Last month, a federal district court judge ordered bulk-retail giant Costco to pay iconic luxury brand Tiffany more than $11 million in lost profits from Costco’s trademark infringement, in addition to $8.25 million in punitive damages which were awarded by a jury back in October 2016.
Tiffany sued Costco after discovering that the megaretailer’s employees were responding to customer inquiries by calling certain solitaire diamond rings “Tiffany” rings. The Costco rings at the center of the dispute had a pronged setting that Costco argued were commonly known as a “Tiffany setting” however, some of the display cases at Costco stores just happened to drop the “setting” or “style” part and simply described the rings to customer as “Tiffany”.
Besides being a juicy legal fight between two well-known public companies, the case offers some important lessons to businesses looking to both protect their name brands from the dangers of becoming generic.
Under U.S. trademark law, certain brand names are stronger and are therefore given more protection than others. The weakest trademarks are what are called “generic” marks, where the brand itself has become synonymous in the consumer’s mind with the thing it is meant to be associated with. Think about the last time you asked for a “Kleenex”, ordered a “Coke”, or were asked to “Google” something. These words are all registered trademarks but have, over time, come to be considered the product or service itself, and not simply a brand of that product or service. In trademark law, it is called “genericide” and it is not a good thing for the trademark holder.
In its counterclaim to Tiffany’s lawsuit, Costco argued that the Tiffany mark had become generic–that the term “Tiffany” itself was merely descriptive of a style of ring setting. While every business or inventor dreams of having their product or service become a household name, if you are not careful with how you manage and enforce your trademark, it could lead to genericide and your trademark no longer being as strong or protectable anymore and, therefore, losing some or all of its value in distinguishing your stuff from that of your (presumably inferior) competitors. To make things more challenging, there is no national trademark police; U.S. trademark law leaves it up to business owners to enforce their own trademarks (whether or not actually registered with the U.S. Patent and Trademark Office). For this reason, any attempts by a competitor (or, really, anyone) to use your trademark or brand without your permission should be taken very seriously and dealt with aggressively and sooner rather than later. Moreover, your company’s employees, sales staff, distributors, partners, and, yes, even customers should all be thoroughly trained (or educated) on the proper usage of your trademark. A good rule of thumb is to use your trademark as an adjective and definitely not as a noun. For example, “Band-Aid-brand bandages” would be the recommended usage, instead of simply, “Band-Aid”. Sloppy or even inconsistent use of your trademark in commerce could leave you open one day to legal challenge that your mark has become generic. Business owners should consider developing a comprehensive, well thought-out trademark or intellectual property policy manual for your company or its employee manual.
Although it may seem counterintuitive that having a product become a household name can be a bad thing, genericide is a real thing and can cost your business dearly in lost profits due to lack of brand differentiation and emboldened competition. Fortunately, an awareness of this danger, and coming up internal trademark policies, can help to make sure your trademark preserves its brand recognition and value.
Ben Bhandhusavee is the Managing Attorney for BhandLaw, a Phoenix business and technology law firm that works with start-up companies, complex business and technology transactions, and intellectual property matters. Ben can be reached at (602) 678-2970 or by e-mail at firstname.lastname@example.org