[Guest Post] Thrifted is the new black

The IPKat is pleased to publish a guest post by Kat friend Theodora Goula (Hugo Boss), discussing second-hand fashion and trade mark rights per European law. Over to Theodora:

Second-hand fashion and trademark rights’ exhaustion under EU law, a guide for brand owners to “wear” this new trend

by Theodora Goula

Every day, more and more consumers are joining the second-hand fashion movement. From typical brick-and-mortar thrift stores in underground areas to sophisticated pre-loved shops in high streets and online second-hand marketplaces, consumers love to go second-hand “hunting”, as they call it. They are searching for unique pieces that are affordable and sustainable. According to Boston Consulting Group, the value of the second-hand industry is already 3% to 5% of the general fashion sales, and it’s expected to grow up to 40% in the coming years (see here).

So, what does this mean for the IP world? Think about trademark rights’ exhaustion, parallel imported goods, but also repackaging, upcycling of second-hand goods and, of course, counterfeit second-hand goods. Let’s start exploring the above issues from an EU perspective, aiming to give some guidance to brand owners.

Exhaustion of rights

The first question is whether trademark rights in second-hand fashion have been exhausted. The answer is not simple. Article 15.1 of the Trade Mark Directive states that trademark rights are exhausted if the goods bearing the trademark have been put on the market in the EEA (European Economic Area) by trademark owners or with their consent. However, how can trademark owners know for sure where second-hand products were initially put on the market? They were usually produced many years ago, and their traceability is almost impossible. In addition, even if trademark owners know in which country they first authorized their sale, is this the sustainable thing to do, to object to their resale just because they are “grey market goods”?

The second question is whether any of the exceptions to trademark exhaustion apply. Under Article 15.2 of the Trade Mark Directive, significant damage to a trademark’s reputation is a valid reason for trademark owners to oppose further commercialization of the goods. The CJEU in Christian Dior v. Evora, C-337/95 (see ECLI:EU:C:1997:517) held that the above Article applies, particularly for luxury brands, as long as the brand owner can prove the brand’s aura of luxury has been severely damaged by how the reseller advertises the goods (para. 44-48). Some thrift store clothes can be hung carelessly and in bulk. At the same time, they are generally advertised with big discount signs or cheap materials, nothing like the aura of luxury of an authorized retail shop. One could argue that this takes away the aura of luxury and distorts the brand’s reputation. However, suppose the advertising method used by the reseller can be seen as a common one in the second-hand industry, and there is no substantial evidence of serious damage to the brand’s reputation. In that case, the brand owner is unlikely to stop the undesirable sale of second-hand goods.

Moreover, the CJEU in BMW v. Deenik, C-63/97 (see ECLI:EU:C:1999:82) held that trademark owners can object to using their marks by third parties if it creates the impression of a commercial affiliation/association between them and those third parties (para. 51, 55). Thus, second-hand sellers should keep the use of any marks to a minimum, only to identify the source of their products. They need to state clearly that they sell second-hand pieces and that their shops or websites have no affiliation with the brands they offer.

De-branding and repackaging

De-branding occurs when the trademark is removed, or the parallel importer does not affix the trade mark to the new package. As such, brand owners can invoke de-branding against upcycling, especially regarding trademarks and products of high reputation. According to the CJEU in Portakabin. v. Primakabin, C-558/08, para. 86 (see ECLI:EU:C:2010:416), in case of de-branding, trademark owners can prevent the reseller from using their trademark to advertise that resale. Meanwhile, in Boehringer Ingelheim v. Swingward, C-348/04, para. 45-47 (see ECLI:EU:C:2007:249), the Court stated that if a parallel importer fails to affix the trade mark to the new exterior package (‘de-branding’) is, in principle, liable to damage the trade mark’s reputation, which is a question of fact for the national courts to decide on a case-by-case basis. Despite the above, upcycling designers could counter-claim that upcycling boosts a brand’s reputation and is a solution to the unsustainable current fashion model.

On the other hand, second-hand sales may also involve repackaging. As the CJEU held in BMS v. Paranova, C-427/93, C-429/93 and C-436/93 (see ECLI:EU:C:1996:282), this could be legitimate, provided that some standards are being met inter alia, the repackaging doesn’t adversely affect the quality of the goods, there is enough information on the new packaging to identify the reseller, and the new packaging has good quality that respects the brand’s reputation (para. 49,50, 75).

Counterfeit goods

Last but not least, a hot topic for second-hand fashion is the resale of counterfeit goods. Second-hand products were usually produced years ago, and it is hard to identify their counterfeits. Brands may lack the product knowledge to do so, while low prices can no longer serve as a counterfeit indicator, as second-hand goods are usually cheaper; thus, it is easy to miss them. Counterfeiters might use second-hand sales to disguise their fakes as more affordable second-hand goods.

Comments

EU law appears to give brand owners space to act against second-hand sales. Nevertheless, as second-hand fashion grows, brand owners must understand the need to embrace it rather than object to it. After all, second-hand might be the answer or a big step toward making fashion more sustainable.

Many brands have started entering the second-hand market, creating web shops to sell vintage items or allow consumers to list their pre-owned items. Brands could also create pop-up or permanent establishments to sell pre-owned goods. This could help brands control the quality of second-hand goods and also preserve any aura of luxury. Moreover, it could give brands part of the second-hand turnover they would miss otherwise. Brands could also attract new audiences and stay relevant, showing that they keep evolving to meet the needs of their audience. Finally, brands could use the data of second-hand buyers to find new target audiences.

In addition, brands could partner with second-hand retailers and online platforms like Vestiaire, Depop and Vinted. This is beneficial for both brand owners and online platforms. Online platforms will handle all technical aspects like shipping, logistics and authentication while gaining credibility, more popularity, and customers by partnering with brand owners. Brands could benefit from the online platforms’ logistic systems without investing in their own.

Finally, what is essential is for brand owners and online platforms to work together to fight counterfeit products. Transparency and intensive training from brand owners are critical to spotting and stopping fakes quickly. Additionally, online platforms should have strict regulations for counterfeit sellers. Product authentication processes and penalties for counterfeit resellers could be used to contain the situation. Lastly, the blockchain could provide a solution to eliminating fakes by tracking authentic products.

All in all, the second-hand movement seems to be a strong one. Of course, only time will show how it is going to evolve. Fashion brands should certainly explore this new trend and learn how to thrive through it.

Credits:

The first image is by OpenClipart-Vectors from Pixabay.

The second image is by MJ Jin from Pixabay.

The third image is by No-longer-here from Pixabay.