Trademark Exhaustion in the Circular Economy: When Does Upcycling Cross the Line into Infringement?

Transforming a battered designer trunk into bespoke Apple Watch bands is sustainable and highly profitable, but is it legal? Welcome to the circular economy, where the eco-conscious art of upcycling collides with intellectual property law.

While the trademark exhaustion (or first sale) doctrine allows thrift shops to resell genuine goods freely once they have been put on the market, upcyclers remain in a precarious position. Because they physically alter products bearing famous logos or marks, they risk triggering the “material alteration” exception, exposing them to infringement suits for confusing consumers or tarnishing a brand’s hard-earned reputation.

This article navigates the high-stakes battlefield between sustainable innovation and brand protection. By unpacking precedent-setting decisions from the 1920s perfume dispute in Prestonettes, Inc. v. Coty to the modern technology clash in Kapil Wadhwa v. Samsung Electronics, it decodes when creative upcycling crosses the line into trademark infringement.

Introduction

We are living in the golden age of the circular economy. Consumers, exhausted by the environmental toll of disposable culture and fast fashion, are demanding sustainable alternatives. Out of this eco-conscious revolution, a massive market for upcycling has emerged. Upcycling is the practice of transforming discarded or vintage pieces into bespoke items of superior quality and value: a pair of worn-out Levi’s and a damaged Gucci scarf are reborn as a high-end, custom patchwork jacket.

It is a victory for the planet, but a headache for intellectual property practitioners. When independent creators repurpose items stamped with famous logos or marks and sell them at a premium, they enter a complex and often hostile legal zone. Brands spend billions building a reputation around their logos and marks, treating them as guarantees of origin and quality. Upcyclers, conversely, argue that if they have lawfully purchased a product, they should have the freedom to dismantle, reconstruct and profit from their creation.

So who wins? Does a brand’s control over its mark last forever, or does a buyer’s right to their physical property prevail? The answer lies in the trademark exhaustion doctrine, and in a critical pitfall called “material alteration”.

The Golden Rule of Resale: The Trademark Exhaustion Doctrine

To understand the upcycler’s legal shield, we have to look at the trademark exhaustion doctrine, frequently called the first sale doctrine. It is the ultimate rule of “no takebacks” in commerce.

When a trademark owner places a product on the market and it is purchased by a consumer, the brand’s right to control what happens to that specific physical item is “exhausted”. If you buy a genuine luxury handbag, the first sale doctrine gives you the right to sell it to a consignment shop, give it to a friend or list it on an online marketplace. The brand cannot sue you for trademark infringement merely because you resold its genuine product.

In India, Sections 30(3) and 30(4) of the Trade Marks Act, 1999 codify this principle. Section 30(3) provides that where goods bearing a registered trade mark have been put on the market by the proprietor or with its consent, their further sale or dealing by a lawful acquirer is not infringement. Section 30(4) withdraws that protection where the proprietor has legitimate reasons to oppose further dealings, in particular where the condition of the goods has been changed or impaired after they were put on the market. The Delhi High Court has read “the market” in Section 30(3) as the international market, so India follows the principle of international exhaustion.

The Exception: Material Alteration and Consumer Confusion

If the exhaustion doctrine is the upcycler’s shield, the “material alteration” exception is the brand owner’s sword. The exhaustion defence protects only items resold in their original condition. Since upcycling fundamentally alters a product, it risks creating a “new” good that falls outside this protection.

A trademark’s core purpose is to prevent consumer confusion. If a creator stitches a vintage designer canvas onto a cheap, generic jacket and leaves the logo prominent, buyers may wrongly assume that the luxury brand sponsored it. If that jacket falls apart, the original brand takes the reputational hit. When upcycled goods cause this post-sale confusion or dilute a brand’s reputation, they cross the line from sustainable art into trademark infringement.

Courts distinguish between honest repair or modest customisation, which is often protected if fully disclosed, and transformative upcycling that creates an entirely new product while still trading on the original mark.

Legal Battles Around the World

The dispute between modifiers and brand owners is not new. For over a century, courts have been called upon to decide how far one can lawfully modify or alter branded goods.

• Prestonettes, Inc. v. Coty (1924): Over a century ago, the perfumer Coty sued Prestonettes for rebottling its perfume, compressing its loose powder into compacts and selling them under the Coty name. The U.S. Supreme Court held that Prestonettes could use the trademark to state truthfully the origin of the contents, provided its labels stated prominently that the products had been independently rebottled or compounded by Prestonettes, which was not connected with Coty. The decision established the foundational rule for modern upcyclers: absolute transparency is the best defence.
• Champion Spark Plug Co. v. Sanders (1947): The U.S. Supreme Court addressed reconditioned goods when Champion sued Sanders for repairing and reselling its used spark plugs with the original trademark visible. The Court allowed the sales to continue, provided that “Repaired” or “Used” was stamped on the plugs themselves and the packaging stated that the plugs were used and reconditioned, giving the reconditioner’s name and address. Full disclosure, the Court held, gives the manufacturer all the protection to which it is entitled.
• Hermès v. Maison R&C / Atelier R&C (2025): In a decision of 10 April 2025, the Paris Judicial Court ruled in favour of Hermès against an independent label that upcycled genuine Hermès silk scarves by cutting them into panels and sewing them onto Levi’s denim jackets. The court held that Maison R&C and Atelier R&C had committed both copyright and trademark infringement. Fundamentally altering the scarves and incorporating them into a new product meant that exhaustion did not apply, and the continued use of the Hermès name and hashtags on the jackets and in online marketing violated the brand’s exclusive rights. Defences based on freedom of artistic expression and environmental benefit were rejected.
• Louis Vuitton’s “remade bags” case in China (2025): In November 2025, the Hangzhou Intermediate People’s Court ruled against a Shenzhen-based company that dismantled authentic second-hand Louis Vuitton handbags and reassembled the monogram canvas into entirely new bags, leaving the LV letters and floral motifs prominently visible. The court rejected the defendant’s reliance on trademark exhaustion, reasoning that the doctrine presupposes that the goods resold are themselves unchanged; substantial dismantling and reconstruction produced new goods, and the prominent marks were likely to mislead consumers into believing that the bags were made by or connected with Louis Vuitton. The court found trademark infringement and unfair competition, ordered the sales to stop and the stock to be destroyed, and awarded damages of about RMB 1.05 million.
• Chanel v. Kamad Reworked (2026): On 21 May 2026, the Paris Judicial Court held that a French upcycling company that repurposed authentic Chanel buttons, belt buckles and clasps into new commercial jewellery had committed trademark infringement. The court rejected the exhaustion defence, ruling that dismantling genuine components to manufacture an entirely different product, which Chanel had never put on the market, exceeds the scope of lawful resale. Despite the upcycler’s own branding on the reverse of the pieces and disclaimers on its website, the court found that the prominent display of the CC monogram created a likelihood of confusion, and it ordered Kamad Reworked to halt sales, destroy its remaining stock and pay provisional damages of €75,000. Louis Vuitton followed suit against the same upcycler: in September 2026 the Paris court ordered Kamad Reworked to pay €920,000 in damages for jewellery made from dismantled Louis Vuitton components, again rejecting the exhaustion defence.

The Indian Position on Upcycling and Refurbishment

Kapil Wadhwa v. Samsung Electronics (2012)

In a landmark ruling on international exhaustion, a Division Bench of the Delhi High Court held that India follows the principle of international exhaustion under Sections 30(3) and 30(4) of the Trade Marks Act, 1999. Kapil Wadhwa was accordingly permitted to import genuine Samsung printers from foreign markets and resell them in India. However, the court made it clear that the exhaustion defence is lost if the goods are “changed or impaired” after being put on the market, and that “legitimate reasons” under Section 30(4) can extend to differences in warranty, after-sales service, packaging and product literature.

The Bench therefore required the importers to display prominently in their showrooms a notice stating that the Samsung products sold were imported into India, that Samsung (Korea) neither warranted the quality of the goods nor provided after-sales service, and that the importers themselves did so. The lesson for resellers is that participating in the secondary market is lawful, but the protection is lost if the goods are altered, and any difference in warranty or service must be clearly disclosed.

Seagate Technology LLC v. Daichi International (2024)

Seagate and Western Digital sued local refurbishers who imported end-of-life hard disk drives, erased the original branding, refurbished the drives and sold them under their own names, such as Daichi. The Delhi High Court held that Section 30(3) protects the further sale of goods bearing the registered mark: the complete removal or disfigurement of the original trademark itself amounts to a change or impairment of the goods under Section 30(4), so the proprietor may oppose de-branded sales. Refurbished drives can, however, be sold lawfully if strict disclosure conditions are followed. The packaging must name the original manufacturer (using the word mark only, without logos) but not so prominently as to suggest an original product; it must carry a prominent “Used and Refurbished” statement identifying the refurbisher; and it must make clear that there is no manufacturer’s warranty or service, with the refurbisher’s own warranty and customer-care details provided instead. The same disclosures must appear on websites, e-commerce listings and promotional material.

The Corporate Counter-Attack and Digital Marketplaces

Major brands are not just fighting back in court; they are aggressively entering the circular economy to maintain control over their intellectual property and secondary markets. Programmes such as Patagonia Worn Wear, Rolex Certified Pre-Owned and Gucci Vault (now Gucci Vintage) show how brands are pre-empting unauthorised upcyclers by doing it themselves.

Furthermore, today’s upcyclers rely heavily on digital platforms such as Etsy, Depop and Grailed to reach consumers. These marketplaces enforce strict IP takedown policies. A single infringement complaint from a brand can result in an upcycler’s digital storefront being shut down instantly, making legal compliance not just a courtroom issue but a matter of daily business survival.

Actionable Guidelines: An Upcycler’s Survival Guide

To navigate this ambiguous legal space safely, creators should adopt strict business practices:

1. Disclaimer rule: Absolute transparency is non-negotiable. Disclaimers must be conspicuous, not buried in fine print, and must state clearly that the product has been independently modified and is in no way affiliated with, sponsored by or endorsed by the original brand, including the absence of any manufacturer’s warranty or after-sales service. Remember, though, that the Chanel decision shows that a disclaimer alone will not save a product that displays a famous logo on an entirely new type of item.
2. Component rule: Be especially careful when using a branded item as raw material. Cutting up a vintage designer bag to make Apple Watch bands or jewellery often triggers infringement because it transforms the item into a completely new product category. Modifying the original item itself (for example, embroidering an existing denim jacket) is generally much safer.
3. De-branding: When in doubt, or when fundamentally transforming an item from its original purpose, remove the original logos entirely. If the famous logo is not visible on the newly created product, the risk of consumer confusion and a subsequent trademark lawsuit plummets. (Note that this applies to transformed products; asSeagate shows, stripping the mark from a refurbished product and reselling it as one’s own raises a different problem.)

Conclusion

The circular economy is not a fleeting trend; it is a vital, necessary evolution in how humanity consumes. Upcycling stands at the creative forefront of this movement, turning the wasteful linear economy on its head. However, saving the planet does not grant a free pass to trample on intellectual property rights.

The trademark exhaustion doctrine remains a vital legal framework that keeps secondary markets alive, preventing major corporations from monopolising the lifespan of every product they make. Yet, as the legal battles discussed above show, there is a strict boundary. Brand owners invest heavily in their reputations, and they have every right to protect consumers from being misled by deceptively altered goods.

For the circular economy to thrive, sustainability and trademark law must find a way to coexist. Upcyclers must embrace radical transparency, using bold, inescapable disclaimers, and must avoid using famous logos simply as aesthetic stickers for entirely new products. When creators respect the true purpose of a trademark, to tell the truth about where a product comes from, they can build sustainable businesses without ending up in court.

References

1. Prestonettes, Inc. v. Coty, 264 U.S. 359 (1924).
2. Champion Spark Plug Co. v. Sanders, 331 U.S. 125 (1947).
3. Kapil Wadhwa & Ors. v. Samsung Electronics Co. Ltd. & Anr., 194 (2012) DLT 23 (DB), Delhi High Court, judgment dated 3 October 2012.
4. Seagate Technology LLC v. Daichi International, CS(COMM) 67/2024, Delhi High Court, judgment dated 21 May 2024, 2024:DHC:4193.
5. Hermès International & Hermès Sellier v. Maison R&C, Atelier R&C & Anr., Tribunal judiciaire de Paris, 10 April 2025 (RG No. 22/10720).
6. Louis Vuitton Malletier v. a Shenzhen-based cultural media company (the “remade bags” case), Hangzhou Intermediate People’s Court, judgment dated 11 November 2025.
7. Chanel v. Kamad Reworked, Tribunal judiciaire de Paris, 21 May 2026 (RG No. 25/00621).
8. Louis Vuitton Malletier v. Kamad Reworked, Tribunal judiciaire de Paris, September 2026.
9. The Trade Marks Act, 1999 (India), Sections 30(3) and 30(4).

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