Intellectual property law eliminates the commercial pleasure of UPcycling



Those looking to make some eco-friendly money by repurposing second-hand goods should just pay attention to the brand they’re teasing. | Content partnership

Businesses seeking to make a profit by recycling branded goods are being warned they could be subject to legal action from image-conscious companies, after Nike forced a US art collective to pull its range of recycled “Satan shoes”.

Upcycling – what’s not to love? The process of reworking an item to give it new life achieves not one but two of the three R’s of the Holy Grail of recycling – ‘reduce’ and ‘reuse’.

Whether it’s an avid tailor turning an old denim jacket into a cool quirky item, or a thrift store owner upholstering an old armchair into a desirable piece of furniture, this reimagining of second-hand goods for to create a product of higher quality or value than the original is surely nothing short of awesome.

But there is a catch, and it could get expensive. Companies that engage in upcycling could find themselves on the wrong side of intellectual property infringement law if they reuse branded products in a way that the original owner objects to.

Court cases involving upcycling and trademark infringement have yet to arise in New Zealand, but the star child of the problem comes from the United States – a lawsuit involving fitness wear company Nike is suing the collective of art MSCHF (“Mischief”, get it?) a potentially dubious shoe collection.

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

Nicknamed the “Satan shoe”, the laces bear a bronze pentagram (five-pointed star symbolizing the five wounds that Jesus Christ received during his crucifixion), the tongue of the shoe has an inverted cross; there is also an embroidered Bible reference of Luke 10:18 (“I saw Satan fall like lightning from heaven”), and an air bubble containing red ink heightened with the blood of MSCHF employees.

For good measure, 666 pairs of sneakers were made. They hit the market for over $1600 a pair and sold out within the first minute. Some pairs have reached $6,000 when sold online.

Nike was not happy. The company argued that the modified sneakers infringed its trademark and were “likely to cause confusion and dilution and create an erroneous association between the products of MSCHF and Nike,” according to court documents.

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

The company also provided evidence through screenshots of social media comments that it suffered a reputational blow, with potential and current consumers led to believe that the Nike brand endorsed Satanism.

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

While New Zealand has yet to see a case like this, marketing and legal experts say companies should consider the possible ramifications of trademark infringement involving recycling.

Bell Gully partner and intellectual property lawyer Tania Goatley and her colleague Olivia Zambuto weighed in on the matter.

According to Sebastien Aymeric, Senior Partner at Bell Gully, someone who takes up upcycling as a hobby can breathe easy because small-scale, non-profit activities for personal use will not be governed by laws such as than the Fair Trading Act.

Even if someone occasionally sells a pair of modified Levi’s jeans at a local market, or modifies a small number of garments to sell them online, they are unlikely to come under scrutiny, says- he.

But if a person or company seeks to appropriate a brand’s image in their own product and resell hundreds of those items, as MSCHF wanted to do, they could be in legal trouble.

Bell Gully senior partner Sebastien Aymeric said small-scale, non-profit recycling for personal use would not fall under laws such as the Fair Trading Act. Photo: Supplied

“If you are a consumer modifying your own shoes for your own enjoyment, you will not fall under the Fair Trading Act,” says Aymeric. “But if your business needs to modify shoes to resell them, and you do so in a way that could potentially be offensive or damage a trademark owner’s reputation, selling those products could confuse consumers. consumers or mislead them into believing that the brand owner has endorsed you or is affiliated with you. »

Bodo Lang, a marketing expert and associate professor at the University of Auckland Business School, says big companies, such as Nike, will be extremely keen to maintain their image amid upcycling.

“They’ve spent hundreds of millions of dollars building their brand, with young, fit, smiling people in their ads… They’ll be analyzing social media to make sure their brand isn’t being misused. way they don’t like.”

This does not mean that all product modifications would receive this reaction. Another company, whose image might confuse Satanic imagery, might have welcomed the modified sneaker, as it could be seen as enhancing their brand, Lang says.

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

“It’s the last thing Nike wants to be associated with. The brand has a large target market and reaches 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 recycled or modified products, Lang says.

The first is the scale of production. Another question is whether a product has been deconstructed in the recycling process is also important.

For example, Lang says consumers are likely to understand that a garment made from scraps of fabric from a range of jeans brands is not made by the original companies. But it wasn’t clear that the modifications to the “Satan shoe” didn’t come from Nike itself.

A major brand considering legal action will also look at the damage caused by the recycled product, says Sebastien Aymeric of Bell Gully. This could be loss of revenue due to offended consumers moving away from the brand and reputational damage, including brand dilution (loss of exclusivity), such as with the “Satan shoe”.

Aymeric describes the marks as “badges of origin”, which not only indicate which company produced the goods, but also give an indication of the quality of that product.
In this way, modifying a product could have a negative impact on the brand at large.

It’s unclear how New Zealand courts would deal with an overcycling complaint – our law has yet to catch up with the overcycling phenomenon, Aymeric says.

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

This defense has been recognized under trademark law and copyright law in cases allowing parallel importation, according to Goatley and Zambuto.

These laws, however, do not appear to take upcycling into account and only address the exhaustion doctrine in an international import context.

This means that there is a gray area around the place of third parties in the context of upcycling, explains Aymeric.

“Where the law is silent is on whether there is an exhaustion of rights when the product is sold not to the end user, but to someone who is going to make changes to the product and to the brand itself and then sell it for a price. profit.”

There are no general provisions in trademark law regarding whether a trademark owner can prevent the intermediary from making changes to its product and trademark.

In this case, Aymeric says a company would have to fall back on a specific provision of trademark law, which makes it an offense for a purchaser of branded goods to use and alter the brand name. in a way that goes against any contract. between the trademark owner and the buyer.

One way to do this is for a brand owner to make it clear through their product terms of use that items should not be altered. This could mean adding disclaimers to sales labels for retail products.

If the buyer fails to comply with these conditions, it could be considered trademark infringement and the trademark owner then has legal recourse.

Expert advice? Bell Gully’s Tania Goatley and Olivia Zambuto say individual hobbyists who like to get into recycling for personal use can rest easy. But businesses should contact trademark owners and consider seeking permission to use their trademark or seeking a trademark license agreement.

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