Chinese court’s rejection of ‘upcycling’ defence shows limits of brand exhaustion

As the global sustainable fashion market continues to boom, upcycling is fast emerging as a legal battleground that stands to test the legal limits of trade mark protection in the second-hand luxury goods market.

Upcycling typically refers to the modification of genuine branded goods, or materials taken from them, into new products.

Enforcement in this area can present a reputational minefield for brands. Against a strong young consumer trend towards pre‑loved and upcycled products, a heavy‑handed response risks attracting criticism and potentially undermining the brand’s sustainability narrative.

For brands, this presents multiple issues, including questions over the use of registered marks on materially altered goods, potential damage to the mark’s origin and quality functions. It also raises concerns around likelihood of confusion, unfair advantage, dilution or tarnishment, and implied endorsement or approval.

To further muddy the waters, trade marks are subject to a principle known as the ‘exhaustion doctrine’. This means that rights in a mark are generally exhausted once goods are placed on the market by the proprietor or with the proprietor’s consent.

However, as a recent case in China, reported by industry platform Lux Juris, has demonstrated, owners may object where there are “legitimate reasons”, particularly where the condition of goods is changed or impaired or where the reseller’s presentation harms the mark’s reputation.

This particular dispute arose from the upcycling and resale of pre-owned Louis Vuitton Malletier handbags. Shenzhen Bangtu Cultural Media Co., Ltd (Bangtu) allegedly acquired and dismantled the second-hand bags before reassembling the materials into altered handbags and later selling them through multiple online platforms.

Louis Vuitton initiated proceedings before the Hangzhou Intermediate People’s Court, alleging trade mark infringement and unfair competition. Bangtu said the products were labelled with its own registered trade mark and that Louis Vuitton’s marks only appeared decoratively on the upcycled bags.

However, the Chinese court upheld Louis Vuitton’s claims, rejecting Bangtu’s ‘upcycling’ defence. The court said that Louis Vuitton’s trade marks featured prominently on the exterior of the altered handbags, while Bangtu’s own labels were confined to the bags’ interior compartments. It ruled that the repurposed nature of the handbags did not exempt them from liability and said Bangtu’s conduct amounted to trade mark infringement and unfair competition.

The court ordered Bangtu to cease trading and destroy any unsold products, publish a corrective statement and pay Louis Vuitton $145,000 in compensation.

Global implications

This example of a court rejecting upcycling as a defence and awarding substantial damages underscores the urgency for businesses to examine how similar disputes involving repurposed luxury goods are likely to be approached in other jurisdictions worldwide.

In the UK and Ireland, while exhaustion generally permits the resale of genuine goods, both jurisdictions allow brand owners to object where goods are materially altered or presented in a way that harms the mark’s functions or reputation.

In the UK, registered trade mark rights are governed by the Trade Marks Act 1994, and infringement under section 10 allows owners to prevent the sale of goods that use the mark without consent, particularly where the condition of the goods has been materially changed or their presentation risks damaging the brand.

The exhaustion provision in section 12 confirms that the resale of genuine goods is generally permitted, but this is subject to the proprietor being able to rely on “legitimate reasons” to oppose further commercialisation where the goods have been altered, impaired, or otherwise presented in a way that harms the mark’s reputation.

Upcycled or heavily re‑worked items routinely fall within that exception. Alongside these statutory rights, unregistered protection through passing off remains available in both jurisdictions, enabling brand owners to act where the presentation of upcycled goods misrepresents a trade connection or suggests approval, leading to damage to goodwill.

In practice, these principles give trade mark owners a strong basis to curb problematic upcycling by restricting the dismantling or repurposing of products, maintaining control over damaged stock, monitoring resale channels, and taking consistent enforcement steps where branding is used in a way that interferes with the trade origin function or implies endorsement.

In one recent noteworthy case, the Court of Appeal of England and Wales highlighted the extent of the blurred boundaries surrounding the exhaustion defence in the second-hand refurbishment sector.

In AGA Rangemaster v UK Innovations Group (UKIG), the dispute concerned renovated AGA cookers converted from fossil fuel to electric by UKIG using its ‘eControl System’. However, the court rejected the exhaustion defence in this case because UKIG added a new system and then marketed the resulting product in a way that resembled official AGA sub-branding. It said that this gave consumers the false impression that the modifications had been undertaken by AGA or with the company’s approval.

Although the ruling centres on the AGA trade mark, it could have considerably broader implications for both brand owners and aftermarket service providers.

The legal framework in Ireland largely mirrors the UK’s position. A trademark owner can rely on the Trade Marks Act 1996, including section 16 which concerns EEA exhaustion. For now, it seems likely that Irish courts would also view substantial alterations as a “legitimate reason” for the proprietor to object.

Circular economy

These are not the only cases providing food for thought for businesses, particularly for those involved in the circular economy, which aims to minimise waste and promote the sustainable use of resources by reusing, repairing, refurbishing and recycling existing materials and products.

In April 2025, the Paris Judicial Court delivered a landmark ruling (45 pages / 1.64 KB PDF, linked ruling in French) in a dispute between luxury brand Hermès and independent Parisian label Maison R&C. Hermès launched legal action against Maison R&C for alleged copyright and trademark infringement after it released denim jackets that were made from repurposed Hermès scarves and bore the Hermès branding .

The court rejected Maison R&C’s application of the exhaustion of rights principle, saying that exhaustion could only apply to the original scarves. As they were materially altered, the court said the scarves became new products and therefore Maison R&C’s conduct amounted to copyright and trade mark infringement.

It is worth noting that the court emphasised that the Hermès scarves were not damaged when acquired by Maison R&C and therefore retained their intrinsic value on the second‑hand market, such that their transformation into jackets did not diminish their attractiveness. It consequently held that Maison R&C’s conduct was motivated by a profit‑seeking purpose rather than any environmental protection aim, thereby causing disproportionate harm to Hermès’ copyright and trade mark rights.

However, in a separate case in February, the Korean Supreme Court took a decidedly different view. In this case, infringement turned on whether there was an intent to sell the refurbished product. The court determined that where the owner requests upcycling for the purposes of reselling the item, or that the person undertaking the upcycling intends to sell the products as their own, this would amount to trade mark infringement.

Consequently the Korean Supreme Court held that where a person upcycles a bag for their own personal use this does not constitute trade mark infringement since it does not amount to using the trade mark in commerce.

Next steps for luxury brand owners

These cases illustrate that trade mark infringement in the second-hand luxury goods market is not clear-cut and that courts may take vastly different positions on what constitutes infringement and what does not. As both the global circular economy and the upcycled fashion market are projected to grow in 2026, this suggests that disputes in this area are only set to increase.

We can expect more challenges to “repurposed” luxury goods that retain prominent branding or bypass brand owners’ quality control. Brand owners have a number of options, including challenging exhaustion rules where goods have been substantially altered or re‑worked as the exhaustion doctrine no longer applies. Owners should be ready to assert “legitimate reasons” under UK, Irish and EU law to object to further commercialisation, and to challenge fundamental principles such as the protection of the environment and artistic freedom.

Co-written by Virginia De Freitas of Pinsent Masons.