Denmark: Upcycling From A Trademark And Marketing Law Perspective

Upcycling has become a widespread trend, and while upcycling may have environmental benefits, it raises a number of legal issues. In this article, we take a closer look at the trademark and marketing law challenges that companies should consider in their upcycling initiatives.

What is upcycling?

Upcycling can broadly be described as a process converting second-hand products into new products without breaking down the materials. Upcycling can have significant environmental benefits, as it reduces not only waste but also the need for new raw materials. The upcycling process often adds new and, in most cases, higher value to products that would otherwise be categorised as waste products or trash. Especially the fashion industry, which is referred to as one of the biggest climate villains, has embraced upcycling, for example by turning buttons on discontinued clothing into earrings and old bags into shoes.

Trade mark law perspectives

A trade mark is a simple sign in itself, and when incorporated in and linked to a specific company or specific products, the value of the trade mark can be enormous. One of the most important functions of a trade mark is to provide buyers of a product with information about its commercial origin – referred to as the function of indicating origin. It is therefore important for the owner of a trade mark to enable buyers to distinguish the trade mark owner's products from other products owned by other companies.

Both the Danish Trade Marks Act and the EU Trade Mark Regulation contain a significant restriction on the proprietor's exclusive rights – namely the rules on exhaustion. The exhaustion rules imply that a trade mark proprietor cannot oppose a third party's commercial use of the proprietor's trade mark for products put on the market in the EEA by, or with the consent of, the proprietor.

The Court of Justice of the European Union ("CJEU") has already ruled on the interpretation of the exhaustion rules in relation to second-hand/recycled goods. However, the same practice does not exist for cases of upcycling - neither in Danish nor in EU case law. However, the CJEU judgments on second-hand/recycled goods, including C-197/21 (SodaStream), contain general principles that may be a relevant interpretative aid in assessing whether a third party is entitled to upcycle original products bearing the proprietor's trade mark – in any case, these principles are probably the closest interpretative aid that currently exists.

In C-197/21 (SodaStream), the CJEU established that the trade mark proprietor may, if there are legitimate reasons for doing so, oppose commercialisation of products bearing the proprietor's trade mark, especially where the condition of the goods is changed or impaired after they have been put on the market. According to the CJEU, a legitimate reason exists

1. when resale by a third party seriously damages the reputation of the trade mark, or
2. when the resale is carried out in such a way as to give the impression that there is a commercial connection between the trade mark proprietor and the third party, and in particular that the third party is affiliated to the proprietor's distribution network. That risk of a commercial connection must, according to the CJEU, be assessed globally in the light of the information appearing on the product and its new labelling, the way in which the product is presented to consumers, and having regard to the distribution practices of the sector concerned and the level of knowledge that consumers have of those practices.

Applying the CJEU principles to upcycling cases, a trade mark proprietor may prevent the use of their trade mark on upcycled products if the proprietor has a legitimate reason for doing so. In assessing the "legitimate reason", the proprietor must consider whether the upcycled products cause serious damage to the reputation of the trade mark. The argument of reputational damage may be particularly relevant for trade marks which, as a result of the proprietor's considerable efforts and investments, have achieved a special position and integration in the market. This applies, for example, in cases where upcycled goods are defective or of poor quality.

In assessing the "legitimate reason", the trade mark proprietor may also consider whether the upcycled products give the impression of a commercial connection to the proprietor, which requires a global assessment. Therefore, the assessment should include not only the appearance of the trade mark on the upcycled products but also, among other things, the way the products are marketed. By way of example, in the case between Rich-Ycled and Louis Vuitton, the Maritime and Commercial High Court found that Rich-Ycled was not entitled to use Louis Vuitton's trade mark on t-shirts despite the fact that the text "I am not" was affixed together with Louis Vuitton's trade mark. Even though this case ended up not being about upcycling, it is still possible to imagine situations where the same types of statements will be used in the marketing of upcycled products. Since the "legitimate reason" requirement must be assessed globally, the use of "I am not" in this example cannot stand alone in the assessment. In that case, factors such as the distribution practices of the sector and the consumers' knowledge of those practices will also be relevant for the assessment.

Marketing law perspectives

When marketing your upcycling business, you must comply with the general requirements in sections 5 and 6 of the Danish Marketing Practices Act regarding misleading information and section 13 regarding documentation. Those provisions generally state that any marketing message must be balanced and factually correct, must not omit material information, and that appropriate documentation is required.

This means, among other things, that in marketing their upcycling initiatives, companies should communicate as carefully and clearly as possible. In an advance notice from 2022, the Danish Consumer Ombudsman found, among other things, that the statement "recycled plastic" (which in small print was elaborated with the fact that the product consisted of up to 55% recycled plastic) in the relevant context was misleading, because an average consumer would understand the wording so as to mean that the product was made exclusively from recycled plastic. Any ambiguities or doubts should therefore generally be avoided; the more precise an upcycling message is, the lower the risk of misleading information.

This also applies to the fact that upcycled goods are actually made from second-hand materials, which can create certain expectations among consumers. To avoid misleading information, it is essential to clarify in the communication what exactly is being sold – including, for example, information about the origin of the product, the percentage left of the original product, the type of processing that has taken place, and the quality of the upcycled end product. Increasing transparency will also increase trust in the product and in the company behind it.

Upcycling has also become a key concept in environmentally conscious consumer behaviour. It can therefore be tempting for companies to use environmental claims or otherwise emphasise a "green" profile when communicating about upcycling. Since environmental statements must be clear, truthful, relevant and, not least, verifiable, it is important to be aware of the relatively restrictive requirements for such environmental marketing. The requirements are elaborated on in our article on greenwashing, which also contains advice on how to ensure balanced and reliable marketing of environmental statements. Read the article here.

However, it should be emphasized that the restrictive requirements for the use of environmental statements may also apply if it is indicated between the lines that it is "green" marketing. We have no case law regarding the question whether the use of upcycling messages is directly comparable with an environmental statement – but it cannot be ruled out in this context that such use will be perceived as indirectly communicating a "greener choice". In that case, the marketing of upcycling messages will be subject to the same strict requirements that apply to the use of "green" statements.

Concluding remarks

Based on the CJEU cases on second-hand/recycled goods, we have taken a closer look at the principles that can be a relevant interpretative aid in upcycling cases where third parties upcycle original products bearing a proprietor's trade mark. Due to the lack of trade mark case law, the legal position is uncertain. It is therefore unclear whether in future upcycling cases, when assessed from a trade mark law perspective, the CJEU will apply the same principles as determined in second-hand/recycled goods cases, or whether the CJEU will come up with other principles.

As is the case for trade mark law, there is no case law on the marketing practices area – neither from the courts nor from the Consumer Ombudsman. Therefore, the legal position on the use of upcycling statements for marketing purposes is generally uncertain.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.