Opinion ID: 4556092
Heading Depth: 3
Heading Rank: 2

Heading: Costco’s Fair Use Defense

Text: To avoid liability for infringement, however, Costco need not rely on a jury to reject Tiffany’s claim that Costco’s actions created a likelihood of confusion. Contrary to the district court’s holding, Costco is also entitled to present its fair use affirmative defense at trial. The Lanham Act provides that when a party “uses the words constituting [a registered] mark in a purely descriptive sense, this use 13 Because liability for trademark infringement under New York law mirrors liability under the Lanham Act, see Standard & Poor’s Corp., Inc. v. Commodity Exchange, Inc., 683 F.2d 704, 708 (2d Cir. 1982), the district court likewise should not have granted Tiffany’s motion for summary judgment in connection with its state-law infringement claim. 32 may qualify as permissible fair use.” Kelly-Brown v. Winfrey, 717 F.3d 295, 308 (2d Cir. 2013). Crucially, a defendant may raise a fair use defense even where the challenged material is likely to cause some confusion. See KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111, 121–22 (2004). To demonstrate fair use, a defendant must establish that it used the allegedly infringing term “(1) other than as a mark, (2) in a descriptive sense, and (3) in good faith.” JA Apparel Corp. v. Abboud, 568 F.3d 390, 400 (2d Cir. 2009) (internal quotation marks omitted); see also 15 U.S.C. § 1115(b)(4). The district court rejected Costco’s fair use defense at summary judgment on the basis that—for the same reasons that underpinned its Polaroid analysis— Costco’s evidence was insufficient to establish that it used the word “Tiffany” in good faith. 14 Having resolved the motion on the basis of good faith alone, the district court did not consider the other factors pertinent to the fair use defense. On appeal, Costco argues that the record contains sufficient evidence to support 14The “good faith” prong of the fair use analysis is essentially identical to the same prong of the Polaroid analysis and “concerns the question whether the user of a mark intended to create consumer confusion as to source or sponsorship.” JA Apparel, 568 F.3d at 401 (quoting EMI Catalogue P’ship v. Hill, Holliday, Connors, Cosmopulos Inc., 228 F.3d 56, 66–67 (2d Cir. 2000)). 33 each prong of its affirmative defense. We agree. For the reasons stated above, the district court should not have concluded that no question of material fact exists on the question of Costco’s good faith. For the reasons that follow, we likewise conclude that Costco created a triable question as to the remaining factors of the fair use analysis.
A defendant uses a term “as a mark” when it employs it “as a symbol to attract public attention,” Kelly-Brown, 717 F.3d at 306 (internal quotation marks omitted), or “to identify and distinguish . . . goods [or services] . . . and to indicate [their] source,” 15 U.S.C. § 1127. Whether a defendant has done so may entail an investigation into, inter alia, whether the challenged material appeared on the product “itself, on its packaging, or in any other advertising or promotional materials related to [the] product,” and the degree to which “defendants were trying to create, through repetition . . . a[n] association between [themselves] and the [mark].” Kelly-Brown, 717 F.3d at 310–11 (internal quotation marks omitted). A jury could reasonably conclude that Costco did not use the term “Tiffany” as a trademark. Tiffany’s own evidence indicates that Costco typically identifies the trademark associated with its branded products as the first word on the 34 product label. 15 For this litigation, Costco produced hundreds of examples of signs for its engagement rings, none of which began with the word “Tiffany” or any other brand name. Instead, Costco’s evidence demonstrates that it displayed the word “Tiffany” in the exact same manner (including typeface, size, color, and relative location on the signs) that it displayed setting information for other engagement rings. Costco also proffered evidence that the word “Tiffany” did not appear on any of its rings or ring packaging, and that the rings actually bore the logo of a different manufacturer. See Car-Freshner Corp. v. S.C. Johnson & Son, Inc., 70 F.3d 267, 270 (2d Cir. 1995) (explaining that a defendant’s display of its own trademark on a tree-shaped car freshener suggested that the product’s shape was used otherwise than as a mark).
Whether a phrase is descriptive refers to its tendency to describe the goods in question in a broad sense, including not only “words that describe a characteristic of the goods[] such as size or quality,” but also words or images that 15 Costco’s evidence indicates that when it did sell genuine Tiffany merchandise, “Tiffany” was indeed the first word on the accompanying signs. Both parties agree, however, that Costco has never sold engagement rings produced by Tiffany in its American stores. 35 more abstractly identify some information about the goods in question. Cosmetically Sealed Indus. v. Chesebrough-Pond’s USA Co., 125 F.3d 28, 30 (2d Cir. 1997) (citing Car-Freshner Corp, 70 F.3d at 269–70 (concluding that a car freshener’s pine-tree shape was a fair use of a protected image because the shape indicated both the product’s scent and the season in which it was sold)). Here, a jury could reasonably find that Costco used the term “Tiffany” descriptively, based on Costco’s evidence that (1) “Tiffany” has a descriptive meaning independent of Tiffany’s brand and (2) Costco intended to and did invoke that meaning when it created its point-of-sale signs. As noted above, Costco has identified over a century’s worth of documents suggesting that “Tiffany”— both alone and in conjunction with words like “ring,” “setting,” “style,” or “mounting”—is widely understood to refer to a particular type of pronged diamond setting. And as Costco’s employees attested in their declarations, both they and their vendors understood the term to be the only precise way to describe that style. Costco also presented unrebutted evidence that it used the term “Tiffany” exclusively on signs identifying rings bearing a Tiffany setting, and that it displayed the same set of information for engagement rings of all styles. In other words, Costco would generally display a diamond ring with a cathedral or bezel 36 diamond setting along with a sign displaying the word “Cathedral” or “Bezel” in the same way that a sign identifying a diamond ring with a Tiffany setting would display the word “Tiffany.” Tiffany, for its part, resists the conclusion that the term “Tiffany” is amenable to descriptive use—or indeed any use other than as a mark—within the jewelry industry. It argues that “no case has ever bisected a trademark to allow the same word to be used exclusively by the trademark holder to denote the source of goods for every product in a registered class except one,” and that doing so here would bring about the “absurd” result that “Tiffany” could be a source identifier for rings of other styles, but a descriptive term for rings in the so-called “Tiffany” style. Appellees’ Br. 10. Tiffany’s argument fundamentally misunderstands our caselaw. There is nothing inherently absurd about a single word’s being both a source identifier and a descriptive term within the same product class. See Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976) (“[T]he same term may be put to different uses with respect to a single product.” (citing 15 U.S.C. § 1115(b)(4))). To the extent that “Tiffany” actually does have the descriptive meaning Costco submits that it does, Tiffany’s putative “absurd” result is nothing more than the 37 predictable reality of a legal regime in which “trademark rights may be acquired in a word or image with descriptive qualities.” Car-Freshner, 70 F.3d at 269. And within that reality, it is well established that “the public’s right to use descriptive words or images in good faith in their ordinary descriptive sense must prevail over the exclusivity claims of the trademark owner.” 16 Id. As a result, the simple fact that a defendant has trademarked a term for use in a particular industry does not preclude a jury’s finding that the term has some descriptive use within the same industry. See JA Apparel, 568 F.3d at 402–03 (holding that fair use may entitle a clothing company to identify its designer on 16 That Tiffany & Co. and the Tiffany setting derive their names from a common source—Charles Lewis Tiffany, who both founded the company and invented the setting—does not alter this proposition. See JA Apparel, 568 F.3d at 394 (explaining that the plaintiff’s trademark “Joseph Abboud” refers to the same individual identified in the defendant’s ostensibly descriptive advertising materials); id. at 402–03 (explaining that the challenged usage might nonetheless be fair use). Nor does it matter that the word “Tiffany” is not inherently descriptive of the diamond setting at issue. One who possesses exclusive rights in a mark by virtue of having used it in commerce can lose that right to exclusivity—either outright or in connection with a limited application—by failing to enforce the mark so that, through usage by others in the marketplace, it becomes generic at least in a limited sense. The record reflects that Tiffany used the word mark “Tiffany” in commerce as early as 1868, while the use of the term “Tiffany” to describe a particular setting style acquired currency in the late 1800s. The record suggests no reason that Tiffany could not have taken action in the late 1800s to prevent the use of the word “Tiffany” descriptively in the general marketplace. Whatever Tiffany’s reasons for not doing so, Costco’s evidence suggests that the word “Tiffany” did acquire an adjectival meaning in the trade to identify a particular style of setting. 38 advertisements even where a competitor has registered that same designer’s name as a trademark in connection with the sale of apparel). Indeed, the fact that Tiffany does not here challenge Costco’s use of the phrase “Tiffany set” or “Tiffany setting” may signal an implicit recognition that some uses of its protected mark are indeed descriptive. As we explained in JA Apparel, whether a defendant has used a name descriptively requires “individualized consideration” of how the defendant has used the name. Id. at 402. And as we explained above, Costco’s evidence is sufficient for a jury to find the word “Tiffany,” when used in conjunction with a particular six-pronged stone setting, had acquired a descriptive meaning in the jewelry trade that did not suggest an association with the jeweler Tiffany & Co., and that Costco used the word descriptively in that sense and in good faith under the particular circumstances of this case. To be sure, a reasonable jury could also reject Costco’s evidence and find that customers would not recognize the word “Tiffany” as descriptive even with the context Costco provided. On this record, however, that decision belongs to the jury and not to the court. 39