Tiffany & Co. filed a lawsuit against Costco on Thursday to stop the largest warehouse club in the world from selling what the high-end jeweler claimed were counterfeit "Tiffany" diamond engagement rings.
The suit, filed in U.S. District Court in New York on Thursday, alleges trademark infringement, counterfeiting, unfair competition, injury to business reputation, false advertising, and deceptive business practices. It also calls on Costco to forfeit profits from the ring sales, plus damages of $2 million per infringement.
A customer contacted Tiffany in November, alerting the company that a Costco branch in Huntington Beach, Calif., was peddling "Tiffany" rings promoted through in-store signs. The jeweler launched an investigation and found that the deception was widespread in more than one Costco store and had been going on for "many years," according to The Associated Press.
Tiffany says Costco knowingly sold its customers the fake rings while leading them to believe they were buying authentic Tiffany diamonds at a discounted price.
"We now know that there are at least hundreds if not thousands of Costco members who think they bought a Tiffany engagement ring at Costco, which they didn’t," Jeffrey Mitchell, Tiffany's counsel, said in a statement obtained by the AP. "Costco knew what it was doing when it used the Tiffany trademark to sell rings that had nothing to do with Tiffany. This is not the kind of behavior people expect from a company like Costco, and this case will shed a much needed light on this outrageous behavior."
Attorneys for Costco reportedly declined to comment, citing pending litigation.
Tiffany and many others in the jewelry industry often maintain aggressive and rigorous intellectual property programs, and regularly take legal action against counterfeiters and infringers.
"What’s different here from many other cases of counterfeiting," Mitchell told CNBC's Business Wire
, “is that here customers might be more easily taken in since Costco members expect authentic brand name merchandise at discount prices at Costco."
"Everyone knows that buying something on a street corner or over the Internet from an unknown source is risky. Until now, no one would have thought it could be risky to buy brand name merchandise from Costco as well," he said.
Costco has more than 600 locations worldwide.
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