Costco Ordered To Pay Tiffany & Co. $5.5 Million For Counterfeit Engagement Rings

Photo: Courtesy of Tiffany and Co.
Update: Costco's drama with Tiffany & Co. looks like it's finally coming to a (very expensive) close. According to Reuters, on Thursday, a federal jury ruled that Costco should pay the jewelry brand $5.5 million for selling a reported 2,500 engagement rings dubbed as "Tiffany" baubles that were not, in fact, Tiffany pieces. The trial began on September 20, three-and-a-half years after Tiffany & Co. sued the wholesale retailer. That $5.5 million is a far cry from what Costco anticipated paying, if anything, for the allegedly faux bling. At the beginning of the trial, the retailer argued that $781,000 was the maximum amount it owed.

This story was originally published on September 9, 2015.

Counterfeit engagement rings from Costco: Sounds like a cruel joke, right? The wholesale retailer was sued on Valentine’s Day in 2013 (quite the romantic gift, no?) by Tiffany & Co. for using “Tiffany" as a generic term to describe pronged rings and for using "Tiffany” on signage in certain jewelry cases. Yesterday, the U.S. District Court for the Southern District of New York ruled that Costco infringed on the venerable jewelry brand’s trademarks; Tiffany & Co. can now battle it out with Costco in front of a jury. A hearing date has been set for October 30.

"Despite Costco's arguments to the contrary, the court finds that, based on the record evidence, no rational finder of fact could conclude that Costco acted in good faith in adopting the Tiffany mark," U.S. District Judge Laura Taylor Swain wrote in the ruling.

Costco has not yet responded to our request for comment.

“We believe this decision further validates the strength and value of the Tiffany mark and reinforces our continuing efforts to protect the brand,” Leigh Harlan, Tiffany & Co.’s senior vice president, secretary, and general counsel, said in a statement.

This isn’t the first time the retailer has dealt with authenticity issues. Costco might be our go-to for a lifetime supply of toothpaste, comically large Grey Poupon, and gigantic samples you can easily make a meal out of, but you can also procure some surprising beauty products amid the restaurant-size salsa and multi-packs of tube socks. There’s a catch, though: Costco isn’t an authorized seller of those awesome, brand-name goodies you’d usually have to hit up a Sephora or department store to score, as R29 reported last month.

It’s called diversion or gray-market production, and it’s comprised of expired or totally counterfeit loot. (Beyond beauty, brands like Calvin Klein and watch label Omega have gotten into scuffles with Costco over gray-market or counterfeit goods in the past.) You can bet that a prestigious beauty brand gets pretty pissed about having its reputation tarnished by being peddled in the vast, decidedly unglamorous aisles (warehouse chic would be putting it nicely) of Costco.

But an eyeshadow palette, no matter how chichi the brand, isn’t exactly in the ballpark of an engagement ring. Plus, a trademarked, brand signature — the Tiffany prong setting — is in question here, not just the value of a brand’s name. It would also be more complicated for a beauty brand to get back at the wholesaler, like Tiffany & Co. is attempting. Unauthorized stock, a.k.a. stuff that’s expired or just otherwise shadily on Costco’s shelves, isn’t actually illegal: once the goods leave a brand’s warehouse, whoever bought the products can do what they want with the stock, meaning it’s out of the brand’s control, as R29 reported.

That said, engagement ring seekers of the world: Check that signage and those prong settings more closely when you’re shelling out hundreds or thousands of bucks, will you? Or maybe just stick to excessive quantities of paper towels and enough hot dogs for a family reunion next time you find yourself at Costco and save the jewelry shopping for another time and place.

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