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Tiffany Squares Off Against Costco

The jeweler sued Costco, claiming it sold engagement rings that it passed off as Tiffany-branded rings.

How much is a good reputation worth? That’s one of the questions Tiffany & Co. is exploring in a lawsuit it filed Thursday against Costco Wholesale Corp.

The high-end jeweler is accusing Costco of selling engagement rings that the warehouse club passed off as Tiffany-branded rings in its stores. Filed in New York federal court, the suit alleges trademark infringement on Costco’s part, as the wholesaler sold rings that were promoted as Tiffany rings on signs in its Huntington Beach, Calif., store. Costco declined to comment on the lawsuit.

The jeweler became aware of the situation in November, and a month later, sent out a cease-and-desist letter. Costco immediately took down the signage, but according to Tiffany lawyer Jeffrey Mitchell, of Dickstein Shapiro, intangible damage had been sustained.

“Tiffany doesn’t sell through Costco, they only sell in Tiffany stores,” Mitchell said, explaining that he believes the rings were also sold in other Costco locations.

Even though Costco agreed to take the signs down, the lawyer said the brand’s “name and goodwill” were tarnished. As a result, the brand is looking for a permanent injunction and damages, which will be decided by the court.

“Tiffany was compelled to do something,” Mitchell said, explaining that by filing a lawsuit, the jeweler is not only upholding its reputation but also informing consumers that the rings were not Tiffany rings.

Fordham Fashion Law Institute professor Susan Scafidi noted that there could be some larger issues at play, namely whether the rings sold were truly counterfeit or if they are gray market goods.

Although Tiffany claims they didn’t make the rings, Scafidi noted that within the past six years, Costco has been sued by Yves Saint Laurent for both selling counterfeit perfume and for repackaging and selling actual YSL cosmetic and beauty products.

In a case that made it all the way to the Supreme Court, Omega SA also sued Costco, challenging the wholesaler’s right to sell “authentic” Omega watches it obtained on the gray market. Omega won that case in a narrow ruling that said Costco infringed Omega’s trademark.

Tiffany is no stranger to a courtroom either. In 2004, the retailer sued eBay Inc., claiming the Internet auction site was selling counterfeit Tiffany jewelry. Tiffany lost the suit, after the Court of Appeals found Tiffany — not eBay — was ultimately responsible to police the Web for counterfeits.

By suing Costco, Tiffany will be able to explore the origin of the rings, as well as whether any of them were from the gray market.

“Discovery is very important here, maybe more so than any legal judgments,” Scafidi said. “You can’t be entirely sure that none of it was from Tiffany.”

Knowing Tiffany’s stringent retail policies, one might wonder whether a consumer would ever really believe that they could get a Tiffany ring at Costco.

To that, Scafidi quipped: “If you can get Lanvin at H&M, why can’t you get Tiffany at Costco?”