Trademarks are valuable property rights that often help the consuming public distinguish between one company’s product and the knock-off products of would-be competitors. The Lanham Act helps those companies that hold a distinct trademark to protect against competitors who seek to capitalize on the trademark. One recent example of a trademark fight can be found in the dispute between Tiffany & Company and Costco Wholesale Corporation over the right to use the name “Tiffany” in the marketing of jewelry using a particular style of six-prong diamond setting. The decision of the federal Second Circuit Court of Appeals illustrates factors that are relevant to an action to protect a trademark from infringement and how the courts view the relevant factors.
Tiffany sued Costco for use of the word "Tiffany" on signage describing engagement ring settings for sale at the big-box store. Tiffany alleged trademark infringement. Costco said its use of the word was “fair use.”
The trial court ruled that the use of the word “Tiffany” would cause confusion and that Costco’s use of the word was not fair use. To prevail on its claim of trademark infringement, Tiffany needed to prove that it had (1) a valid mark entitled to protection and (2) that Costco’s actions were likely to cause confusion. Tiffany was able to show that it holds a valid mark entitled to protection. The second issue of confusion is resolved by the eight-prong Polaroid test which takes into consideration
strength of the mark,
degree of similarity,
proximity of products/competitiveness,
likelihood that Tiffany would "bridge the gap" by developing a product for sale in Costco's market,
evidence of actual confusion,
quality of products, and
sophistication of relevant population of consumers.
Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492 (2d Cir. 1961).
These are a series of factors with no one factor being dispositive. The district court concluded that Tiffany established the confusion element with proof from an expert who had surveyed Costco buyers and learned that two out of five were likely to believe that Tiffany & Company was the source of the rings that Costco was selling with its use of the “Tiffany” label.
The Second Circuit recently concluded that a reasonable jury could conclude that Costco’s use of the word “Tiffany” was not likely to confuse its customers, and the court remanded the case to the trial court for trial. Tiffany & Co. v. Costco Wholesale Corp., 971 F.3d 74, 80 (2nd Cir. 2020). The court of appeals disagreed that Tiffany’s evidence was dispositive because Costco had challenged the methodology used by Tiffany’s expert. In addressing the bad faith element, the court of appeals concluded that the mere fact that Costco admitted it wanted to sell jewelry that looks like Tiffany’s jewelry is not itself sufficient to find as a matter of law that Costco acted in bad faith. Costco presented evidence showing that the term “Tiffany” has been used as a generic descriptor to describe settings in thousands of advertisements, dictionaries, and trade publications. The court similarly addressed other factors and concluded that a reasonable juror could conclude that Costco’s use of the word “Tiffany” was not confusing.
Costco’s Argument of “Fair Use”
The court of appeals next addressed Costco’s “fair use” defense. Under the Lanham Act, when a party uses the words constituting a trademark in a purely descriptive sense, this use may constitute what qualifies as a permissible fair use. To prove fair use, a defendant must show that it used the term in question (1) other than as a mark, (2) in a descriptive sense, and (3) in good faith. Costco presented evidence showing that its rings bore the logos of the actual manufacturers and that the word “Tiffany” was not highlighted in its advertisements in any special typeface, font, color, or location. As previously discussed, Costco presented evidence of numerous other sources showing the use of the word “Tiffany” in a descriptive sense to refer to a particular style or type of pronged diamond setting. Based upon this evidence and Costco’s evidence that it was acting in good faith, the court of appeals concluded that Costco had presented enough evidence of its “fair use” defense to take the issue to a jury.
Thus, the court of appeals vacated the district court’s ruling in favor of Tiffany & Company as a matter of law, and remanded the dispute to the district court for a trial before a jury on the questions of whether there was an infringement and whether Costco’s fair use defense will allow Costco to use “Tiffany” as a descriptor for the rings Costco markets. It will be interesting to see how jurors view the evidence and arguments once this case goes to trial.