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A majority of consumers trust e-commerce platforms and social media marketplaces, but online sellers don’t feel the same way.

According to a global survey of 500 consumers and 525 e-sellers from insurance provider Chubb, 85% of consumers say they trust social media marketplaces. However, a large number of e-sellers don't trust social media commerce sites when it comes to managing inventory (75%), handling refunds and returns (69%), shipping and fulfillment (67%), payment processing (65%), and security and privacy (58%).

Of course, repair communities have existed for some time, and it is not a surprise that owners continue to have a strong desire to maintain product viability. What is different now is the existence and influence of the internet. Now, repair and upcycling communities have a vast meeting space for exchanging information.[56] It is possible to find replacement parts for just about any appliance,[57] car,[58] or electronic good[59] online. Additionally, communities exist for selling upcycled products. One of the most prominent is Etsy, which allows individuals to sell a variety of crafts and goods, including such esoteric items as upcycled Pop-Tart boxes, bags made of old Levi’s jeans, and lamps make of empty gin bottles.[60] The strength of such communities, which are becoming ever more robust, has significantly increased the options available for extending product lifecycles.

//DH

Business model innovation can create competitive advantages. As business leaders push towards a more sustainable, circular economy than the current take-make-waste system, they’re embracing novel circular services to create new value for customers and transform processes across supply chains.

Yet, from the legal challenges recently brought against companies engaging in circular and sustainable practices, it is clear that the relationship between IP owners and these practices is, at best, uncomfortable and generally controversial. Notably, IP owners continue to rely on IP rights as the invisible string they pull to oppose most attempts by third parties to repair, reuse, resell, upcycle, or recycle their products without their consent. For example, IP owners have regularly blocked or attempted to block third parties trying to repair, refurbish, or upcycle original products, leading to a series of legal disputes. Even though some of these disputes were ultimately decided in favor of the unauthorized parties, many were not, and most cases were settled under confidential terms.10

This situation is largely due to the fact that IP protection has historically been justified based on the theory of incentives for innovation and creativity, but on a linear rather than circular model. We have been repeatedly told that IP rights benefit society by encouraging innovation and creativity on the one hand and market competition on the other. Specifically, the IP system incentivizes investments in innovation and creative industries by granting IP owners the right to exclude third parties from using their IP-protected products and processes without their consent for a (generally) limited time. In this way, IP owners can recover costs while also disseminating new products and works for the benefit of society. However, during the term of protection of IP rights, IP owners' right to control their products and processes extends to any use, including those related to circular and sustainable practices, unless a specific limitation or exception applies.11 In this way, IP owners can often prevent third parties from repairing, reselling, upcycling, and recycling their products when they can claim that these activities constitute an act of infringement of their IP rights.

It is old news that we live in an age of over-production and over-consumption. Yet, consumers across the globe have started to finally grasp the magnitude of the environmental consequences of the current system and are increasingly requesting environmentally friendly products. As a result, many industries are under pressure to change their traditional business model– in which new products are pushed out multiple times per year, and items are discarded as soon as they break or fall out of style– and develop new practices to reduce their environmental footprint.

Specifically, these practices should focus on eliminating waste and reusing resources, which includes repairing old products, reselling used or upcycled products, and recycling products at the end of their lives to create new raw materials or reuse their parts.1 In the past several years, many companies have started voluntarily engaging in some or all of these practices, often with the assistance of new technologies and online marketplaces. Yet, tensions with the Intellectual Property (IP) system arise when third parties try to carry out these practices without IP owners’ consent. The reason for these tensions is that the IP system still focuses primarily on granting IP owners full control over their products. Under this system, the main concern is maximizing social welfare by promoting investment in innovation and market competition. Yet, this system was designed for a linear economy where products are manufactured, sold, and ultimately discarded without considering production’s indirect costs, including environmental impact. Today, on the other hand, we can no longer ignore the environmental costs of production. Thus, promoting sustainability and economic practices that facilitate a circular economy has become a priority. In this context, the primary concern is reusing and recycling existing resources to reduce industrial externalities and environmental damage, not only producing new and innovative products.2

Under trademark law, problems arise due to the uncertainty surrounding the conditions under which repaired, refurbished, or upcycled products, still bearing their original trademarks, can be commercialised.14 One could think of the replacement of automotive or IT equipment components, refilling of empty containers, repair of electronics, jewellery, watches, and more. In most such cases, the items to be refurbished or repaired would still carry their original makers’ trademarks. Analogously, in the sphere of upcycling, especially with fashion items, old pieces of clothing, bags, or jewellery reworked into new ones might still retain their original trademarks. The primary infringement criterion in trademark law, use ‘‘in the course of trade’’,15 automatically captures such activities, provided that they occur in the commercial sphere and not as a purely private matter.16 Effectively, this brings all business models based on the sale of repaired, enhanced, or upcycled goods within the ambit of the use ‘‘in the course of trade’’. Another trademark law’s primary infringement criterion of the use ‘‘in relation to goods or services’’17 is likewise unable to immunize the business models at issue, as this criterion had been consistently interpreted by the CJEU as requiring as little as establishment of a ‘‘link’’ or ‘‘association’’ with goods or services, rather than necessitating the use of another’s trademark as an identifier of the user’s own commercial source.18 Consequently, trademark proprietors are well positioned to assert that repair, refurbishment, and upcycling amount to prima facie trademark infringement– by giving rise to either consumer confusion (including post-sale confusion19) or by blurring, tarnishment, or unfair freeriding on a trademark with a reputation.20

D. Take Care with Any Attempt to Create a DMCA for Trademarks

Finally, it is worth noting that the call among online sellers for more certain contributory liability is legitimate and reasonable. Although the Second Circuit’s Tiffany v. eBay[308] standard has been influential, it has the potential to be applied inconsistently across the country. However, proposed legislation that creates a “super DMCA” for trademarks[309] is likely to shift the balance far too much in favor of brand owners. It is critical that sustainability and broader upcycling advocates have a seat at the legislative table to ensure that any new regime provides appropriate defenses to inaccurate accusations of infringement or dilution. Moreover, a punishment regime such as the DMCA’s false claim section should be integrated as well.[310]

The first scholarly proposal suggests ending any notice and takedown scheme in favor of increasing the monitoring requirements on the intermediaries.122 The goal of this setup is to make it easier to hold Online Marketplaces contributorily liable, thereby incentivizing more proactive actions by Online Marketplaces.123 Arguably, such a legislative decision would have lower enforcement costs than the current judicial approach.124 Shifting the burden toward Online Marketplaces would increase the costs for Online Marketplaces; underlying this proposal is the idea that it is only fair to increase such costs for Online Marketplaces in light of their massive revenues.125

While this proposal is not without merit, it ultimately is not the best solution to this problem. Heightening standards for Online Marketplaces may be theoretically simple and easy to implement, but it is too blunt of an approach to be truly effective. Increasing the standards too much for Online Marketplaces will make it more difficult and expensive for Online Marketplaces to function. This issue is even more severe for potential new Online Marketplaces because such an approach will increase startup costs, limiting the creation of new businesses and disincentivizing potentially economically smart risks (because the specter of liability can lead to safer but less dynamic decisions). Increased startup costs would also further consolidate market power in the largest Online Marketplaces, increasing the likelihood that those Online Marketplaces will use their market power to harm consumers.126 While increasing the incentives for Online Marketplaces to police their marketplaces themselves is important to slow and eventually stop counterfeiting in Online Marketplaces, such a blanket approach is not ideal.

Another area in which the liability regime is likely to have a significant impact on investments is innovation. A more stringent liability rule can affect both the rate and direction of innovation. First, the increase in the total cost of providing the service induced by the increase in liability costs will have an adverse effect on future profits from radical innovations that create new services, which could decrease platforms’ incentives to carry out such innovations. This argument holds not only for an incumbent platform but also for a potential entrant, thus highlighting another potential entry barrier induced by a more stringent regime. Note, however, that this argument may not apply to incremental innovations improving the quality of services that are already offered by an incumbent platform. The reason is that incentives to innovate are driven by the difference between post-innovation and pre-innovation profits, and, in this case, both terms may be affected by the increase in liability costs.

Second, a change in the liability rule applying to platforms may also affect the level of investments in innovation indirectly through its effect on competition between platforms. As emphasized before, a more stringent liability regime may lead to a decrease in competition because of an increase in entry barriers. Less intense competition will, in turn, affect the platform’s incentives to innovate. The long-standing literature on the effect of competition on innovation suggests that the level of innovation is either increasing in the degree of competition or is an inverse U-shaped function of competition intensity (see e.g., Aghion et al., 2005 and Vives, 2008). In both cases, a decrease in competition in a market that is highly concentrated (e.g., a market with a dominant platform) will tend to lower the incentives to innovate.

The host of new regulations and increased liability created by SHOP SAFE would be catastrophic for competition in e-commerce. This regime would devastate smaller online platforms like Etsy, OfferUp, and other small platforms that allow third-party sellers because it applies to any platform with just $500,000 in sales in the past year—for comparison, Amazon had $364.38 billion in sales in the U.S. last year. So, while this bill seems to target tech giants like Amazon, their ample resources for regulatory compliance and deep pockets to fight lawsuits, really makes SHOP SAFE an opportunity to eliminate many of their smaller competitors through legislative games instead of offering better products or services.

Any site with “features that allow for arranging the sale or purchase of goods” qualifies as an “electronic commerce platform” and this could include messaging apps, forums, and any small-scale online seller. Even the $500,000 threshold is entirely undermined by a provision that applies the requirements in the bill to platforms of any size if they are served with 10 notices of trademark infringement—with no time frame limitation specified. Anyone familiar with the rampant copyright takedown notice abuse enabled by the Digital Millennium Copyright Act will recognize that aggressive rightsholders will easily be able to extend SHOP SAFE to any platform under this law.

//DH

The doctrine of contributory liability currently applied by U.S. courts is balanced and largely working well. Many small or early-stage e-commerce companies would not be able to afford the cost and risk of a legal framework that mandates proactive policing and/or holds companies liable for user-generated infringing content they have no knowledge of or direct involvement in. And any changes which shift the fundamental balance in the current law could have outsized and negative impacts on startups. Such changes would reduce the viability of existing and prospective startups—potentially forcing them out of the market—but it would also restrict options for the content creators and small businesses who rely on diverse e-commerce offerings, reduce innovation and competition in the online marketplace, and harm the U.S. economy as a whole.2

Not all individuals standing in Moore's shoes would stand up to a large trademark holder to protect their product.67 The threat of prolonged litigation not only may lead to alleged infringers prematurely settling with the threatening party, it could lead to them giving up entirely. For instance, a USPTO Trademark Litigation Study found that several individuals threatened with the process of litigation withdrew their own registration for trademarks altogether, without settling, because the possibility of litigation was too expensive to be a viable option for a small businesses or individual trademark holders.68

Threatening litigation is not an uncommon tactic for multiple reasons.69 First, enforcing trademark rights, even if the claim is weak, is an effective strategy with relatively few downsides.70 Second, aggressive trademark enforcement is often effective in settling disputes without the claims ever rising to the level of litigation.7 1 Third, cases that do go to court have limited case law upon which to rely.72 This could result in excessive fees when a party would have to craft an original argument for trial, potentially costing an alleged infringer, which is usually a small business, a substantial amount of in attorney's fees.73 Small businesses may not have sufficient support from human resources, may not be able to dedicate the time to prepare for such a lawsuit, or just may not have the financial ability to defend a suit.74 Even if a small business is capable of securing free or low cost legal assistance, the time devoted to the lawsuit would take away from the operation of the business, which could bury a company in debt.75

In a unanimous decision, the Supreme Court seemed to agree that there were higher costs to a business because of infringement claims and it warned in Already, LLC v. Nike, Inc. that litigation produces limitations in the marketplace and that other costs could arise from the threat of trademark infringement:

[C]harges of trademark infringement can be disruptive to the good business relations between the manufacturer alleged to have been an infringer and its distributors, retailers, and investors. The mere pendency of litigation can mean that other actors in the marketplace may be reluctant to have future dealings with the alleged infringer. 86

One downside to over-enforcement may cause the balance of benefits to sway the other way—the potential for shaming by the trademark owner’s consumers or the broader public.121 In these days of over-sharing on social media, it is easy for recipients of abusive ceaseand-desist letters to post them or share that they have received such demands.122 Unfortunately, though, the prospect of shaming or being labeled a “#trademarkbully” does not deter all entities, and additionally, not all shaming is successful.123 Given that there are no provisions in the Lanham Act that penalize entities for over-enforcing their marks, some entities could see only benefits to enforcement. Post-Romag, these benefits have potentially increased.

These threatened legal actions burden the targeted company rather than the trademark holders that send out the cease-and-desist letters.7 6 The targeted company is in a precarious situation in deciding which action to take.77 They can choose to wait and see if the threatening party will take legal action against them, while continuing to potentially infringe the trademark. Otherwise, the targeted company may seek a declaratory judgment, which could state that its trademark does not infringe upon the other party's mark, thereby precluding further legal action against it.78 The threatening party suffers no consequences from sending such letters. Since they are often viewed as aggressive policing tactics, no sanctions are imposed and the threatening party can decide whether or not to pursue legal action. 79 Small businesses are particularly influenced by the potential threat of litigation, which in turn is externalized as a cost to the consumer and the economy.80

By extrapolating the theory of famous economist Adam Smith, it seems that this externalized cost in trademark bullying creates a barrier to entry, which in turn limits the choices available to consumers. ' It does so by imposing higher costs in the market place, thereby increasing the initial amount of capital investment needed for new market entrants and ultimately limiting the amount of entrants who are capable of success in the market.82 Cease-and-desist letters specifically impose high costs on businesses, not just in legal fees, but also in time diverted from the business.83 This harms the consumer, because the fewer companies that are in the market, the fewer products that are available to the public, and those available will tend to be of a lower quality. 84 Competition between companies improves the quality of products and lowers prices, because competitors produce better and cheaper goods or services in order to win consumers.85

In its current form, the act requires that marketplaces ensure sellers use images that accurately depict the goods sold and use “identifying characteristics” of listings and sellers to determine if goods are counterfeit, but it does not require trademark owners to provide a way for marketplaces to know what authentic goods should look like. Instead, the act only requires the trademark owner to provide the notice of its mark and a point of contact. It expressly prohibits requiring that trademark owners “participate in any program specific to the electronic commerce platform” such as an information-sharing programme. Without reliable information about brands’ products and trademarks, platforms cannot possibly implement successful screening measures and may be forced to remove non-infringing listings for fear of liability.

Though AI tools are being developed that may have the future ability to compare logos and trademarks used in listings to those provided by brands, those tools may yield false positives and false negatives and will lack the context and judgement to identify legitimate activity that is protected by doctrines like fair use. To avoid engaging in costly inquiries, marketplaces may simply overcorrect by removing any suspect listings, sweeping in authentic products as well. While all parties should be engaged in the fight against counterfeits, shifting the burden entirely onto marketplaces in this way will harm all parties – the marketplaces, trademark owners, sellers and consumers.

Entrepreneurs and larger firms are waking up to the fact that there is a viable market for recycled, repaired, and even upcycled goods. There is also an increasing desire on the consumer end for more sustainable products as well as measures to reduce landfill and other product disposal harms to the environment. Although some legal barriers to this new market are being actively debated, other barriers have taken a back seat and seem primed to surge only when increased business activity exposes the liability. This is the case with trademark law, which has the potential to substantially deter the small-firm and nonprofit actors that will likely lead this aspect of used-good evergreening.

This Article investigates emergent trademark barriers that have been substantially overlooked in the current discussion regarding product renewal, which has largely been concerned with the right to repair. It considers the surprising power that the doctrines of post-sale confusion, dilution, and repair-or-reconstruction possess to thwart legitimate and sustainable business activity. After reviewing the literature demonstrating that most confusion based on such legal theories is not harmful, this Article proposes some simple modifications to the current rules that would reduce uncertainty. It concludes that sustainable product lifecycles can be better supported when trademark barriers are reduced. Such a change would provide consumers with a more robust path to counter our disposable world.

The real beneficiaries of the SHOP SAFE Act are not consumers but big brands that want to aggressively pursue knockoffs, cheap competition products, and the secondary resale market. Trademarks can be extraordinarily broad, encompassing certain colors or even common words or phrases. Creating such an expansive regime of trademark liability online will inevitably lead to brands pursuing aggressive protection of anything they deem remotely infringing with little regard for SHOP SAFE’s intended purpose of protecting consumers. For example, the infamously litigious Monster Cable Products, Inc. has more than 70 trademarks on the word “monster” and has gone after auto transmissions, carpet-cleaning machines, mini-golf, people selling t-shirts, the job-hunting site monster.com, Monster energy drink, and even Disney over “Monsters Inc.” merchandise. It is easy to imagine how aggressive rightsholders will abuse SHOP SAFE by bullying platforms into settlements over meritless claims of infringement.

Another key issue not addressed is that while most brand owners act in good faith, some abuse the system. For example, brand owners have brought trademark infringement lawsuits to stop the sale of parody products, or labeled 26 as counterfeiting the resale of their genuine branded products to control distribution channels in contravention of perfectly legal and valid commercial activity as to authentic goods.27

In addition, so-called “trademark bullying” is a well-recognized problem. Trademark bullies are brand owners (often large companies) who use the threat of trademark infringement lawsuits to pressure smaller companies or individuals to stop engaging in lawful activity that the brand owner does not like. Trademark bullying reduces competition and 28 29 harms free speech, imposing real costs on both companies and consumers. Because smaller companies and individuals lack the resources to fight a large brand owner, they are often forced to comply with the brand owner’s demands, no matter how frivolous. Changing the secondary trademark liability standards could make bullying behaviors worse.

The marketplace has increasingly focused its attention on efforts to eliminate the waste from broken or outdated products.[1] Not only is the case for repair or refurbishment premised on consumer savings, but there is also the belief that it contributes to saving the planet in some small way. Less waste means less landfill space and environmental damage from unnecessary production and disposal.[2] However, policymakers are waking up to the fact that there are barriers to repair and reuse, some of which are created by industries that would prefer to sell new products.[3] Measures to reduce barriers and even create a legal right to repair[4] are laudable, but they often relate to a relatively narrow set of facts: a consumer owns a particular item and wishes it repaired to function as initially purchased. This focus ignores the legal issues related to other important product reclamation and upcycling contexts that may actually be more important for a sustainable future.[5]

Consider the future of the internal combustion engine, one of the most durable applications of technology in modern history. Though it has been substantially improved over the years, the principle of exploding liquid fuel pushing cylinders to turn a crank shaft that eventually turns wheels is essentially the same as that established back in the 1870s.[6] This technological paradigm is now in flux as electric vehicles have come to be viewed as not only a viable option, but likely the future of personal transportation.[7] Various jurisdictions have mandated an end to the gas- or diesel-powered car within the next thirty years.[8]