For the last article in our fashion law column we wanted to talk about one of the biggest trends of the moment: vintage and second hand.
The fashion industry is the world’s second largest polluter just after the oil industry and is responsible for the 10% of all humanity’s carbon emissions. These discouraging figures can be reduced significantly by tapping into vintage and second hands. Indeed, the attempt to extend the lifespan of garments and accessories that have already been released into the market is rapidly gaining ground.
Upcycling involves repurposing preexisting garments, accessories, bags and fabrics into new products: it reduces waste and promotes creativity, and it has been recognized by Vogue as the biggest fashion trend of 2021.
There are now several upcycling examples in the fashion sector. For instance, in 2019, Arc’teryx launched a re-commerce program called Rock Solid Used Gear, consisting in the buying back by the brand of pre-owned gear, the cleaning and repairing of products with plenty of life ahead and the reselling of items at a lower cost. Several other brands, like Levi’s, North Face, Eileen Fisher and Patagonia, are now adopting upcycling in order to maintain their pre-owned branded products in circulation for longer and to tap into the growing resale segment of the market.
Another example of the enduring embrace of circularity comes from Farfetch, the biggest online luxury-fashion retail platform, which in 2021 announced a collaboration with The Restory, a company providing modern aftercare for luxury fashion, creating Farfetch Fix (Farfetch Fix offers to consumers “bespoke repairs to return your design shoes, handbags and small leather goods to their former glory”).
Considering the above examples, it appears that most of the circularity-centric efforts are coming either from brands buying back, revamping and reselling products bearing their names, or from third parties – such as Farfetch or The RealReal through an in-house “suite of repair services” – that refurbish designer garments and accessories without the underlying brands’ involvement.
Although these efforts serve the same goal, namely the extension of products’ life, it must be acknowledged the difference between brand authorized repair/resale scenarios and those carried out independently by third parties. As a matter of facts, several lawsuits have shown that the trend of modifying or refurbishing branded products, and then selling them without the authorization of the original brand owner or without adequately informing consumers of the modifications, can have serious legal implications – this happened recently in the case that Chanel filed against What Goes Around Comes Around.
This raises a hard question for brands: how can you promote eco-friendly upcycling while protecting your trademark?
By registering the trademark, the owner obtains exclusive rights on it, i.e. the right to use his sign exclusively and to prevent its use by unauthorized third parties.
However, several jurisdictions allow the reselling of a trademark bearing product once the trademark holder releases that product on the market (in the U.S. legal system this is called the “first-sale doctrine”, while in the European system it is referred to as the “principle of exhaustion”).
Nonetheless, it must be highlighted that the first sale doctrine does not apply when the material condition of the product has been changed after its first sale (article 5 of the Italian Code of Industrial Property), which consumers could believe was authorized by the mark owner. Therefore, if the process of refurbishing or repairing the product causes a material change to that product, then the first sale doctrine won’t probably find scope of application.
In light of the above, certain services – such as reheeling shoes, cleaning leather bags, or mending damaged stitches on garments or accessories – are not likely to clash with the correct application of the first sale doctrine, thus allowing a third party to provide such services without needing the approval from the trademark owner. On the contrary, when the third party intervenes on the trademarked products by permanently altering them, and then resells them, the first sale doctrine does not apply.
However, pursuant to article 21 of the Italian Code of Industrial Property, platforms offering repair and refurbishing services for trademarked products are free to advertise their services without the risk of infringing the brands’ trademarks.
Given the different application of the first sale doctrine depending on whether the change is material or non-material, and as a result of the continuous expansion of the resale market – able to make pre-owned luxury products more affordable and easier to access – some brands complained that their trademarked products are refurbished and then sold without their approval, thus preventing them from checking and ensuring an excellent level of quality of those goods.
Therefore, it is possible to foresee potential issues when unauthorized third parties materially alter authentic products which enter into the marketplace in a resale capacity, thus generating confusion among consumers as to the origin of the products – especially when the reseller is not aware of the changes made to the goods, thereby failing to mention them in the product listing.
According to a 2019 fashion industry report by McKinsey, products modification issues will likely continue to arise as “the lifespan of fashion products is being stretched as pre-owned, refurbished, repaired and rental business models continue to evolve”, and particularly as consumers “demonstrate an appetite to shift away from traditional ownership to newer ways in which to access product”. Therefore, the implementation of resale models and the move towards circularity will require a careful balancing of the interests at stake, namely the interests of trademark owners, actual or potential competitors in secondary markets, consumers, and society.
When faced with an upcycler infringement, a brand still has ways to deal with the misappropriation without involving the Courts. For instance, “informal enforcement” through demands letters, B2B discussion, or take down requests might help to address the infringement. Trademark holders should engage the services of a trusted IP counsel to develop an enforcement plan based on the facts of the specific violation at hand.
On the other hands, brands can protect themselves from third-parties misuses by proactively producing their own upcycled products. IP consultants could further help brands establishing upcycling partnerships and product streams, also through licensing agreements, merchandising agreements, cobranding agreements, and other contractual agreements.
By taking part in the circular economy, fashion brands can contribute to sustainability by adequately monitoring their trademarks downstream.
If you would like to know more about this topic, please contact carolina.battistella@dlapiper.com