The IP law takes the commercial fun out of UPcycling

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Those interested in making eco-friendly money from repurposing products they love should just pay attention to whose trademarks they’re teasing | content partnership

Businesses looking to make a profit by upcycling branded items have been warned they could be vulnerable to legal action from image-conscious companies after Nike forced a US art collective to withdraw its upcycled ‘Satan Shoe’ line.

Upcycling – what’s not to like? The process of revamping an item to give it new life fulfills not one, but two of the three Holy Grail Rs of recycling – “Reduce” and “Reuse”.

Whether it’s an enthusiastic seamstress reupholstering an old denim jacket into a cool original piece, or a thrift shopkeeper reupholstering an old armchair into a desirable piece of furniture, this reinvention of used goods to create a product of higher quality or value creating original is certainly nothing but awesome.

But there’s a catch, and it could get expensive. Companies that engage in upcycling could find themselves on the wrong side of the intellectual property infringement law if they repurpose branded items in a way that offends the original owner.

Legal cases related to upcycling and trademark infringement have not yet surfaced in New Zealand, but the poster child for the problem comes from the US – a lawsuit by fitness apparel company Nike against art collective MSCHF (“Mischief”, got it?). a potentially questionable shoe collection.

It started in 2021 when MSCHF (which, according to this New York Times article, prides itself on viral stunts and products that explore ideas and poke fun at things) collaborated with an upcycled version of the Nike Air Max 97 sneaker brought out rapper Lil Nas X.

The laces, referred to as “Satan’s shoe”, bear a bronze pentagram (five-pointed star symbolizing the five wounds suffered by Jesus Christ during his crucifixion), the tongue of the shoe has an inverted cross; There is also an embroidered Bible reference from Luke 10:18 (“I saw Satan fall from heaven like lightning”) and a red ink bubble laced with the blood of MSCHF staff.

Also, 666 pairs of sneakers were made. They launched for more than $1600 a pair and sold out in the first minute. Some pairs have reached $6000 when resold online.

Nike wasn’t happy. The company argued that the modified sneakers infringed on its trademark and, according to court documents, “would likely cause confusion and dilution and create a false association between MSCHF and Nike’s products.”

“Decisions about which products to swoosh over [Nike tick logo] on belong to Nike, not third parties like MSCHF,” said Nike.

The company also presented evidence that it had suffered reputational damage through screenshots of comments posted on social media, leading potential and current consumers to believe that the Nike brand endorsed Satanism.

That case was eventually settled out of court, with MSCHF issuing a voluntary recall of the sneakers.

While New Zealand has yet to see such a case, marketing and legal experts say businesses should think about the potential impact of trademark infringement related to upcycling.

Bell Gully’s partner and intellectual property attorney Tania Goatley and her colleague Olivia Zambuto have been handling the matter.

Someone who takes up upcycling as a hobby can breathe easy, says Bell Gully’s senior associate Sebastien Aymeric, because small, charitable activities for personal use aren’t covered by laws like the Fair Trading Act.

Even if someone occasionally sells a modified pair of Levi’s jeans at a local market or alters a small number of clothing items to sell online, they probably won’t get too much scrutiny, he says.

But if an individual or company tries to appropriate a brand’s image in their own product and resell hundreds of those items, as MSCHF wanted, then they could get into legal trouble.

Sebastien Aymeric, a senior associate at Bell Gully, says small-scale upcycling for personal non-profit use doesn’t fall under laws like the Fair Trading Act. Photo: Delivered

“If you, as a consumer, modify your own shoes for your own pleasure, you fall outside the scope of the Fair Trading Act,” says Aymeric. “But if your business is modifying shoes to resell them and you do it in a way that is potentially objectionable or could damage a brand owner’s reputation, then selling these products could confuse consumers or entice them to that the trademark owner has consented to or is affiliated with you to think.”

Bodo Lang, marketing expert and associate professor at the University of Auckland Business School, says that in the face of upcycling, big companies like Nike will be very concerned about protecting their image.

“They’ve spent hundreds of millions of dollars creating their brand, with young, fit smileys in their ads… They’ll be scanning social media to make sure their brand isn’t being used in a way they don’t like.”

This does not mean that all product changes would receive this reaction. Another company whose image could merge with the satanic imagery might have welcomed the modified sneaker as it could enhance its brand, Lang says.

But that was clearly not the case for Nike, which wants to maintain mass appeal and societal acceptance.

“It’s the last thing Nike wants to be associated with. The brand has a large target market and appeals to a range of different types of consumers,” he says. “It’s a potential disaster for them.”

There are a number of different factors companies will consider when looking at upcycled or modified products, Lang says.

One is the production scale. It is also important whether a product was deconstructed in the upcycling process.

For example, Lang says consumers are likely to understand that a garment made from scraps of material from a range of denim brands is not made by the original companies. But it wasn’t clear that the modifications in the “Satan Shoe” weren’t made by Nike themselves.

A major brand considering legal action will also look into what damage the upcycled product has caused, says Bell Gully’s Sebastien Aymeric. This could result in lost revenue as offended consumers move away from the brand and reputational damage including brand dilution (loss of exclusivity) as in the “Satan Shoe”.

Aymeric describes brands as “signs of origin” that not only show which company produces the goods, but also give an indication of the quality of the product.
This way, changing a product could have a negative impact on the broader brand.

How New Zealand courts would handle an upcycling lawsuit is unknown — our law has yet to catch up with the upcycling phenomenon, says Aymeric.

However, one legal defense against trademark infringement that might apply in an upcycling situation is the “exhaustion doctrine”. This means once a product is sold in the market by the brand owner who holds the intellectual property rights, the trademark rights can no longer be exercised.

This defense has been recognized under the Trade Marks Act and the Copyright Act in cases that permit parallel import, according to Goatley and Zambuto.

However, these laws do not appear to take upcycling into account and only address the doctrine of exhaustion in an import context at an international level.

That means there’s a gray area where third parties fit in the context of upcycling, says Aymeric.

“Where the law is silent is the question of whether there is exhaustion of rights if the product is not sold to the end consumer but to someone who makes modifications to the product and brand themselves and then sells it for a benefit.”

Trademark law does not contain general provisions as to whether a trademark owner can prevent the middle person from making changes to their product and trademark.

In that case, Aymeric says, a company would have to resort to a specific provision in trademark law that provides that it is an infringement for a buyer of branded goods to use and alter the trademark in a way that violates any contract between the brand owner and the buyer.

One way to achieve this is for a brand owner to make it clear through the terms of use for their products that items may not be modified. This could mean adding disclaimers to sales labels for retail goods.

If the buyer violates these conditions, this can be considered a trademark infringement and the trademark owner must then take legal action.

The advice of the experts? Bell Gully’s Tania Goatley and Olivia Zambuto say there’s peace of mind for individual hobbyists keen to dabble in upcycling for personal use. However, businesses should reach out to brand owners and consider asking permission to use their brand or seeking a brand license agreement.


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