Authored By: Tamanna Ashra
Renaissance Law College
ABSTRACT
The growth of the resale and vintage fashion market in India poses a complicated issue surrounding intellectual property rights (IPR), consumer preferences, and the principles of the circular economy. It’s a legal analysis of the resale of branded and designer apparel, examining the rights of brand owners, and the defences of which resellers may avail themselves. It examines important aspects of The Trade Marks Act, 1999[1], specifically First Sale and The Copyright Act, 1957[2], specifically the doctrine of exhaustion of rights. The analysis covers the Designs Act, 2000[3]and also touches upon relevant Indian and foreign case-law such as the Chanel Inc. v.In what is bound to be a precedent-setting decision, What Goes Around Comes Around, LLC has established the limits of legal resale.The article critically assesses the problems of brand dilution, counterfeit products and product quality as compared to the legal rights of the resellers of true products.It finds that the concept of international exhaustion is generally supportive of the resale market under Indian law, but there are certain grey areas on legitimate basis of the brand owner to refuse subsequent transactions and the responsibilities of online intermediaries.The results indicate a lack of clarity in judicial regulations and strong industry self-regulation which could enable a transparent and sustainable resale system.
KEYWORDS
Intellectual Property Rights; Resale Fashion; Vintage Fashion; Doctrine of Exhaustion; First Sale Doctrine; Trademark Law; Copyright Law; Fashion Law; Circular Economy; WGACA (what goes around comes around).
INTRODUCTION
The fashion industry is transitioning from a linear economy to a circular economy and sustainability is becoming a key consumer value. This shift has spurred the rise of resale and vintage clothing in India. The incredible growth of the pre-owned luxury and designer goods market, which was once considered a niche product in a handful of thrift shops, is now a well-established, multi-crore dollar industry fueled by online platforms and a generation of consumers that are more environmentally and economically conscious. This emerging market, however, is surrounded by a complex legal environment that produces a complex relationship between the rights of the IP owners and the business of IP resellers. This article aims to analyse this interaction in a comprehensive manner in the Indian context. It aims to provide clarity on the legal scope of resale of fashion products bearing a brand, focusing on the legal framework provided by trademark, copyright and design law. This article will break down the concepts and precedents that have been crucial in India’s legal landscape and elucidate the rights and responsibilities of brand owners, resellers, and intermediaries, thereby offering a comprehensive understanding of the legal challenges and prospects in the country’s circular fashion economy.
BACKGROUND
The resale fashion economy in India is propelled by a confluence of factors.It is also more cost-effective for economically privileged consumers to obtain luxury and designer brands.On the environmental side, it promotes the circular economy concept over the linear ‘take-make-dispose’ model, thereby improving the lifespan of clothes and lowering their carbon footprint.Culturally, it provides for a growing need for items that are unique, vintage, and out of production, thus providing a sense of individuality.A new generation of curated online resale platforms has enabled the professionalization of the resale market, keeping up with this demand.There are generally two types of business models: one being consignment-based where the platform lists out and sells the items on behalf of individual owners for a commission, and the other, direct to consumer where the platform buys the items directly for its own resale.Authenticity, curation and trust are the three cornerstones on which key players in the Indian market are working, like Saritoria, The Luxury Closet, Confidential Couture and Carol’s Shop.They use stringent authentication to prevent counterfeits and offer a hassle-free transactional experience to legitimize the pre-owned market and make it a regular retail channel.
LEGAL ANALYSIS
THE TRADE MARKS ACT, 1999
The doctrine of exhaustion of rights, outlined in the Trade Marks Act, 1999, is at the heart of a reseller’s right to engage in trading in the brand. The definition of infringement in section 29[4] of the Act is followed by some important exceptions in section 30. In other words, Section 30(3)[5] provides that the sale of goods that are registered trademarks and have been acquired lawfully by another party does not constitute a violation. Also called the ‘first sale doctrine’ in trademark law, this principle holds that the rights of the brand owner and/or his/her authorised representative to control the sale and distribution of a particular product are ‘exhausted’ once the sale is made. The reseller can then resell that genuine article without having to seek permission from the trademark owner. An important factor is the term ‘use in the course of trade’. To infringe there has to be some indication that an association exists with the brand owner when the mark is used. A reseller can usually rely on the brand’s trademark to specify that the products are intended for resale and that it is not an authorized reseller, but must avoid confusing consumers into thinking that the reseller is authorized or that the brand owner approves of the reseller. Additionally, India is based on the principle of international exhaustion where anything lawfully put on the market anywhere in the world can be imported and resold in India without the trademark owner’s consent. But this right is not a complete right. Section 30(4)[6] makes a crucial exception in which the trademark owner has a ‘legitimate reason’ to object to subsequent transactions, such as when the condition of the goods has been ‘changed or impaired’. This clause plays an important role in the field of used fashion, as alterations, damages, or poor maintenance can occur.
THE COPY RIGHT ACT, 1957
The resale fashion economy in India is propelled by a confluence of factors. It is also more cost-effective for economically privileged consumers to obtain luxury and designer brands. On the environmental side, it promotes the circular economy concept over the linear ‘take-make-dispose’ model, thereby improving the lifespan of clothes and lowering their carbon footprint. Culturally, it provides for a growing need for items that are unique, vintage, and out of production, thus providing a sense of individuality. A new generation of curated online resale platforms has enabled the professionalization of the resale market, keeping up with this demand. There are generally two types of business models: one being consignment-based where the platform lists out and sells the items on behalf of individual owners for a commission, and the other, direct to consumer where the platform buys the items directly for its own resale. Authenticity, curation and trust are the three cornerstones on which key players in the Indian market are working, like Saritoria, The Luxury Closet, Confidential Couture and Carol’s Shop. They use stringent authentication to prevent counterfeits and offer a hassle-free transactional experience to legitimize the pre-owned market and make it a regular retail channel.
THE DESIGN’S ACT, 2000
Designs Act 2000, the novel aesthetic characteristics of a product, including its shape, configuration, pattern or ornamentation are protected. A registered design provides owner with the exclusive right to apply the design to a specific article. The scope of the Act is however mostly targeted at the prevention of products containing the registered design being manufactured and sold without authorization. The Act does not prohibit re-sale of original articles lawfully placed on the market by the design owner and with his consent. Thus, the rights of the design owner to a particular fashion accessory are exhausted when it is sold once it is registered. A reseller who sells genuine and pre-owned articles shall not be considered to infringe the rights of the design owner under this Act. The protection provided by the Designs Act is not for the subsequent use of the genuine trademarked products incorporating a design, but merely against the piracy of the design itself. This means that although it is important to prevent the unauthorized use of a new line of clothes, the Designs Act does not create a significant obstacle to the existence of a secondary market for fashion.
CASE LAW DISCUSSION
INDIAN CASE LAW’S
The Indian judiciary has upheld the concept of ‘international exhaustion of rights’, which is of great significance in the resale market where luxury goods are sourced from across the globe. In *Philip Morris Products S. A & Anr v. Sameer & Ors*[7], the Delhi High Court dealt with the issue of parallel importation of Marlboro cigarettes. The court ruled that the doctrine of international exhaustion applies in India under Section 30(3) of the Trade Marks Act. It has laid down that lawful acquisition of goods from a market from which the owner has placed them does not mean that the importation and resale of the same goods in India amounts to trademark infringement. This decision will give a significant boost to resellers who import genuine branded fashion goods from abroad and sell them in India.
On the copyright side, although the Supreme Court has not yet ruled on the first sale doctrine in relation to fashion, their remarks in Engineering Analysis Centre of Excellence Private Limited v. The Commissioner of Income Tax[8] provide examples. The principle of such cases as John Wiley & Sons Inc. v. Prabhat Chander Kumar Jain[9], involving the resales of imported books, was referred to and affirmed.It is based on the exhaustion principle, which is the right to distribute a copyrighted work after the initial sale.The decision of the highest court is an important affirmation of the first sale doctrine, thus offering a strong defense of the resale of fashion products that could potentially be deemed “artistic work” under the Copyright Act.
INTERNATIONAL LAW’S
One of the most titanic battles between luxury brands and resellers has captured worldwide interest in the case of Chanel, Inc. v. A federal jury in the Southern District of New York[10] chose this week to decide on the fate of What Goes Around Comes Around, LLC (WGACA)*. Chanel sued WGACA, a leading luxury retailer, for trademark infringement, false association and the sale of counterfeit goods. Chanel’s main claims were that WGACA’s marketing activities gave the impression that it had an affiliation or endorsement by Chanel and that certain items marketed by WGACA, such as handbags, were not authentic or sold without authorization by Chanel. One major issue was WGACA selling goods that it did not originally market to the public, like giving gifts to employees or members of the press. Through a lengthy litigation, the jury ruled in favor of Chanel in finding WGACA guilty of trademark infringement and false association. The ruling gave attention to some important issues in the resale market. First of all, it highlighted the need for straightforward and explicit statements of non-affiliation. Second, it stressed the danger of selling something that isn’t known to have come from a legitimate source. The court’s ruling also provides a warning to resellers: the resale of genuine items is allowed under the first sale doctrine, but the way a product is marketed and the guarantees of authenticity are key. Resellers may not so extensively use a brand’s trademarks in their marketing that they cause a likelihood of consumer confusion about a relationship or connection with the brand. The case could have implications for the judiciary in India, especially in regard to the concept of false association and the level of extent to which resellers can utilize a brand’s marketing materials and trademarks.
CRITICAL ANALYSIS
The legal framework is generally supportive of the resale market, but has some tension and legal ambiguity.The main conflict is between the brand’s desire to protect its brand equity and the reseller’s right to sell the good that is legally owned.Brand owners have a great challenge in the secondary market.Brand dilution is a major concern: Products that are available for sale at a discount might reduce the brand’s exclusivity and luxury image.Others include loss of quality control.Once the product is in the resale market, the brand owner has no control on the condition, the context in which the product is sold, or the services after sales, which can have a negative effect on the brand’s reputation.However, the greatest danger is that of counterfeit products.Advanced forged products can enter the supply chain and even a thorough authentication system can’t guarantee that a counterfeit product will not be sold, resulting in a direct impact on the consumer as well as the brand.
The Indian resale and vintage fashion market is in a promising yet challenging phase.The secondary market is well grounded in the existing concept of IPR, in particular the Exhaustion of rights under trademark law and the First Sale doctrine under copyright law.Indian law, in its embrace of international exhaustion, is, in essence, pro-foreign international luxury resales.The rights of resellers are not limitless, however.The main legal issues come from the requirement to ensure that customers are not misled about affiliation to brands, the constant danger of counterfeit goods and the possibility for the brand owner to rely on the exception in Section 30(4) of the Trade Marks Act for ‘legitimate reasons’.This Chanel v. WGACA case is a prime example of the importance of marketing and authentication as well as the underlying right to resell.In the future, the Indian market would gain from well-defined judicial interpretations of the meaning of the term ‘impairment’ of goods, as well as clarity regarding the liability of the middlemen, who play an active part in making sure that goods are authentic.If control is not to be left in the hands of legislators, it will be up to industry self-regulation.Establishing industry-wide standards for authentication, clear communication of non-affiliation with brands, and clear policies on altered and damaged goods will be key to gaining consumer confidence and a sustainable and robust circular fashion economy in India.
CONCLUSION
Intermediaries such as resale websites are also subject to legal obligations. They might be protected by the Information Technology Act, 2000 but their participation in the curating, authentication and marketing of the products may lead them to claims of infringement, especially as they are alleged to have known about such deals. A largely untouched but powerful exception for brand owners gives that Section 30(4) of the Trade Marks Act is the ‘legitimate reasons’ exception. The argument could be made that the condition of a second-hand good, major changes made to it or poor sanitary conditions in which it is stored are an ‘impairment’ of the goods, which could be a justifiable basis for not permitting the good to be resold. For instance, if a reseller performs repairs on a luxury handbag using non-original parts, the brand could claim the integrity of the handbag may have been violated. The difficulty for the court will be to decide what will count as ‘impairment’ and how the interests of the brand owner in protecting their brand will be weighed against the interests of the reseller in trading.
BIBLIOGRAPHY
STATUTES
- The Trade Marks Act, 1999
- The Copyright Act, 1957
- 3. The Designs Act, 2000
INDIAN CASE LAWS
- Engineering Analysis Centre of Excellence Private Limited v. The Commissioner of Income Tax, C.A. No. 8733-8734 (Supreme Court, 2021)
- Philip Morris Products S. A & Anr v. Sameer & Ors, CS(OS)/1723/2010 (Delhi, 2014)
- John Wiley & Sons Inc. v. Prabhat Chander Kumar Jain, IA No. 11331 / 2008 in CS(OS) No. 1960 / 2008
INTERNATIONAL CASE LAWS
- Chanel, Inc. v. What Goes Around Comes Around, LLC, 1:18-cv-02253 (SDNY)
[1] The Trade Marks Act, 1999
[2] The Copyright Act, 1957
[3] The Designs Act, 2000
[4] Trade Marks Act, 1999, s 29
[5] Trade Marks Act, 1999, s 30(3)
[6] Trade Marks Act, 1999, s 30(4)
[7] Philip Morris Products S. A & Anr v. Sameer & Ors, CS(OS)/1723/2010 (Delhi, 2014)
[8] Engineering Analysis Centre of Excellence Private Limited v. The Commissioner of Income Tax, C.A. No. 8733-8734 (Supreme Court, 2021)
[9] John Wiley & Sons Inc. v. Prabhat Chander Kumar Jain, IA No. 11331 / 2008 in CS(OS) No. 1960 / 2008
[10] Chanel, Inc. v. What Goes Around Comes Around, LLC, 1:18-cv-02253 (SDNY)
