Upcycled Goods: Considering When Restoration Crosses Into Infringement

• Published date: 30 March 2022
• Subject Matter: Intellectual Property, Trademark
• Law Firm: Cooley LLP
• Author: Mr Bobby Ghajar and Dina Roumiantseva

"Companies seeking to 'upcycle' or reuse products made by others should...pay attention to labels or stamps identifying the product as rebuilt, refurbished, or repaired. Full and accurate disclosures are highly relevant to the analysis and can help mitigate the risks."

Two recent decisions dealing with high-end watches illustrate the fine line between permissible and infringing modifications when the final product bears a trademark of the original maker. As the trend of "upcycling" or "creative reuse" continues to grow, entrepreneurs should be aware of the potential pitfalls in modifying the products of others.

Generally, the first sale or "exhaustion" doctrine protects a reseller of authentic goods from infringement liability-but only when the goods have not been materially altered in any manner and meet the trademark owner's quality standards. There are, however, some circumstances where courts have found certain modifications to be permissible.

Repurposed Antique Watches Pass the Test

In September 2021, the Second Circuit sided with Vortic LLC and its founder Robert Thomas Custer, whose stated goal was to preserve a part of American history by re-purposing antique pocket watches made in American factories into one-of-a-kind wristwatches featuring clear backs that showcase the mechanical components and original engravings. Hamilton Int'l. Ltd. v. Vortic LLC, 13 F.4th 264 (2d Cir. 2021).

The watch line at issue, "The Lancaster," prominently featured the "Hamilton" trademark on the original pocket watch face. Hamilton International Ltd., now a unit of the Swatch Group, has owned the "Hamilton" trademark since 1909 and manufactured pocket watches at its factory in Lancaster, Pennsylvania until 1969. Vortic used the original pocket watch face and mechanical movement, but added a wrist strap, case, and minor internal parts that were manufactured by Vortic or came from modern sources. The metal ring around the clear back cover read "Vortic Watch Co." and "The Lancaster," along with Vortic's serial number for the watch. Each buyer received the watch with a booklet that displayed Vortic's logo and described Vortic's restoration process, as well as a "Vortic Watch Company Authentication Card" signed by the Vortic watchmaker who did the conversion.

Hamilton filed a trademark infringement suit, which culminated in a one-day bench trial. The district court in the Southern District of New York ruled for Vortic, relying on the factors set out by the Supreme Court in Champion Spark Plug Co. v. Sanders as well as the traditional likelihood of confusion factors.

In Champion, a manufacturer of spark plugs under the "Champion" brand sued a dealer of refurbished "Champion" plugs. Champion Spark Plug Co. v. Sanders, 331 U.S. 125, 130 (1947). The Supreme Court found the use of...