in the United States were asked ‘[w]hat brands come to mind when you think about diamond jewelry?’ Tiffany was at or near the top of the list.”[9]  Thus, the court said, even if some people use the word “Tiffany” to talk in a descriptive way about the types of rings that Costco sold, most people understand the word “Tiffany” to function as a trademark.

The Takeaway

The simple lesson in all of this for Utah business owners is that you should be careful with any words, names, symbols or other marks that are used in commerce by competitors in the marketplace.  Even if you do not believe that their marks qualify for legal protections, you should take time to study the trademark laws before you use any marks that are the same as or similar to their marks.  You may also want to consult with an attorney, especially if you intend to make extensive use of a mark that you know resembles the mark of another business.


[1] http://fortune.com/2016/10/05/costco-tiffany-jewelry/.

[2] Tiffany & Co. v. Costco Wholesale Corp., 127 F. Supp. 3d 241, 245 (S.D.N.Y. 2015).

[3] 15 U.S.C. § 1127.

[4] http://www.veritrademark.com/articles/five-categories-trademarks

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Tiffany & Co. v. Costco, 127 F. Supp. 3d 241, 248.


© 2016 Kevin R. Worthy. All rights reserved.

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