Tiffany Sues Costco Over Alleged Fake Rings
Tiffany TIF -1.90% & Co. sued Costco Wholesale Corp. COST -0.80% on Thursday, contending that the warehouse chain sold engagement rings it falsely claimed were made by the luxury jewelry company.
The suit, filed in U.S. District Court in Manhattan, claims Costco violated counterfeiting laws by selling fake Tiffany rings for many years. It seeks to find out the exact number of counterfeit Tiffany rings Costco sold and the source of the jewelry, as well as damages.
Costco declined to comment.
The suit is the latest skirmish in a long-running battle between manufacturers—which try to rid the marketplace of knockoffs and counterfeit products that can hurt their brands—and retailers who lure shoppers with bargains.
Tiffany filed a high-profile lawsuit against eBay Inc. EBAY -2.03% in 2004 to force the Internet auction site to take greater steps to prevent fake Tiffany jewelry from being sold on its site. Tiffany, headquartered in New York City, lost the suit after a federal appeals court found that it was ultimately the manufacturer's responsibility, not the auction site's, to police the Internet for counterfeits.
Costco, based in Issaquah, Wash., primarily carries large packages of food and household items that it sells at a discount to customers who pay a yearly membership fee. But the country's largest warehouse chain is also known for procuring a small number of high-end products, from diamonds to fine art.
Costco removed a Pablo Picasso drawing from its website in 2006 when the authenticity of a previous Picasso drawing it sold was questioned. A federal jury in Houston found Costco guilty of trademark violation in 2011 for selling a fake copy of a Farouk Systems Inc. product called a CHI flat iron.
In the current case, a Costco shopper in Huntington Beach, Calif., alerted Tiffany in November that the wholesale club there had two diamond rings for sale identified on a sign as "Platinum Tiffany." A one-carat ring was priced at $6,400. The cheapest one-carat diamond engagement ring Tiffany sells is $11,000, according to a company spokeswoman.
Tiffany, which sells its jewelry only at its own retail stores, bought one of the rings and determined it was a counterfeit because the stone lacked a microscopic laser inscription that Tiffany puts on all its diamonds. The platinum band wasn't engraved with the Tiffany & Co. trademark.
Costco removed the rings after Tiffany contacted the company in December. Tiffany said it decided to file suit after learning that that Costco had sold rings promoted as Tiffany for "many years," according to the lawsuit.
"When we discovered it was not a one-time rogue event at one store, we knew we had a big problem that had to be dealt with," said Tiffany's lawyer, Jeffrey Mitchell, of Dickstein Shapiro LLP.
A version of this article appeared Feb. 15, 2013, on page B3 in some U.S. editions of The Wall Street Journal, with the headline: Tiffany Sues Costco on Alleged Fakes.