The concept of Upcycling represents a variety of processes by which an “old” product is changed and turned into a “new” product. This is a way to turn old products into new products, without breaking those products down into raw materials. Upcycling promotes circular fashion, as existing material stays in circulation instead of being thrown away.
Many parties have an interest in upcycling, both for environmental and commercial purposes. However, when the upcycled products contain someone else’s intellectual property, there are concerns about trademark and other intellectual property rights being violated.
In this article we will examine what Upcycling is and what it has to do with violations in the fields of intellectual property with an emphasis on trademark laws.
What is Upcycling?
Upcycling is creating something new from discarded materials by repairing, refurbishing or reusing them. Upcycling means taking an existing product and creating a new use for it that can be of higher quality or higher value than the original.
One way to reuse is by breaking down existing products and using their components to create something new. Another way is by adding on the original product to increase its value.
There is a tendency to get confused between the term Upcycling (reuse) and the term Recycling (circulation), but in fact these are two terms with different meanings. Recycling means turning garbage into raw materials that can be used to create new products. On the other hand, in Upcycling, old products are not turned into raw materials, but they are restored in a different way or with an addition.
Upcycling and infringement of intellectual property laws
Upcycling products bearing a trademark or content protected by another intellectual property, by a third party who is not the owner of that trademark or intellectual property, may create legal problems when the product in which Upcycling is done is sold by that third party. A company that sells upcycled products may be exposed to claims for infringement of trademarks or other rights.
The main rights to be considered in this context are: trademarks, plagiarism, copyright and designs.
What is trademark infringement?
The Trademarks Ordinance defines a violation of a mark as “use by a person who is not entitled to it – (1) of a registered trademark or a similar mark, in respect of goods for which the mark is registered or goods of the same category; (2) of a registered trademark, for the purpose of advertising the goods of the type of goods for which they relate The sign is registered or for the purpose of advertising goods from that class.” To show that there is a literal infringement (infringement using the same mark) according to subsection (2), it must be pointed out that the infringer made use of the registered trademark. Whereas for the purpose of examining whether there has been an infringement with respect to a similar mark that is not the same, the ruling establishes the “triple test” which examines a deceptive similarity between the registered mark and the infringing mark.
So for example, let’s say that a certain company did Upcycling with a shirt bearing the Adidas trademark, and that company added its trademark or other content of its own to the shirt. Adidas can claim that the product in which Upcycling is done is a new and different product which creates a false impression that this product belongs to Adidas itself or was created under its sponsorship or approval.
What is trademark dilution?
Another claim that can arise is in relation to the dilution of the trademark. The purpose of the dilution doctrine, as adopted in Israeli law (in section 46a of the Trademarks Ordinance), is to protect trademarks that have acquired international recognition and a powerful reputation, from being exploited by a foreign entity. Dilution of reputation is actually a situation in which a trademark is used as mentioned, which leads to the erosion and blurring of the unique and high-quality image that the trademark was able to instill in its consumers. In order for a cause to arise under the reputation dilution doctrine, it is not necessary to prove that there was a deception. However, this does not obviate the requirement to prove the erosion and blurring of the reputation acquired by the registered mark as a result of using the other mark, due to the creation of some kind of relationship between the allegedly infringing product and the product of the claimant – see for this matter CF (Tel Aviv District Court) 45192-12-14 Societe Des Produits Nestle v. Espresso Club Ltd. (published in Nebo, March 2, 2017).
For example, let’s say that a certain company did Upcycling on a shoe bearing the Nike trademark, and that company painted and added a new painting on the shoe. Nike will be able to claim that the upcycled product is a product that does not match its design line, a product of lesser value that dilutes its trademark reputation. The dilution occurs both at the time of sale and when the consumer walks around with the new upcycled product.
Upcycling and infringement of copyrights and designs
Alongside the risk arising from the infringement of trademarks, there is also the risk of infringement of copyrights and designs.
For example, in a situation where a certain item is protected by a registered design, a violation of a design does not include a necessary element of deception, and therefore using the product protected as a registered design can constitute a violation.
This is also the case, for example, in a situation where a certain item includes a painting protected by copyright (for a full review on this subject, see CA 1248/15 Fisher Price Inc v. Devron – Import and Export Ltd. (published in Nevo, 8/31/2017)), also a copyright violation does not include a necessary element of deception, therefore using a product that includes a copyrighted element can also be considered an infringement.
How to reduce the risk?
The king’s way to reduce the legal risk is full disclosure that this is a product that has been upcycled. Such a disclosure may help reduce the exposure to claims of infringement of intellectual property rights and may also rule out the fear of deception during the sale. However, such disclosure doesn’t exclude the risk since there can be a situation of violation of intellectual property laws even when there is no deception.
Another way is to apply for permission from the owner of the right, the risk in this way is that if the owner of the right refuses to give permission, the application will be an admission that the permission of the owner of the right is necessary. The main advantage of obtaining permission is the complete elimination of the legal risk present in the Upcycling operation.
Intellectual property infringement and the first sale doctrine
The owner of an intellectual property right in general and a trademark right in particular may prevent others from using his rights. For example, in order to prove trademark infringement, the owner of the mark is required to show that he owns a valid trademark, that the infringer used the same trademark or a similar mark without his consent, and that the use of the trademark creates a risk of deception.
However, certain uses of trademarks or intellectual property are also permitted without the owner’s consent.
For example, the first sale doctrine allows reselling products that carry someone else’s intellectual property without asking for the owner’s consent, as long as the seller legally owns the original product. The main rationale behind the original sale doctrine is to ensure that the owner of the intellectual property only profits once for the sale of each item.
In trademark law, the original sale doctrine means that once an original, branded product is in commerce, trademark protection is extinguished. After extraction, selling original products without the consent of the trademark owner does not infringe the trademark, except for sales where the sellers present themselves as official agents of the trademark owner.
The doctrine obliges resellers of products bearing trademarks not to sell the products in a way that would imply to consumers that they are related to the owner of the trademark. The original sale doctrine poses the same question that underlies trademark infringement – is there a fear of deception among consumers?
If there is no fear of deception, one must ask whether one of the exceptions to the doctrine exists: the first exception is the exception of the substantial difference – the goods sold by the defendant are fundamentally different from the plaintiff’s goods. The second exception is an unauthorized first sale exception – for example, when the defendant purchased the products directly from the trademark owner’s manufacturer.
Let’s say that company A does upcycling in an original product that bears the trademarks of company B. Based on the original sale doctrine, it is likely that the upcycled product will not infringe Company B’s trademarks. However, an upcycled product is inherently different from the original products bearing the trademark, and this is one of the exceptions to the original sale doctrine.
In 2018, Chanel filed a lawsuit against What Goes Around Comes Around (WGACA), for, among other things, counterfeiting and trademark infringement (Chanel, Inc. v. What Goes Around Comes Around, LLC ((1:18-cv- 02253) (03/14/18). Chanel claimed that WGACA misled consumers into believing there was an official relationship between it and Chanel. The District Court for the Southern District of New York held that WGACA did more than just resell original merchandise as it claimed that it is known under the name of Chanel and therefore ruled that there is a violation of Chanel’s trademarks.
Fair use protection in relation to a trademark
Another permitted use of trademarks is fair use. Use of another’s trademarks may be permitted in accordance with section 47 of the Trademarks Ordinance which provides protection for “true use”: “Registration according to this order shall not prevent a person from using his name or the name of his business, or the geographical name of his place of business, of his or his predecessors in business , or from the user in the true definition of the essence or quality of his goods”.
According to section 47 of the Trademark Ordinance, a person may use a mark to indicate the essential definition of the essence or quality of the product.
In the ruling, three tests were established in order to examine whether use is “true use”. The three tests can be divided into two types. The first type concerns the fear of misleading the consumer regarding some commercial relationship between the owner of the mark and those who use it. The second type concerns the proportionality of use. This type includes two tests: whether the use of the trademark is “necessary”, and whether it does not exceed what is required “in a reasonable and fair manner”.
However, in the case of CA 8668/19 CHANEL v. Saint Wish Ltd. (published in Nevo, 31.10.2021), in which perfumes from the appellant’s brand were re-bottled, and sold by the respondent at a lower price than the price of the original bottle, the court explained that use In a trademark it is never “necessary” in the strong sense of the word, and the meaning is whether the use is objectively justified, i.e. whether there is a real connection between the user or his product and the registered trademark. There is no blanket permission to use a trademark, even if no fear of deception has been proven, but there is also no blanket prohibition to use it. The circumstances of the use of the trademark, the nature of its use and its proportionality must be examined.
Also, in the same matter it was determined that if it turns out that there is a difference in the properties of the perfumes, the consumer mistakenly attributed incorrect properties to the appellant’s perfumes. Although it is not the usual fear of deception because it is not about the origin of the product but its features, there is no real difference between the two types of deception. What both have in common is the expectation of the consumer, who may rely on the trademark as an indication of the features and quality of the product or service. Therefore, although there is no fear of deception in relation to the process of transferring the perfume, there is still a fear of deception in relation to the properties of the appellant’s perfume. According to the ruling, fear of misleading the consumer negates the defense of genuine use.
In other words, true use protection in relation to Upcycling, is also a relative protection that depends on the circumstances of the case and the question of misleading the consumer.
