Building trademark expertise since 1986 JULY/AUGUST 2009| Issue 219 | Trash or treasure? Controlling brands in the age of recycling L’Oréal v eBay L’Oréal takes on eBay in France and the UK Copad v Christian Dior Discounting premium goods
www.ipworld.com Building trademark expertise since 1986
Trash or treasure? K Controlling your brand in the age of upcycling
By Andrea Anderson, Holland & Hart
IN SUMMARY ecycling is so ‘90s. What’s hot now owner authorises the initial sale of branded R is “upcycling,” the creation of goods, it implicitly grants a licence to use its – Upcycling is the creation of jewellery, jewellery, fashion and objects for the trademark to future sellers of those goods, fashion and other objects assembled home assembled from used, thrown-out, even if those sellers are outside the found and repurposed elements, sometimes authorised distribution chain.1 from used and thrown-out items, known as “trashion.” Thanks to the For example, a consumer who buys a such as product packaging. As a upcycling movement, the eco-conscious tennis racquet at retail and resells it on eBay result, these upcycled goods often consumer can store her writing instruments has every right to inform consumers of the in a pencil case made from OREO cookie racquet’s brand and even to promote the carry the names of high street wrappers, carry that pencil case in a purse racquet under the brand name. But what if brands. But what are the implications made from FIRESTONE tyre inner tubes, that same consumer fashions a shoddy lawn for trademark owners when their and accent her home with wall art crafted chair from several used tennis racquets and from TIDE and GAIN detergent bottles. sells it on eBay? Is the racquet company brand names appear on recycled These “trashion” products possess a certain powerless to prevent its brand name from goods that are being sold? eco-chic cachet, particularly where they being used in connection with inferior- display the trademarks and other branding of quality lawn furniture? the original repurposed elements. Not necessarily. The exhaustion doctrine AUTHOR Without a doubt, upcycling confers an or “first sale” rule prevents a brand owner Andrea Anderson is partner at Holland environmental benefit by reducing, or at least from taking action only where the branded & Hart in Boulder, Colorado. Andrea delaying, the addition of trash to our goods are sold in their original unaltered provides a full complement of landfills. But even the most eco-conscious state. However, there is an exception to the trademark-related services to an brand owners have a right to be concerned rule for instances where a branded product international clientele with an about the uncontrolled use of their has been “materially altered” in some aspect, emphasis on strategic counselling and trademarks on upcycled products. but nevertheless sold as “new.”2 In these dispute resolution. Notwithstanding these concerns, the law is instances, courts have held that the alteration fairly well-settled that a brand owner has renders the product infringing. Courts almost no right to control the resale of its reason that, when consumers buy a branded branded goods. The legal doctrine of product, they believe they are receiving, and “exhaustion” provides that once a trademark are entitled to receive, the exact product as owner has made the initial sale of its product, produced or authorised by the brand owner. it cannot use the trademark laws to control Therefore, when a product bearing a how and where its product is marketed or trademark has been altered, consumers are sold. In other words, when the trademark likely to be deceived, confused, or mistaken
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about the qualities, features, or characteristics have three options: (1) ignore the upcycled establish the brand owner’s right to monitor of the product. It is this likelihood of product; (2) send a demand letter or file a the quality of products and to reject confusion, mistake or deception that creates lawsuit; or (3) attempt to negotiate a licence products that do not meet its standards. In liability for trademark infringement. with the upcycler, through which the addition, the licence should specify the types A “material alteration” leading to company may control the use of its brand. of products that the brand owner’s trademark infringement liability can include packaging or product may be used to create, repackaging or reconstruction of a product.3 Option 1 and it should require the upcycler to obtain For example, in a 1994 case brought by Ignoring the issue is probably the most advance written approval for any additional Eastman Kodak, a defendant created and sold broadly employed strategy. Some brand products. Other important provisions disposable cameras constructed from used owners may assume, not without reason, that include the upcycler’s indemnification of the parts, including lenses that it obtained from the use of their brands in upcycled products brand owner and a disclaimer of all used and discarded disposable KODAK is not harming brand image and that warranties by the brand owner. cameras. Although the defendant sold the consumers are unlikely to attribute the Kraft Foods Company chose the licensing cameras under a different mark, the upcycled product to the brand owner. But option, and its partnership with Terracycle, a packaging for the cameras prominently ignoring upcycling entirely can lead to a host company that makes innovative products featured the phrase “KODAK lens.” The of problems. First, it sets a bad precedent. from “waste-stream” materials, is one of the court found that this prominent use of the Even if the first upcycler produces harmless most successful and high-profile upcycling KODAK mark was likely to cause consumers products on a small scale, the next upcycler arrangements today. As a part of their to mistakenly believe that Eastman Kodak might not. Failure to police the first could partnership, both Kraft and Terracycle endorsed the quality of these used and weaken a brand owner’s case against the encourage consumers to send packaging potentially damaged lenses. Consequently, second. More concerning, in the event that from Kraft’s BALANCE and SOUTH the court preliminarily enjoined the an upcycled product is the subject of a BEACH LIVING bars, CAPRI SUN defendant from prominently displaying the product liability claim, evidence that a beverages, and CHIPS AHOY! and OREO KODAK mark on its packaging.4 company knew its packaging was used to cookies to Terracycle. Kraft even pays Based on this reasoning, there are good create a potentially harmful product but consumers a few cents for every item as long arguments, that, in some instances, the failed to take action could be damaging from as the proceeds are directed to non-profit presence of a brand name on an upcycled legal and public relations standpoints. groups. Terracycle converts these items into product is likely to cause consumers to pencil cases, backpacks, shopping bags, mistakenly believe that the product was Option 2 homework folders and lunch boxes that are produced under the authority of the brand Sending a demand letter and/or initiating a sold through retailers such as Target and owner or that the product complies with the lawsuit are among the most direct ways to Office Max. As a result of this partnership, brand owner’s quality standards. approach the situation. Before taking legal Kraft receives favourable publicity and Take, for example, a messenger bag action, however, companies should seriously increased exposure for its brands while constructed from only one brand of cookie consider obtaining a consumer survey to Terracycle receives a steady stream of raw wrappers, where the trademark is determine whether confusion is likely. Solid material for its products. prominently and frequently featured in the survey evidence showing a likelihood of Of course, not every reuse or repurposing product design. A reasonable consumer could consumer confusion may be critical to any of a branded product or packaging is a conclude, based on the prominence of the case, since the use of brands in upcycled candidate for an upcycling partnership. trademark, that this product was produced products is a fairly novel issue. Aside from the Where a product is poorly constructed, by the brand owner or under its authority. legal merits of a lawsuit, companies should doesn’t fit with the brand image, or portrays Consider, on the other hand, a tin wall also consider the public relations fall-out the brand unfavourably, a brand owner ornament, constructed from several different associated with their actions. A company’s should consider taking affirmative measures materials, including reclaimed cookie tins, zero-tolerance approach to the repurposing of to prevent the misuse of its brand. K anti-freeze containers, and SPAM spiced ham its branded packaging could result in negative cans. Here, the appearance of the brands is reports in the press and blogosphere that Notes partial and incidental. When confronted with portray a company as a polluter with little 1 Polymer Technology Corp. v. Mimran, 975 this product, a reasonable consumer would concern for the environmental impacts of its F.2d 58, 61 (2d Cir. 1992); see also not likely associate it with any one brand products and packaging. Restatement Third, Unfair Competition § 24, owner. Consequently, the product should not comment b (1995). be deemed infringing. These examples Option 3 2 Brilliance Audio, Inc. v. Haights Cross illustrate that, like every trademark dispute, Pursuing a licensing arrangement with an Communications, Inc., 474 F.3d 365, 370 whether the use of a brand name on an upcycler may prove to be a more productive (6th Cir. 2007); Davidoff & CIE, S.A. v. PLD upcycled product constitutes infringement is approach for both the brand owner and the Intern. Corp. 263 F.3d 1297, 1302-04 (11th a highly fact-intensive inquiry, which should upcycler. Most significantly, under a Cir. 2001); see also Restatement Third, depend on the subtleties of each case. licensing arrangement, a brand owner can Unfair Competition § 24, comment d (1995). Without clear legal guidance on the issue, control the use of its brand and ensure that 3 Eastman Kodak Co. v. Photaz Imports, Ltd, what strategy should a company adopt if it any upcycled products are consistent with 853 F. Supp. 667 , 674 (W.D.N.Y. 1993) aff’d encounters upcycled products incorporating its brand image. Any licence with an without pub. op. 28 F.3d 102 (2d Cir. 1994). its brands? In most instances, a company will upcycler should contain provisions that 4 Id. at 678. www.ipworld.com Trademark World #219 | July/August 2009 | 2