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Zale Says Sterling Proves Its Own Diamond Brilliance Claims are Misleading

Seeks Prompt Trial Date

Dec 21, 2012 10:06 AM   By Jeff Miller
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RAPAPORT... Zale's Celebration Fire is “the most brilliant diamond in the world,” according to Gil Hollander, the final witness to testify in a preliminary injunction hearing that kicked off its defense in a civil suit brought by its chief competitor,  Sterling Jewelers. 

In a court briefing filed by attorneys for Zale,  Hollander testified that Celebration Fire would win its defense, using any test for brilliance discussed at trial.  (Read Sterling's response that was filed yesterday.) Furthermore, Zale concluded that since Sterling admitted there was no industry standard for brilliance, and claimed that Zale's tests for brilliance were inadequate, Sterling contradicted  its own marketing practice of relying only on GemEx to prove brilliance, according to Zale.

Zale contended that none of Sterling's witnesses contradicted its brilliance statement, because that would damage Sterling's own marketing claims and they made no effort to identify any cut of diamond that was as brilliant as the Celebration Fire. Instead, Sterling, according to Zale, took the ''absurd position that if there is a single diamond in the world that is more brilliant than any single Celebration Fire, then Zale should not be permitted to advertise the Celebration Fire diamond as 'the most brilliant.'''

Sterling's  Solasfera Diamond, which is  advertised as “the highest-performing diamond in the world on GemEx BrilliantScope tests,” and its Biro88,  touted as the “world’s most brilliant diamond,”  are both  “accompanied by a GemEx® light performance report.” Star129 Diamonds are “proven to be the most brilliant diamonds cut today” and are also “accompanied by a GemEx Light Performance Analysis Certificate,” and the Leo Diamond “delivers measurably more brilliance than other diamonds of similar quality and grading” and comes with a GemEx Light Performance Report,'' all claims which give Sterling unclean hands, the defendant wrote.

Zale argued that consumers do not benefit from having its Celebration Fire campaign halted, when in fact Sterling and other competitors continue to make superiority claims regarding brilliance. ''It is the height of hypocrisy for Sterling, the market leader in advertising measurable brilliance, to ask this court to stop its major competitor from doing so,'' according to Zale.

While Zale agreed there may be isolated individual diamonds that shine brighter, such a case is irrelevant to an ad campaign that accurately tells the world that the Celebration Fire ''diamond cut is the most brilliant in the world,'' according to the company's brief.

''What is directly relevant is that Sterling’s own expert, the president  of GemEx, conceded that the worst Celebration Fire diamond he tested was probably more brilliant than 99 percent of the diamonds in his 2.7 million diamond database.

''Sterling’s consumer survey expert also conceded that if Celebration Fire is in fact more brilliant than 99 percent of the diamonds available, then Zale’s advertising claim is true,'' the defendant  wrote.

Zale also requested that the court deny Sterling's request for an injunction and urged for a prompt trial date.

In addition, Dr.  Jose Sasian testified that brilliance is light return, such as an amount of light reflected from the diamond through the crown to the observer’s eye or a detector. ''This is a measurable effect, although there is no single industry standard for measuring it. Sterling agrees,'' Zale wrote.

''In its complaint, Sterling stated that 'the brilliance of a diamond is a recognized property within the jewelry industry and among jewelry consumers. It is not a statement of subjective opinion but is capable of being systematically, reliably and scientifically measured.'  In the same way there are multiple ways to measure, for example, air pollution, one can measure light return in different ways, for example as gray-scale pixel values (ImaGem’s method) or as a percentage area of illuminated facets (GemEx’s method). Both are generally accepted in the diamond industry, but neither is an industry standard,'' Zale stated.

Citing similar cases in which an injunction was denied in favor of defendants, Zale stated that ''an establishment claim need not rely on an industry standard test to be truthful'' and cited the case of Gillette Co. versus Norelco Consumer Products Co. as an example. Norelco advertised its electric razor as being “clinically proven” to shave with “less irritation” than a wet razor and developed its own test for measuring razor irritation. The court denied Gillette’s motion for a preliminary injunction, noting that even though Norelco’s test was flawed in several respects, Gillette failed to prove the test had been unreliable. But Zale held steadfast that its own testing was not flawed as Sterling contended.

In Euro-Pro Operating versus TTI Floor Care North America, the court denied the plaintiff’s motion for a preliminary injunction where the defendant’s claim – that its vacuum was the “only one” that could vacuum under an 11.5-inch high-chair – was accurate based on the defendant’s own testing method, and not an industry standard, Zale argued. Similarly, the defendant cited cases where courts denied an injunction for products that had no industry standards including that of internal automobile air flow, diaper pail odor control and  protective coverage provided by sunscreen.zale sterling brilliance

Secondly, Zale argued that the purpose of this case was to determine whether or not it had violated the  Lanham Act, not industry standards, which do not exist in the first place. Sasian testified on behalf of Zale that the ImaGem system used by PGGL to test the Celebration Fire accurately and reliably measured brilliance. The only evidence Sterling produced, to the contrary, was a declaration of GemEx’s Randall Wagner.

But Zale pointed out that Wagner's business was tied, both directly and indirectly, to Sterling and that ''moreover, Wagner is a direct competitor of ImaGem. Further, Wagner was hired and then fired by Zale, and he filed a lawsuit against Zale in 2008. Regardless, Wagner did not provide any scientifically based criticism of the ImaGem system,'' the defendant stated.

Sasian also testified that the PGGL test performed for Zale was accurately and reliably performed, whereas Sterling produced no evidence to the contrary, and Zale wrote that there was no evidence to suggest its 19 tested diamond cuts were not representative of the most brilliant diamond cuts on the market.

Nonetheless, if the court determines that an industry standard test is required for measuring brilliance, any injunction should be limited to simply removing the ad’s reference to testing, rendering the “most brilliant” claim non-actionable puffery, Zale suggested.

At the hearing, the court challenged Zale to assume the burden of brilliance by proving that the “most brilliant diamond in the world” claim is true, which the defendant claimed it had. In its filing, Zale stated that even if the court disagrees, the burden remains on Sterling  to prove that the claim is false.

Where Sterling failed to defend its cause, according to Zale,  ImaGem carried out testing and made statements to Zale in July: “We do understand that Shrenuj has processed few diamonds for light performance test to help you defend the claim ‘Celebration Fire is the Most Brilliant Diamond in the World.’ We support all the results for the test done on those stones by PGGL.”

''Sterling makes much of ImaGem’s disclaimer that ImaGem is not itself making a superiority claim such as most brilliant in the world. But as Dr. Aggarwal testified at deposition, this disclaimer is his policy for all clients,'' Zale wrote.

However, Zale stated that  GemEx also has a disclaimer regarding marketing representations based on GemEx testing.  While the test report itself may have some errors, such flaws do not render the test scientifically unreliable. Courts applying the “tests prove” standard “should give advertisers a fair amount of leeway, at least in the absence of a clear intent to deceive or substantial consumer confusion,'' Zale contended.

Hollander said that Zale did not include the Solasfera diamond in the test because, after an extensive search, he could not find any evidence that Sterling was still marketing the diamond. Sterling’s vice president of merchandising, Stuart Lee, testified that the Solasfera is available in only 80 of Sterling’s more than 1,300 stores.

The brief argued that ImaGem’s database of more than 2,000 Celebration Fire diamonds confirms that the diamond is the most brilliant.  That data shows that Celebration Fire is considerably more brilliant than other diamonds and while there may be outliers that score lower, they are not representative of the brilliance score a Celebration Fire is likely to receive, 90 percent of which scored 175 or higher, according to Zale.

In the same way, a car company’s claim that its car is the “fastest” or “most reliable” is not false if the car tested is representative of the speed or reliability of the brand, the defendant stated.

''Sasian, the only truly independent expert in the courtroom, testified that because of the novel way the Celebration Fire is cut – with 71 facets producing 10 hearts and arrows, rather than the usual eight hearts and arrows in other exceptionally cut round brilliant diamonds – the Celebration Fire diamond has more pathways available for light to reflect back to the observer’s eye. He further testified that given two stones of equal color and clarity – one cut using the Celebration Fire design and the other cut using any other diamond design – he would expect the Celebration Fire to be more brilliant,'' Zale wrote.

But Sterling’s primary support  was a declaration from a purported independent expert,  Wagner of GemEx, and now in its post-hearing brief, Sterling does not mention, not even once, the results of GemEx’s tests, Zale pointed out. ''Instead, after originally introducing Wagner as a pioneer in the development of the technology to measure brilliance,  Sterling cites to Wagner only for the proposition that there is no industry standard for defining or measuring brilliance.

''Sterling now appears to be minimizing the significance of the tests Wagner conducted. Sterling’s legal attack is completely contradicted by its own marketing practice of relying on GemEx to prove its claims for more brilliance.''
Zale argued that Sterling’s retreat from GemEx remained ''perfectly clear'' because Wagner highlighted the weakness of Sterling’s position. ''Despite substantial evidence demonstrating that Wagner is biased against Zale and ImaGem, and is beholden to Sterling, GemEx’s largest customer, his testimony actually was more favorable to Zale than to Sterling.''

Sasian testified that the GemEx system suffers from three limitations that are not found in the ImaGem system. First, GemEx uses direct light from only five illumination directions, while ImaGem uses diffuse light from a continuous range of illumination directions across a 14-degree arc.  Zale argued that  GemEx’s device gathers less information about the diamond and is not able to detect the brilliance of the diamond at intermediate positions. Second, the images produced by the GemEx system show clear signs of pixel saturation, meaning that the device is not well calibrated, Zale said. Third, GemEx does not count colored light in its measurement of brilliance, even though the colored light is contributing to the diamond’s total light return.

''Additionally, Wagner conceded that he did not follow his usual protocol when testing the Celebration Fire, contrary to Sterling’s statements to this court that the Celebration Fire diamonds were tested using the same procedures that GemEx has used in evaluating and certifying over 2.5 million diamonds.''

Wagner now admits that instead of testing each Celebration Fire diamond once, as he does with every other diamond, he took four separate measurements, turning the diamond 90 degrees four times, and calculated the average of those four measurements, Zale stated. Wagner conceded that this was “not the standard procedure that’s followed on every diamond through our database,” according to the brief.

''Wagner also conceded that his testing process permitted the tester to test as many times as they want until they get a score they like.''  

Sterling’s expert Michael Rappeport testified that in extensive consumer  interviews, many interviewees recognized that there was some degree of exaggeration in Zale’s “most brilliant diamond in the world” claim. Moreover, some people thought the ad referred to a single diamond, while others thought it referred to a class of diamonds, and still others thought it referred to the average brilliance of the Celebration Fire as compared to the average brilliance of other diamond brands, Zale stated.

''Because the ad conveys different messages to different people, it is ambiguous and cannot be literally false as a matter of law. As such, Sterling was required to produce evidence that consumers were actually deceived,  such as a reliable consumer survey proving that the ad conveys the particular message Sterling alleges,'' Zale argued.

The defendant concluded that the Rappeport consumer survey on behalf of Sterling was completely unreliable because he tested an overly broad universe, did not test actual and prospective purchasers of diamonds,  used an artificial survey stimulus that bears little resemblance to Zale's ads  and only provided multiple choice questions that offered three possible responses, which Zale classified as incomplete answers.

Rappeport did not  include ''not sure'' or ''don't know'' as responses, nor possible responses that reflect the heart of this case, such as whether the advertising statement is referring to the cut of the diamond,  the average brilliance of diamond brands, or the brilliance of each individual diamond, Zale pointed out.

Zale also took issue with Sterling's use of this survey, produced  on December 12,  rather than with its motion papers, as  Zale did not have time to conduct its own counter-survey or prepare a rebuttal expert report.

''At trial, Zale will be able to demonstrate through expert testimony the fatal flaws of Rappeport’s survey and introduce its own survey,'' attorneys wrote.

Arguing for the court to deny Sterling injunction, Zale said that Signet's U.S. division had not shown irreparable harm and rather than bring to witness an economist, it offered Lee, its vice president of merchandising.

Lee, however, testified to no particular expertise in evaluating the future impact of Zale’s advertising on plaintiff’s business. Nor did he explain how his experience in merchandising permits him to offer anything more than speculation on the subject, according to Zale.

Zale’s counsel retained  Jacob Jacoby, who was denied the chance to testify, as a rebuttal expert immediately upon learning that Sterling intended to produce a consumer survey. But because of  Jacoby’s prior commitments, he was unable to complete his report criticizing Rappeport’s survey until Sunday night, whereupon the report was immediately served on Sterling, the defendant stated. Sterling filed an immediate motion to deny Jacoby's testimony, claiming it had not time to question the witness before the preliminary injunction hearing.

''Indeed, Sterling has made clear through its litigation strategy that the public interest is not its concern; rather, its focus is on inflicting maximum disruption on its chief competitor during the busiest time of the year. For example, Sterling knew about the Celebration Fire campaign as early as October 5,  yet it did not file its lawsuit for over five weeks. Then, instead of moving for a preliminary injunction at that time, Sterling waited another week – until two days before Thanksgiving – to do so, on the eve of the most important shopping season of the year for Zale. Sterling even included a motion for expedited discovery. As Sterling’s own witness conceded, a jewelry retailer who wanted to file a lawsuit against a competitor in the most disruptive way possible would proceed in essentially the same manner as Sterling has in this case,'' Zale wrote.

Zale pointed out, too, that Sterling had not taken action against other competitors who make ''most brilliant'' claims, but ''perhaps not coincidentally, those diamonds all claim support from GemEx – and in some cases are sold by plaintiff itself.''

Denying the injunction and setting a prompt trial date would adequately protect Sterling and would avoid the risk of harm to Zale from an improvidently issued injunction, the defendant claimed in its request.

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