Court tosses ruling that Costco must pay $21 million for selling fake 'Tiffany' rings, in yet another twist in a 7-year legal saga

• A court of appeals overturned a $21 million judgement against Costco for its sale of diamond engagement rings marked with the word "Tiffany."
• In a lawsuit filed in 2013, Tiffany had accused Costco of trademark infringement and counterfeiting for using the "Tiffany" name.
• The 2nd US Circuit Court of Appeals in Manhattan said in a ruling Monday that it agreed with Costco that Tiffany "is not only a brand name, but also a widely recognized descriptive term for a particular style of pronged ring setting" and not likely to confuse customers.
• In response, Tiffany said it is disappointed in the ruling and has "no qualms" about trying the case again.

Costco is off the hook for a $21 million payment to Tiffany & Co., a federal appeals court said Monday.

Tiffany accused Costco in a 2013 lawsuit of trademark infringement and counterfeiting for Costco's sale of diamond engagement rings that used the word "Tiffany" in advertising. A district judge later ruled Costco liable, and a civil jury awarded Tiffany more than $21 million in punitive damages and lost profit.

The 2nd US Circuit Court of Appeals in Manhattan tossed that judgement on Monday, saying it agreed with Costco that "reasonable jurors" could find that Tiffany "is not only a brand name, but also a widely recognized descriptive term for a particular style of pronged ring setting" and is not likely to confuse customers.

The court said a jury, rather than a district judge, should rule on the question of Costco's liability. The case will now go back to the district court for a new trial.

Tiffany Senior Vice President and General Counsel Leigh Harlan said the company is disappointed with the court's decision.

"We continue to believe that the District Court was correct in its findings, and that the jury's finding on damages, which resulted in a $21 million award for Tiffany & Co., is a clear indicator of the strength of the Tiffany brand, and of the jury's outrage over Costco's actions," Harlan said in a statement. "We have no qualms about trying this case again, and remain confident that a jury will find counterfeiting and infringement upon retrial, just as the District Court judge originally ruled."

The legal battle between the two companies began more than seven years ago, after a Costco customer contacted Tiffany and said she had spotted engagement rings at the big-box store that were being advertised as Tiffany rings.

Tiffany sent investigators to Costco and found a jewelry display case containing engagement rings with signs bearing the name Tiffany.

Tiffany then contacted Costco, saying the signs constituted infringement and counterfeiting. Costco said that within a week it removed all signs using the word "Tiffany."

Several months later, Tiffany filed suit against Costco.