Tiffany Sues Costco! What’s Up?

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\"RRIn the land of the brand, the Holy Grail, surely, is building a brand that’s universally known and is in constant mention by consumers.

Or is it?

There’s such a thing as too much familiarity. There are more than a few instances of brand owners losing legal possession of their own brand because they became generic descriptors of the product, sometimes with dire consequences for its erstwhile owner.

Now, in an interesting lawsuit filed in US district court of the Southern District of New York, Tiffany is in legal battle with membership retailer Costco about the appropriation of the Tiffany name by Costco. There’s some reason to believe that while the facts would seem to strongly favor Tiffany & Co, it may not be the victor, at least not in a narrow legal sense.

But first, let’s take a look at how brands can evolve into popular vernacular, to the degree that their ownership is snatched from their creators.

Among a number of examples of brands lost in legal action are thermos, escalator, linoleum, videotape, and yo-yo. In the last instance, the Duncan Toys Co. went bankrupt when it lost control of its trademark. Also in the litany of lost brands is aspirin. That brand was once owned by Bayer, a German company, but it was awarded as war spoil after World War I. So it became a generic term in the US, the UK and France. In other parts of the world, Bayer still defends the use of its Aspirin brand. Curiously, Bayer also lost the right to its Heroin brand under the same circumstances. It hasn’t seen fit to defend it. Yet.

Numerous other brands are teetering perilously close to becoming generic terms, brands such as Scotch Tape, AstroTurf, Jacuzzi, Band-Aid, Frisbee, Hoover, Taser and Rollerblade.

To be sure, prudent brand owners take a range of actions to defend ownership of their brands. Milder steps include issuing letters to offenders, such as publications, reminding editors about trade names. Owners are particularly sensitive to use of their brand name spelled without a capital letter. As past editor of a major trade publication, I received countless letters from brand owners reminding me about correct usage, even when no error had been committed. Brands often ran paid ads to remind the trade who owned a brand. These activities can be seen as setting the stage for a lawsuit, should one be required.

Of course, lawsuits are filed, even for comparatively minor offenses. For instance, Faberge has sued the owner of a restaurant in Brooklyn called “Faberge.” The restaurant also appropriated Faberge’s purple color motif and has menu items such as “St. Peter’s Kabob” that are evocative of Faberge’s Russian heritage.

This brings us to the matter of Tiffany and Costco. For many years, Costco sold a particular type of engagement ring as a “Tiffany ring.” When this came to the attention of Tiffany, it filed suit. It would seem that Tiffany should be on firm ground, especially since, like Apple, it controls the entire process from product and package design, to manufacturing and to its own retail stores. Maybe not. Costco argued that the particular Tiffany ring setting featuring a pronged diamond setting, which Tiffany first produced in the 19th century, had devolved to become a universal descriptor and wasn’t really Tiffany’s to control any more. Costco said its own ring vendor and other retailers follow the same practice.

In an early ruling in the ongoing court battle concerning Costco’s claims, a judge said “a genuine factual dispute” exists about whether the Tiffany trademark has taken on a generic meaning in the minds of consumers. That could be very bad news for Tiffany and, by extension, other brands.

Despite that encouragement, Costco subsequently discontinued use of the Tiffany name to describe the ring and has offered refunds to any consumer claiming to be deceived by the ring’s description, possibly to contain the size of the judgment should it lose.

Indeed, Tiffany continues to press its lawsuit by seeking a court order that forbids Costco from using its brand again and — in a bit of overreach — wants disgorgement of a portion of all of Costco’s profit, even profit from the sale of products totally unrelated to jewelry, such as gasoline, food, clothing and memberships.

Doubtless, Tiffany wants to put the trade on notice that there’s a high price to be paid for seizing its brand.

As we look out years into the future, it’s possible to see now-solid brands that might slip into generic usage; brands such as Coca Cola (or Coke), Google, Twitter and maybe even Apple’s iPhone. Apple is fortunate that no one calls computers “Apples” in a broad sense.

How bad is this news for brands? It’s very bad since for many companies, its brand is by far its most valuable asset. Loss of exclusive brand ownership spells doom for many companies. For Tiffany, loss of the Costco lawsuit could render its Tiffany engagement ring all but worthless. Look for brand owners to remain dedicated to the fight for the right to their own brands. After all, as we’ve seen in The Robin Report, brands are in enough trouble already.



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