On Wednesday, a Southern District of New York jury awarded punitive damages of $8.25 million to Tiffany & Co. in its case alleging Costco infringed the TIFFANY trademark by selling rings labeled “Tiffany” at its warehouse stores.  This award is on top of the $5.5 million in damages the jury awarded on September 29, 2016 based on Costco’s profits.  Today’s award brings the total damages to nearly $14 million.

Tiffany filed the suit in February 2013, claiming violations of the federal Lanham Act, as well as state unfair competition laws.  During the litigation, Costco consistently took the position that the TIFFANY mark is invalid because it has become generic for a particular type of ring setting. However, late last year U.S. District Judge Laura Taylor Swain granted Tiffany’s motion for summary judgment on its trademark infringement and counterfeiting claims, holding that Costco’s use of “Tiffany” on ring labels caused consumer confusion.

The most recent jury award may have been a surprise to some, given that punitive damages are not available under federal trademark law.  The Lanham Act does contain a treble damages provision to enhance awards in certain circumstances, but that provision explicitly states such an award “shall constitute compensation and not a penalty.”  Nevertheless, the jury was able to base its award on New York state law, which allows for punitive damages where a defendant’s conduct constitutes “gross, wanton, or willful fraud or other morally culpable conduct to an extreme degree”

Before the award is final, Judge Swain must decide if she accepts the jury’s findings.  Even then, Costco is widely expected to appeal to the Second Circuit.