The popularity of pre-owned luxury goods is evident in the success of platforms like Vinted, Vestiaire Collective, The RealReal, Thrift+, and Back Market. Other companies are also adapting to compete with them: In October, for example, eBay scrapped seller fees for private users in almost all product categories. At the same time, the e-commerce platform revealed that pre-owned goods currently represent 40 percent of its gross merchandise volume. Despite – or perhaps because of – its attractiveness to price-sensitive consumers, the resale market presents several challenges for brand owners. Most notable among these are the potential loss of revenue from new products, infiltration of counterfeit or unauthorized goods, and harm to brand reputation due to faulty, damaged, or substandard goods and services.
However, intellectual property protections can offer limited ways to address these issues. Once goods are sold, a trademark holder’s rights are generally exhausted, meaning that, outside exceptional circumstances, brand owners cannot prevent subsequent sales of their trademark-bearing products via infringement litigation. But while brands’ recourse is limited, it is not non-existent. In some recent cases, courts have seemingly recognized the damage that can be caused in some resale scenarios and the remedies available under trademark law.
For example, in February 2024, a jury in the U.S. found in favor of Chanel in a counterfeiting, trademark infringement, false advertising and unfair competition case against reseller What Goes Around Comes Around (“WGACA”). Chanel had accused WGACA of selling counterfeit bags and other products not meant for sale, such as display-only items. WGACA denied the allegations waged against it by Chanel, but a New York federal jury unanimously backed Chanel on all counts and awarded the luxury company statutory damages of $4 million, with additional remedies, including equitable remedies, expected.
Control in the European Context
Not limited to cases in the U.S., the Court of Justice of the European Union (“CJEU”) has issued several judgments that center on the resale of branded goods, though their examination must be prefaced with an acknowledgment that these cases often turn on facts that are specific to the industry or product involved. In one instance, the CJEU found that the de-branding and re-branding of Mitsubishi forklift trucks otherwise unavailable in the concerned markets constituted “use in the course of trade” of a trademark. Belgian company Duma, which sells new and second-hand forklift trucks, had imported and modified the vehicles.
In its ruling in Mitsubishi Shoji Kaisha Ltd v. Duma Forklifts NV (Case C-129/17), the court said that “the proprietor of a mark is entitled to oppose a third party, without its consent, removing all the signs identical to that mark and affixing other signs on products placed in the customs warehouse […] with a view to importing them or trading them in the European Economic Area (“EEA”) where they have never yet been marketed.” The court essentially found that any act by a third party preventing the proprietor of a trademark from controlling the first placement of goods bearing that mark on the market in the EEA undermines the essential function of a trademark to indicate origin.
The court further held that de-branding can also affect the investment and advertising functions when the product is not marketed by the trademark proprietor or with its consent.
A more recent case concerned the resale of HP-branded IT equipment sold by Senetic, a resale company based in Poland. Senetic believed that it could market the equipment lawfully on the basis that HP’s trademark rights were exhausted. However, it needed information in the form of serial numbers from HP to confirm this, which HP was not willing to provide.
In its judgment in the case (Case C-367/21), the court ruled that the EU Trade Mark Regulation precludes “the burden of proof of exhaustion of the rights conferred by an EU trade mark being borne exclusively by the defendant to the action for infringement” where the goods have been distributed through a selective network with an assurance that they can be marketed legally “and the proprietor of that trade mark refuses to carry out that verification at the purchaser’s request.”
This ruling is significant in that it shifts the burden of proof initially to the trademark owner in cases where it has the relevant supply-chain information that would show whether or not trademark rights are exhausted.
The AGA Cooker Case
In the United Kingdom, a recent judgment by Deputy High Court Judge Nicholas Caddick KC addressed a situation where a reseller, UK Innovations Group Limited, marketed and sold modified AGA range cookers. The defendant had developed a control system that could be fitted to AGA cookers to convert them to run on electricity. AGA alleged that this infringed six of its trademarks. In its defense, UK Innovations Group pointed to section 12 of the Trade Marks Act 1994, which states that infringement of a registered trademark does not occur by the use of that mark in relation to goods that the proprietor has consented to put on the market in the UK or the EEA.
In his judgment, Nicholas Caddick KC found that UK Innovations Group’s offer of an opportunity to “Buy an eControl AGA” created the impression that there was a commercial connection between the retrofitted products and AGA. He stated the statements on the UK Innovations Group website “taken as a whole were likely to give customers the impression that what they were being offered was an AGA product (an eControl AGA, one of a range of AGA products) and this was something about which the Claimant could legitimately object.”
The court held that the reference to the “eControl AGA” was likely to be seen not as purely descriptive but rather as an official product line and an inherent part of the AGA brand. Moreover, UK Innovations Group’s references to its eControl System “were likely to be taken as references to a system that was connected with the AGA.” Determining that this was a problematic issue, the judge was careful to draw a distinction between objections to the sale of refurbished goods and complaints against the way in which they were sold.
“[While] I do not think that [AGA] had legitimate reasons to object to [UK Innovations Group] selling AGA Cookers which they had refurbished and fitted with the eControl System, I find that it did have legitimate reasons to object to the way in which [UK Innovations Group] went about marketing and selling these cookers. In my judgment, in this context, the interests of AGA as a trademark proprietor outweigh the interests of people (such as UK Innovations Group) dealing with the cookers in the aftermarket.”
The court also found that UK Innovations Group’s actions were detrimental to and took unfair advantage of the AGA marks’ distinctive character without due cause as under s.10(3) of the Trade Marks Act.
Resale: A Range of Options
These cases show that in certain circumstances, trademark owners may be able to take action when it comes to the unauthorized offering of their products in the resale market. The viability of such arguments are likely to be finely balanced and will depend on the nature of the product, the industry concerned, and all public-facing communications. In general, to be successful in enforcing their rights, trademark owners will often need to show that there is some behavior by a reseller that is misleading to the consumer or damaging to the brand and/or that counterfeit or other unauthorized goods have been sold.
Vanja Nedimovic is trademark and design attorney at Dennemeyer. She is qualified as an EU trademark attorney and a Canadian trademark agent.
