Upcycling can be defined as the process of creating products of higher value from discarded objects or materials. This practice thus extends the life of products and reduces waste production by transforming them, leading to a reduction in the extraction of new resources and CO2 emissions.

Local communities and corporations have been concerned about incorporating safe and appropriate methods for the redesigning and remodelling of unused materials and products, such as upcycling, into modern living, notably since French Law No. 2020-105 dated 10 February 2020 on the fight against waste and the circular economy. Article L. 541-15-8 I of the French Environmental Code now establishes a principle of prohibition against the disposal of new inedible products intended for sale: producers, importers and distributors of these products are subject to an obligation to reuse, repurpose or recycle their unsold goods in accordance with the hierarchy of treatment modes established by the legislator, in France.

Today, the fashion sector is thus forced to evolve. Luxury giants have already signed partnerships with startups specialising in fibre recovery to create new spools, and other companies have developed projects to recycle their unsold items into new raw materials. It is in this specific context that the practice of upcycling is now developing.

However, although many companies specialise in upcycling by reusing materials and fabrics from fashion houses without using authentic trademarks, the current trend is towards the upcycling of branded goods.

Therefore, despite a positive environmental impact, when a third party engages in upcycling using branded products, they risk infringing the rights of the trademark holder, provided that the conditions for such infringement are met.

Nonetheless, most of the trademarks used are well-known, so their holders might also be able to defend themselves by invoking the special regime applicable to them.

Legal risks associated with upcycling

In light of the principle of territoriality, a holder of a trademark protected in France can only restrict third-party use of their mark if their actions are localised within French territory, and if the audience targeted by the contentious act is the French public.

Article L. 713-2 of the French Intellectual Property Code distinguishes between the unauthorised use of a sign identical to the trademark and used for products or services identical to those for which the trademark is registered, from the use of a sign that is identical or similar to the trademark and used for goods or services that are identical or similar to those for which the trademark is registered. Only the latter scenario requires demonstrating a risk of confusion in the public’s mind, including the risk of associating the sign with the trademark.

The risk of confusion is irrefutably presumed in cases of the use of an identical sign for identical products or services. A sign is identical to a registered trademark when it reproduces without modification or addition all elements of the trademark.

In the context of upcycling branded products, the scenario of “double identity” is generally applicable: companies customise existing products without needing to reproduce the trademark since it is already affixed. The final upcycled product retains all elements of the trademark, without modification or addition.

According to Article L. 713-2 of the French Intellectual Property Code, an infringement of a trademark right is characterised when, without the authorisation of the trademark holder, the upcycler uses the trademark in business life as a trademark, infringing one of the essential functions of the protected trademark.

On one hand, the third-party upcycler must have an interest in presenting externally marked products, particularly in the signs they display. On the other hand, they must demonstrate “active behaviour and direct or indirect control over the act constituting the use”. For example, modifying a product originally manufactured and marketed by the trademark holder constitutes a positive act of use.

Regarding the condition of use in the course of trade, the Court of Justice of the European Union considers an act to be performed in the course of trade “when it occurs within the context of a commercial activity aimed at economic advantage and not in the private sphere”. Generally, it is plausible to assert that any company selling a large volume of upcycled products displaying protected marks is engaged in the course of trade. Here, it is not about sanctioning individuals who, for personal consumption, craft one or two upcycled prototypes at home using protected signs or sell their marked product resulting from their upcycling operation without it being part of a commercial activity, i.e., if the sales do not exceed, notably due to their volume or frequency, the realm of the private domain.

An upcycling operation of marked products can only be considered counterfeiting if it infringes one of the functions of the trademark used. Therefore, determining the functions of a trademark is crucial in qualifying an act as counterfeiting. The mark must guarantee to consumers the commercial origin of the product. Furthermore, the Court has also considered among these functions those consisting of “guaranteeing the quality of that product or service, or those of communication, investment, or advertising”.

It is likely that, without permission from trademark holders, upcycling constitutes an act of counterfeiting. It is an act of use in the course of trade. Only the conditions related to use as a trademark and infringement of one of the essential functions could be lacking, depending on the specific circumstances: everything will depend on the perception of the upcycled product in the specific context in which the sign is used by the relevant public.

Defences and limits

While upcycling of branded products without the trademark holders’ authorisation may constitute an infringing practice, the exclusive right conferred by the trademark does not allow its holder to prohibit its use when the exhaustion of rights rule applies.

Article L. 713-4 of the French Intellectual Property Code establishes the principle of exhaustion of rights, according to which the holder of a trademark cannot prohibit its use for products placed on the market in the European Union or the European Economic Area, provided that they have consented to it. The rule is initially based on Article 36 of the Treaty on the Functioning of the European Union (TFEU), which allows Member States to restrict the principle of free movement of goods, and the notion of specific subject matter developed by the Court of Justice.

The application of the principle of exhaustion is subject to the fulfilment of two conditions: the branded product must have been placed on the market in the European Union or the European Economic Area with the trademark holder’s consent. Branded products will not be considered to have been placed on the market when the holder has “imported them into the European Economic Area with a view to selling them there, or when he has offered them for sale to consumers in the European Economic Area, in his own stores or in those of a related company, but has failed to sell them”: placing a branded product on the market therefore involves a first transfer of ownership, which alone enables the new owner of the goods to dispose of them.

The concept of upcycling is to give a second life to products that, by hypothesis, have already been sold or even subjected to multiple successive sales: upcycling of branded products involves modifying products already existing on the market. If upcyclers are sued for infringement by trademark holders, they could invoke the principal of exhaustion of the trademark holders’ rights as a defence.

Since the principle of exhaustion is a defence that can be invoked by upcyclers, the conditions of this exhaustion must, in principle, be proven by them. However, proving these conditions can be difficult, especially if branded products are subject to successive resales or if the third-party upcycler does not have access to this type of information; for example, if the trademark holder markets their products through an exclusive distribution system.

That is why the Court of Justice considers that if the third-party upcycler manages to demonstrate a “real risk of partitioning of national markets if they bear the burden of proof”, the burden of proof regarding the initial and consented marketing of the products outside the European Economic Area will lie with the holder of the upcycled mark. And once this proof is provided, it will then be incumbent on the upcycler to prove the existence of the trademark holder’s consent to the subsequent marketing of their products in the European Economic Area.

However, despite the fact that the principle of exhaustion is generally conducive to upcycling practices, the trademark holder of the used trademark has the option to object to the subsequent marketing of their marked products if they justify a legitimate reason.

Indeed, paragraph 2 of Article L. 713-4 of the French Intellectual Property Code sets a limit on the application of the principle of exhaustion and states that the trademark holder may object to any new act of marketing if they justify a legitimate reason.

Legitimate reasons include, “in particular”, the subsequent modification or alteration of the products’ condition. The presence of the word “particularly” indicates that the list is not exhaustive and that legitimate reasons can therefore cover many cases. Among those recognised by the Court of Justice, alteration of the original condition of the product as well as harm to the reputation of the trademark or its holder are two legitimate reasons that can be invoked by the holder of upcycled branded products.

Regarding the alteration of the original condition of the upcycled product: The Court of Justice has specified that respecting the function of guaranteeing the identity of origin of a trademark implies that the final consumer can be certain that a branded product they wish to purchase has not been subject, at a previous stage of its commercialisation, to “an intervention carried out by a third party without the consent of the trademark holder, which has affected the product in its original state”.

The risk of altering the authentic product resulting from the upcycling operation justifies that trademark holders whose marks have been used without their consent may object to their commercialisation. Assessing this legitimate reason requires taking into account the nature of the upcycled product and the upcycling process, to determine whether the mark remains capable of fulfilling its essential function of guaranteeing origin, despite the upcycling operation, which could be an infringement of the integrity of the authentic product.

Regarding harm to the reputation of the trademark or its holder, the Court of Justice requires that, following the upcycling operation, “the presentation of the refurbished product is not such as to harm the reputation of the trademark or its holder”. Such a legitimate reason will be recognised if the presentation of the authentic product is likely to affect the “value of the brand by damaging the image of seriousness and quality associated” with the authentic product and the “confidence it is likely to inspire in the relevant public”. When assessing this legitimate reason, the nature of the product and the market to which it is intended are taken into account.

The holder of the authentic product can rely on these different legitimate reasons if, following the upcycling operation, their trademark is no longer capable of fulfilling its function of guaranteeing identity of origin: if any legitimate reason is recognised, the upcycler cannot rely on the principle of exhaustion and will effectively become a counterfeiter.

Thus, while the exhaustion of rights rule is a defence generally available to upcyclers, this rule has limited application if the original condition of the product is substantially affected or if harm is caused to the reputation of the trademark or its holder.

Upcycling is a “trendy” operation, which fits into a movement of circular economy and reuse of already used products. The practice extends the life of existing materials, and as a result, the need to create new clothing gradually diminishes, allowing the conservation of some of our natural resources. But despite a popular attempt to legitimise the practice, it can become an infringing practice, contrary to trademark law. It all depends on the use made of the authentic sign affixed to the initial product by the third party, as well as the infringement of one of the functions of this mark that may result from it.