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The leading case in the online context is probably Tiffany (NJ) Inc. v. eBay Inc.[256] In this case, the famous jewelry company, Tiffany, argued that eBay should be liable for the large number of counterfeit Tiffany merchandise available on the auction site.[257] As in the music filesharing cases, the issue was the extent to which eBay is responsible for the illegal actions of third parties on their site, particularly when actual knowledge is extraordinarily difficult to glean until an aggrieved trademark owner submits a notification.[258] Dismissing the notion that eBay induced any infringement, the court considered whether its continued supply of services to counterfeiters constituted contributory infringement.[259] The court rejected Tiffany’s argument, finding that in order to be liable, “a service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods.”[260] As a result, courts and commentators have generally agreed that “good faith” online retail sites are not liable for infringement without actual knowledge and thus have no need to engage in overly aggressive policing.[261]

Nevertheless, many service providers bemoan the lack of certainty in online liability standards for contributory infringement.[262] The incentives are for sites to block goods that even potentially infringe, and in fact many prominent forums like Etsy and Shapeways engage in rather aggressive policing.[263] Additionally, legislation has been proposed to essentially overturn the Tiffany v. eBay standard. The SHOP SAFE Act[264] creates a contributory infringement regime that applies even in the context of generalized knowledge unless certain steps are taken to earn “safe harbor” status.[265] In combination, the restrictive actions of third parties have the potential to dramatically curb sustainable upcycling.

Overall, the first-sale and fair use defenses provide a strong initial base of rights for those who wish to repair, recondition, or even improve a product. So long as a consumer has access to relevant information about modifications and receives an honest description of the lack of connection with the trademark owner, liability based on purchaser confusion may be avoided. One might assume that this essentially solves the trademark issue. However, there are two lingering problems that are likely to increase the litigation burden and prevent at least some upcycled or repaired goods from entering the market. One is the ambiguity that surrounds the question of what amount of disclosure will retain first-sale rights. And the second is an additional theory of liability called post-sale confusion that does not depend on purchaser confusion. Taken together, they can create significant problems for businesses that support sustainable product renewal.

Thankfully for the artists and mechanics who satisfy a genuine consumer interest in modifying purchased goods, there is a legal rebuttal to a case of exceeding first-sale rights. If the modifier clearly discloses the nature of the alteration and the fact that the trademark owner is not a sponsor, courts generally will not find confusion.[166] The Supreme Court’s decision in Prestonettes supports this principle by identifying as a key factor in its finding the defendant’s efforts to clarify that its repackaging and compounding of the perfumed powder were not conducted by the trademark owner.[167] The Court found that clear disclosure of the defendant’s modification activity was enough to avoid purchaser confusion.[168] Subsequent cases agree that disclosure about the nature and source of alteration can cure initial confusion, averting liability.[169] Most important is the Supreme Court’s 1947 decision in Champion Spark Plug Co. v. Sanders, which involved a company that sold reconditioned Champion spark plugs with a denotation that they were “repaired.”[170] The Court refused to enjoin the seller, noting that the fact that the modification was clearly stamped on boxes and individual items prevented consumers from attributing any inferiority in the reconditioned product to Champion.[171] According to the Court, even though the second-hand dealer may benefit from association with the trademark, “that is wholly permissible so long as the manufacturer is not identified with the inferior qualities of the product resulting from wear and tear or the reconditioning by the dealer. Full disclosure gives the manufacturer all the protection to which he is entitled.”[172] Essentially, the direct fact that a rational consumer will not be confused helps to extend first-sale protections.[173]

Consumers are increasingly pushing for sustainable business practices in retail, driving businesses to reassess what they produce — and how. From ingredient upcycling to plastic alternatives to smart trash cans, we look at the technologies placing sustainability at the center of retail products and processes.

The fashion industry generates over 92M metric tons of waste every year. Global food waste totals around 1.6B metric tons. It’s no secret that industries in the retail sector are some of the most wasteful and polluting in the world.

Trademark Infringement in Upcycled Products on the Secondary Markets

Rolex Watch U.S.A., Inc. v. BeckerTime is a good example of the intersection of secondary markets and trademark infringement in upcycled products.27 BeckerTime is a company that now only sells preowned watches, but at the time they upcycled watches, creating hybrid watches using Rolex and third-party parts, marketing them as “genuine Rolex” watches.28 However, because Rolex had never certified or endorsed BeckerTime, by marketing the watches as “genuine Rolex’s” was an infringement on Rolex’s IP.29 In 2020, Rolex sued BeckerTime, alleging counterfeit and infringing use of Rolex’s trademark in connection with the advertising, promotion, service, and sale of unauthorized watches and watch parts.30

The right-to-repair movement, which supports the freedom for individuals and small businesses to repair and alter their own products, is a growing consumer rights movement. The movement claims that not only does the inability of products to be fixed limit consumers’ freedom to use and maintain the products they buy, but it also causes the production of superfluous electronic waste and raises the price of electronic equipment. The right-to-repair movement aims to extend the life of electronic devices through repair and refurbishment, which can help to reduce e-waste and also protect the viability of the repair and refurbishment labor markets, by making diagnostic tools, repair manuals, and replacement parts available to the general public. The right-to- repair movement seems to be gaining pace and moving closer to its objectives as legislative initiatives are made in numerous states in the United States, the European Union, and other nations. The movement may contribute to reducing electronic waste, protecting the environment, and promoting sustainable living by continuing to advocate for laws that expand internet access, lengthen the useful lives of current technology, and enhance digital equity.

Moreover, there are signs that product disposal trends are slowing (or at least attitudes may be shifting). In addition to the percentage of recycling efforts that work, consumers and firms are also finding it easier to preserve existing goods by repairing them[45] or remaking them into new, usable products.[46] Instead of filling landfills and junkyards, or inflicting mountains of waste on vulnerable populations, there is a growing market in product renewal. To some degree, the interest in such products reflects a sustainability mindset. But in some cases, it is nothing more than a desire for less expensive versions of new products. There are even instances in which the remade article is actually more expensive and luxurious than the original. Increasingly, there is a real business case to be made for alternatives to disposal.

B. The Novel Outlets and Supply Chains for Existing and Remade Products

Momentum is building to advance a more circular economy globally. Many major companies, start-ups, cities, countries, and international organisations have all embraced circular economy principles and launched supporting initiatives.

Venture capital and private equity investment into circular economy businesses has grown since 2020, indicating growing commercial interest. Multilateral organisations, such as the OECD (Organisation for Economic Co-operation and Development), World Economic Forum and United Nations (UN) all have major initiatives to accelerate the transition to a circular economy.

The circular economy is in full swing, and for an excellent reason. With finite natural resources on the planet and the demand for resources exceeding what the earth can regenerate each year, we cannot continue with our current linear production path. The second-hand trend is here to stay.

The circular economy aims to transition into consuming less natural resources by reusing, upgrading, and recycling products. There are many benefits to this way of thinking, including reducing waste, extending the life of products, and saving resources. It’s also been shown to boost the economy by creating jobs in the recycling and reuse industry.

Individual companies, ranging from Patagonia to Caterpillar, have been embracing circularity. This is a positive step, but not enough. Meaningful circularity requires scale and therefore more than what one company can typically do on its own. This is where marketplaces come in. Circular marketplaces connect multiple buyers and sellers of used, repaired, refurbished, remanufactured or recycled goods, components or materials. Circular marketplaces have the potential to play a major role in transforming the way we approach material reuse, with a market size that has real impact.

Green Unicorns

Since the industrial revolution the dominant economic model in high income countries has been a linear economy. In a linear economy a take-make-use-dispose mentality directs societal consumption behaviour. The almost inevitable fate of a product is its disposal at the end of its product life. According to Lieder & Rashid (2016 p. 37) this is explained by “disposable products with the explicit purpose of being discarded after use (planned obsolesce) heralded the era of fashion and style hence stimulating throwaway-mindset which is today known as linear consumption behaviour”. This system reaches the limits of its capacity. A wide range of environmental problems, water and air pollution and resource depletion call for a radical change and transition to a sustainable economic system. Scarce resources will be under even more pressure as material intensity is predicted to increase with the global middle class, i.e. the largest resource demanding consumer group, doubling in size to 5 billion by 2030 (EMF 2013b). Human survival is at stake as the stability of economies is threatened together with the “integrity of natural ecosystems” (Ghisellini et al. 2016 p. 11). To do justice to the demanding consumers, the supplying producers but also the struggling environment a solution serving all stakeholders needs to be implemented as quickly as possible. A possible and not at all new but rather rediscovered solution can be the implementation of a circular economy (CE).

In short, CE is about creating closed loop material flows keeping “products, components and materials at their highest utility and value” (EMF 2013a) and use them through multiple phases. CE is also about waste prevention, resource efficiency, leakage minimisation and dematerialisation (Geissdoerfer et al. 2017). Figure 1 depicts a principle model for a CE where raw materials are only added for manufacturing and re-manufacturing of products or components already in the system. These have been recycled or re-used by the consumer maybe several times already. Waste is almost non-existent and leaves the system as residual waste if not further used.

Existing law correctly recognizes that trademark owners are in the best position to accurately and efficiently distinguish counterfeit products from authentic goods. Shifting legal responsibility to e-commerce sites, online marketplaces, or other third-party intermediaries through new liability rules would stifle innovation, reduce cooperation, and fail to prevent counterfeiting.

The current doctrine of secondary liability in trademark law achieves the proper balance, fostering a diverse ecosystem of online marketplaces that benefits small businesses and consumers. When intermediary services fail to act on specific knowledge of infringement (for example, when a brand owner has notified an online service of a counterfeit product), courts have generally held services liable. The existing regime has helped provide the legal framework to grow a robust secondary market for safe, genuine goods at competitive prices. Consumers derive enormous value from secondary markets, where they have the opportunity to resell products they no longer need, or purchase genuine products at a discount.

If there’s one constant in the platform economy, it’s change. Platforms started out fueling the matchmaking economy (eBay) and have evolved to further encompass the sharing economy (Airbnb) and the gig economy (Upwork).

The next phase: platforms supporting the circular economy, which reuses raw materials and products by connecting consumers to enterprises and to each other to reuse, repair, refine, or recycle goods.

Legislators behind the SHOP SAFE Act are taking a complicated and misguided policy approach to protect consumers by reorienting copyright and trademark law previously established by overturning standing court precedent. If passed, the bill would adopt a guilty-until-proven-innocent attitude towards internet retailers, forcing legitimate small businesses that operate online to prove they aren’t selling stolen items.

The bill’s broad interpretation of trademark law would allow big-name brands to copyright basic colors, common phrases, and simple words. This means online sellers would have to “proactively” hunt down trademarked items to comply with SHOP SAFE’s hastily put-together and poorly-written policies. Small business owners aren’t seasoned trademark attorneys. They simply shouldn’t be expected to become experts on complex trademark regulations, nor should they spend valuable time and resources agonizing over hypothetical issues with their product that could potentially put them out of business.

In surveys conducted by the NSF and Census Bureau, both private and public firms rate trademarks as their most important intellectual property assets, ahead of trade secrets, copyrights, and patents (Jankowski 2012). This paper uses the 1996 Federal Trademark Dilution Act to examine the effects of trademark protection on firms' profits and strategy. We document that treated firms' operating profits increased sharply after the FTDA's passage, and fell back after its key provision was nullified by a Supreme Court decision. The value of added trademark protection was localized in industries that had high advertising expenditures, selling expenditures, and trademark holdings ex ante. More affected product markets had sharply lower entry and exit post-FTDA, consistent with a mechanism whereby the FTDA raised entry costs for potential entrants into affected product markets. Treatment effects were strongest in firms that faced moderate entry threat ex ante, consistent with strategic entry deterrence by the incumbent firms.

Guided by theory, we investigate the effects of strengthening trademark protection on firm strategy. Treated firms reduced product quality as measured by increased incidence and value of product recalls, and curtailed innovation by reducing R&D spending, patenting, and new product announcements. While these observations are broadly consistent with a quiet life or rent extraction hypothesis, we also find that treated firms introduced new products into previously unexplored markets by extending their brands into all-new goods and service classes. Taken together, these observations suggest that stronger trademark protection led firms to pursue exploitative rather than exploratory innovation and product market strategies.

Next we investigate the relationship between trademark protection and innovation. A large theoretical literature predicts that the incentive to innovate depends on firms' market power, specifically the difference between expected preinnovation and postinnovation rents (Arrow 1962; Aghion and Howitt 1992; Aghion et al. 2009). Both the quiet life hypothesis (Bertrand and Mullainathan 2003) and the Chamberlin (1933) rent extraction hypothesis suggest that stronger trademark protection leads to more managerial slack or more preinnovation rents, and thus to less innovation. Alternatively, the higher profits we document might have relaxed financial constraints and been at least partly plowed back into R&D.

Table 4 investigates several measures of firms' innovative activities. Column 1 shows that treated firms reduced R&D spending over assets by 0.32 pp following the FTDA. This is a significant change relative to their pretreatment mean of 3.4%. Column 2 shows that treated firms took out 9% fewer patents post-FTDA. When we weight patents by the adjusted citations they subsequently received, the reduction is greater at —14% (Column 3). However, the estimated dollar value of granted patents for treated firms (from Kogan et al. 2017) actually increased post-treatment by 13% (Column 4). The asymmetry of the citation- and dollar-weighted estimates is striking, and consistent with the FTDA leading treated firms to pursue a less exploratory and more exploitative innovation strategy.

The central argument in favor of trademark protection is that trademarks incentivize firms to produce high quality products and prevent a race to the bottom in product quality. We investigate this central pillar of the FTDA’s effects on firm strategy using a broad and objective measure: recalls of unsafe products.16

The Consumer Product Safety Commission (CPSC) conducts safety testing and enforces recalls of most consumer products in the United States; the National Highway Traffic Safety Administration (NHTSA) conducts safety testing and enforces recalls of automotive products in the United States. Unsafe products are detected through several channels. First, firms are required by law to conduct appropriate internal safety tests and report defects as soon as they are discovered. Second, the agencies conduct proactive testing in their own labs. Third, the agencies operate hotlines and Web sites that allow consumers to report unsafe products. We collected data on all product recalls announced by the CPSC and NHTSA between 1982 and 2005.

As litigation around the country against tech companies and social media platforms continue to develop, questions remain around Section 230 of the Communications Decency Act and the limited federal immunity it provides to these companies.

Recent lawsuits against social media sites like TikTok, Meta, and Snapchat, and circuit court considerations of Section 230, has brought the statute to the forefront. However, the scope and reach the statute has in granting immunity to online computer services and publishers regarding user-generated, third-party content remains unclear.

Third-Party Service Providers Are Objecting to the Remedies in Schedule A Cases

Courts are not alone in pushing back on these cases. As discussed above, plaintiffs generally seek an order directed to third-party domain name providers requiring they disable defendants' webpages and for e-commerce platforms to freeze defendants' assets. This is critical to plaintiffs' recovery because, without appearing, plaintiffs can never discover the identity of the defendants. Thus, plaintiffs only recovery comes from the seizure of assets frozen in connection with the TRO/PI. Though some courts express concern with asset freezes so early in a case, they have generally complied with plaintiffs' requests.

SAD scheme suits refer to Schedule A Defendants, meaning large numbers of defendants sued as a group because their specific identities could not be established

Mass counterfeiting cases developed as a reaction to the Tiffany ruling, as a way to potentially reach the entities responsible for infringing listings, and mass counterfeiting litigation has proliferated during the past ten years. 337 Mass counterfeiting cases allege trademark counterfeiting against a large number of defendants who are typically listed on an attached "Schedule A." 338 Schedule A, and therefore the identity of the defendants, may be held under seal for at least part of the case's pendency. In some instances, the plaintiffs themselves remain anonymous for some amount of time.339 The defendants are usually websites, Paypal accounts, store I.D. numbers, and other aliases and anonymous entities; in many cases, their identities overlap to an extent that may be difficult to determine 340 Often the individuals responsible for these websites and accounts are located in another country, but they are subject to personal jurisdiction in the filing district because they target the U.S. as a market for their counterfeit products. 34