Upcycling, Sustainability, and IP: what it means for the world of fashion

By Irene Calboli, Professor of Law, Texas A&M University School of Law, USA

Unquestionably, we live in an age of over-production and over-consumption. However, today - unlike the past - consumers are more environmentally conscious and increasingly focused on the need for sustainability. This is particularly true for fashion, an industry that is responsible for producing nearly 10 percent of global greenhouse gas emissions. In response, new ways to “consume” fashion have emerged, offering alternatives to simply purchasing new clothes and accessories. One of the most popular alternatives is upcycling.

What is upcycling?

Upcycling refers to the process of improving an existing product by modifying it in a way that makes it appealing to consumers. In turn, by extending the life of existing products, upcycling promotes both sustainability and a circular economy.

Interestingly, although upcycling has existed for many years, the fashion industry has recently seen a major boom in upcycled fashion products, particularly during the COVID-19 pandemic. Forced to stay at home, many creative individuals kept themselves busy by taking the old fashion items they owned and turning them into something new to resell.

Generally, upcycling can take two forms. First, original products can be deconstructed to create new products from the constituent parts of the originals. As analyzed below, this upcycling technique frequently uses parts of products bearing famous logos to create new accessories. Examples include earrings or pendants made with buttons from old luxury clothes or from cut-up pieces of designer bags. The second upcycling technique involves transforming original products into something new by adding to them. For example, by adding fringes, jewels, or other accessories to luxury bags to “revamp” or customize them.

Upcycling and sustainability

How then, does upcycling promote sustainability in the fashion industry? First and foremost, upcycling minimizes the need for new raw or synthetically-created materials. These materials are no longer necessary because new products are created from old ones. In addition, by reviving existing materials and increasing their life cycle, upcycling reduces landfill waste. Moreover, less manufacturing means fewer carbon emissions released into the atmosphere and, in turn, a more sustainable approach to producing and consuming fashion.

Is upcycling a threat to luxury brands?

While upcycling offers many benefits, no matter how environmental-friendly, it can trigger a host of legal issues. In particular, when the materials used are protected by trademarks, copyright, and other forms of intellectual property (IP).

While upcycling offers many benefits, no matter how environmental-friendly, it can trigger a host of legal issues.

Unsurprisingly, given their appeal to consumers, many upcycled products include elements from existing luxury products. In general, these luxury products are protected by trademarks, copyright, design rights, or other IP rights. This means that upcycled products may infringe those rights.

Navigating the legal landscape to avoid IP infringement

Infringement of IP rights is likely, for example, when upcycled products are made with materials featuring logos or other protected trademarks. To establish infringement, a trademark owner must show that the infringing party (in this case the party making the upcycled products) uses the same or similar trademark in commerce without the owner’s consent, and that the infringing use of the mark could lead to a likelihood of consumer confusion. In this respect, upcycled products may infringe because they may create a likelihood of confusion among consumers as to the source of the products. For example, consumers may think the product was made by a luxury brand.

There are, however, instances where certain uses of a mark without the trademark owner’s consent are lawful. One such instance is where the principle of exhaustion, or first sale, applies. According to this principle, a trademark owner cannot prevent the lawful purchaser of a product that bears their trade mark from selling, loaning, or giving that item to someone else. Once a genuine, trademarked product enters the stream of commerce, trademark protection is exhausted and subsequent unauthorized sale of the product does not violate trademark protection.

Nevertheless, the principle of exhaustion may not be applicable to the upcycling of products carrying logos and other marks. The notable major exception to the principle of exhaustion is when the quality of the product has been altered. In fact, courts have held that trademark rights are not exhausted if “material differences” exist between the purchased goods and the goods being re-sold. In turn, upcycled products that use materials displaying logos and other marks may constitute trademark infringement because the products are materially different from the originals. Upcycled products may also infringe when they use the original product intact with some embellishment - for example, by adding a fringe to an existing purse - because again, the upcycled product is materially different from the original.

How are the courts responding?

How then are courts deciding cases relating to upcycled products that are brought before them? Are they finding that upcycled products infringe? Or are they permitting the unauthorized use of trademarks (or other IP rights)? While this field continues to evolve, a review of recent selected cases may shed some light on the future of upcycling.

With the rising popularity of upcycling, unsurprisingly, several lawsuits have been filed by luxury trademark owners against parties selling upcycled versions of their products.

Chanel Inc. v. Shiver + Duke LLC

One of the most recent high-profile lawsuits was filed by Chanel against a company called Shiver + Duke in the United States (U.S.)

Notably, in February 2021, Chanel sued Shiver + Duke, alleging trademark infringement, unfair competition, and trademark dilution. Shiver + Duke was a small but popular company known for its upcycled jewelry that contained pieces from luxury brands, including repurposed authentic Chanel buttons. The buttons in question were not obtained directly from Chanel nor provided to Shiver + Duke with the knowledge or consent of Chanel. They were also not verified as genuine by Chanel. Additionally, the original use of the buttons was on Chanel clothing—not jewelry. As an additional and relevant fact, the upcycled Shiver + Duke products were also similar to the jewelry made by Chanel.

One of the claims brought by Chanel in the lawsuit is that Shiver + Duke’s upcycled products can create a likelihood of customer confusion with authentic Chanel jewelry. Chanel also claimed that Shiver + Duke’s use of the Chanel buttons on jewelry amounted to a materially different use from the original intended use, which implied the Shiver + Duke could not rely on trademark exhaustion as a defense.

Chanel ultimately reached a settlement in principle with Shiver + Duke in November 2022, the terms of which are confidential. Chanel requested the case be discontinued without costs to either party and without prejudice to restoring the action to the Court’s calendar if the parties were unable to memorialize their settlement agreement by December 14, 2022.

Louis Vuitton Malletier S.A.S. v. Sandra Ling Designs, Inc.

Louis Vuitton is another brand that is often used in upcycled products. In February 2021, Louis Vuitton filed suit against Sandra Ling Designs, Inc. (SLD) and Ms. Ling in the United States, alleging trademark infringement for creating and selling apparel, handbags, and accessories made from purportedly authentic pre-owned Louis Vuitton goods.

The defendants had altered the original products to create new products and had made materially altering additions to the original products.

Notably, Louis Vuitton argued that the goods made by SLD prominently bore Louis Vuitton trademarks and underwent fundamental alterations that turned the allegedly authentic products into items that no longer met Louis Vuitton’s strict quality standards, thereby rendering the products ingenuine. Louis Vuitton argued material alteration and the vast potential for customer confusion. For its part, SLD argued that customers were unlikely to be confused about the source of its wares because language disclaiming affiliation with Louis Vuitton appeared on each upcycled product.

Similar to the Chanel case, the parties reached a settlement, with SLD offering to allow judgment to be entered against them, including a USD 603,000 fine and a permanent injunction, while also agreeing to drop all counterclaims against Louis Vuitton.

Similar suits have also been filed by Nike, Rolex, Ralph Lauren, and others, all ending in confidential settlement agreements. In none of these cases have the courts explicitly ruled that upcycled products can rely on the principle of trademark exhaustion and thereby not be considered as trademark infringement.

Can we reconcile upcycling, intellectual property, and sustainability?

There is no doubt that upcycling can create challenges for trademark owners, particularly, luxury brands. However, the cases mentioned above beg the following questions. Should trademark law, and IP law in general, prohibit the practice of upcycling as an infringement, rather than incentivizing it in support of the circular economy and sustainability? In other words, should upcycled products be forbidden because of (unlikely) consumer confusion, or should they be permitted on the basis that the IP rights attached to the elements used in upcycled products are exhausted?

Should trademark law, and IP law in general, prohibit the practice of upcycling as an infringement, rather than incentivizing it in support of the circular economy and sustainability?

While there are no clear answers to these questions, at least for now, we should nonetheless reflect on the opportunity that upcycling could offer society, the economy, and the environment. In a world plagued with overproduction, where consumers are becoming increasingly environmentally conscious, the role of IP law needs to promote sustainability and support efforts to decrease the negative environmental impact of overproduction. In other words, IP rights need to promote the public interest in terms of promoting sustainability and reducing waste while also safeguarding the need for trademark owners to protect their exclusive rights.

IP rights need to promote the public interest in terms of promoting sustainability and reducing waste while also safeguarding the need for trademark owners to protect their exclusive rights.

Emerging trends in support of the circular economy

Interestingly, perhaps because sustainability has become such a pressing issue, a few famous brands have started their own internal upcycling lines. Two such companies, Stella McCartney and Louis Vuitton, have started upcycling their own products in order to reduce their environmental impact.

In addition, the online rental and resale market has seen a significant uptick in recent years, including the creation of online thrift stores like The RealReal where customers can purchase vintage and unaltered pre-owned designer items.

Online secondhand and rental companies like ThredUP or Rent the Runway are also enjoying  increasing popularity. These companies allow customers to rent clothes for a period of time or for certain events. While these services technically do not offer upcycled products, they still promote a circular economy and sustainability by selling or renting used products.

Can we, or should we rely exclusively on voluntary practices by brands to upcycle?

While commendable and important steps in the right direction, these isolated efforts are not sufficient to promote upcycling on a larger scale. Can we, or should we rely exclusively on voluntary practices by brands to upcycle? This is why the possibility for every company to engage in upcycling — of their own products, or the products manufactured by a third party that they have purchased lawfully — will remain an important part of the discussion on sustainability and the circular economy.

In conclusion, it is clear that both consumers and businesses are beginning to take a step back to examine how we can reduce waste and increase sustainability. Upcycling can have a positive impact on the environment and IP law needs to promote it. How it will, and how it should, are the sticking points of the debate, which will certainly continue both in the law courts and the court of public opinion.

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• Source: https://www.wipo.int/wipo_magazine/en/2023/03/article_0006.html