By May M. Cheng and Javeria Baig
The European Union’s Ecodesign for Sustainable Products Regulation (ESPR), Regulation (EU) 2024/1781, establishes a legal framework for product-specific requirements aimed at improving durability, repairability, recyclability and transparency of products in the EU.[1]
A recent rule under the EU has come into effect which restricts the destruction of unsold consumer products. Article 23 imposes a general duty to prevent the need to destroy unsold consumer products, whereas Article 25 goes further to prohibit large companies from destroying unused clothing, accessories and footwears, effective July 19, 2026. Same prohibition will apply to medium sized companies, effective 2030.[2]
The rationale for this is simple – prevent the waste of products and the resources utilized in its making. Essentially, destroying new and usable goods wastes raw materials, water, energy and labour, while also contributing to the environmental footprint through excessive greenhouse gas emissions.[3]
This is a pronounced issue for luxury brands. Luxury brands rely on scarcity and exclusivity as cornerstone strategies to cultivate desirability. By allowing their products to reach discount channels, there is a risk of weakened exclusivity and diminished brand value.
The question that arises is what happens when destruction of unused goods is removed as an option for these luxury companies?
What can brands do with unsold products?
As these regulations prohibit the destruction of unsold products, luxury companies are forced to consider alternatives to manage their excess inventory while ensuring control over the distribution of their goods.
The EU provides that companies should aim to manage their stock inventory and consider controlled resale, remanufacturing, donations, reuse, and repair of such goods.[4][5]
However, not all these alternatives are necessarily realistic or useful for luxury brands. Luxury brands may be reluctant to adopt the strategy of resale or repair without strict measures, considering the possibility of their goods flooding the grey market. This is an intersection of growing tension between the environmental policy and brand scarcity, posing a commercial challenge. Similarly, discounting unsold products or donating poses a similar threat to a brand’s scarcity. Such products can still find their way onto grey market platforms, diluting sales at full price and rarity. Beyond this risk, such markdowns and discounts can diminish the prestige of the brand and can get consumers to delay purchases in anticipation of securing goods at a lower price. This directly impacts the brands’ control over pricing.
Practically, brands can adopt strategies such as limiting their production growth, tightening their traceability measures, implement an in-house operated resale, or promote internal reuse and upcycling programs.[6]
Could brands simply remove their logos?
At first glance, debranding or anonymizing excess inventory before allowing them to enter the secondary market seem to be plausible workarounds for the issue of unwanted branded goods from circulating through resale, donations, or upcycling channels. However, in practice, it is unlikely to be a realistic solution on a large scale, especially for luxury goods.
One such issue is that simply removing the logos can be costly. Often, logos are not always a removable label. Luxury branding of goods is often integrated into the product, as such that logos may be engraved, embossed, or woven into textiles. Removing these elements while maintaining the goods’ appearance, functionality, or value, is a difficult ask in these such situations.
Another concern is the risk of economic devaluation associated with debranding. For many luxury brands, much of the value for their goods is derived from association with the brand itself. For example, consumer recognition and associated prestige of the brand is what often justifies its premium pricing.
Upcycling as a growing area
Another attractive alternative is upcycling. This is different from ordinary resale where a product is resold in the same condition in which it was originally purchased. Upcycling involves repurposing old or existing products into new unique products that appeal to consumers.[7]
For luxury brands, this means redesigning existing goods and materials into entirely new and different goods. In light of EU’s rule, this can potentially lead to increased demand for business that can identify new uses and transform unused inventory into something different yet useful. Beyond reducing waste and complying with the restrictions of the new rule, upcycled products can increase appeal for consumers who are passionate about sustainability and want to promote environment friendly goods. As such, these upcycled products can also be marketed as limited-edition products.
Let’s put this into perspective – consider Gucci-Up program launched in 2018. A brand that has taken steps to embed circular principles in their business model with an ongoing objective to design out waste and pollution and enhancing reuse, recycling, and second life. Gucci-Up is modernizing past products and materials to give them a second life.[8]
The future of luxury upcycling seems promising. Brands can price their limited upcycled products higher than their standard collections, bolstering the perception of quality and reinforcing the emphasis on rarity.
The trademark problem
While upcycling is an attractive narrative, it also creates significant challenges for trademark owners. The tension here is that luxury brands often seek to maintain control over their product’s presentation, modification, and their trademarks, whereas sustainability initiatives aim to keep products in circulation for a long period of time.
Fashion brands have increasingly turned to litigation to challenge independent upcycling business for trademark infringement, depreciation and dilution of good will and related claims.
A principal example of such growing tension is the dispute between Chanel and Kamad Reworked decided in May 2026 by the Paris Judicial Court. The Court was asked whether jewelry incorporating Chanel-branded elements be sold as upcycled products or if that transcended into trademark infringement.[9]
The judgement emphasizes that sustainability objectives do not displace trademark rights.
Chanel contended that the products being sold by Kamad Reworked (“Kamad”) were marketed as original products created through the upcycling of buttons and belt buckles bearing Chanel’s CC monogram and word mark. Kamad argued that this was not the case. The components of the product were authentic and purchased on the second-hand market which were later reused in upcycling. They also stated that each product was represented as Kamad’s original creation alongside a certificate of authenticity clearly stating no affiliation with Chanel. Despite this, the Court was not convinced.
The Courts reasoning was simple – there was not enough evidence to support the claim that components were authentic Chanel products. Thus, Kamad could not rely on the defence of the doctrine of exhaustion. Even if Kamad could establish authenticity of the components, the defence of exhaustion would not apply because exhaustion does not necessarily allow dismantling of the genuine product to extract components and creating a new product.
While the original product may be authentic, the modifications can be substantially different from the quality standards or design choices reflective of the trademark owner. This requires line drawing between legitimate reuse and trademark infringement. The Court did not discredit luxury upcycling, nor did it undermine its legitimacy. Instead, it highlights a clear distinction between reselling a luxury product and transforming that product into a new item that continues to capitalize on the goodwill associated with the original trademark.[10]
Doctrine of Exhaustion
As seen earlier, the discussion around upcycling raises a question: once a trademark owner puts an authentic product on the market, how much control does it continue to have over that product? In trademark law, the doctrine of exhaustion precisely answers that question. Under this doctrine, once a trademark owner markets a genuine product for sale, it generally loses its ability to control subsequent sales of that product.[11] This is why the second-hand resale of luxury goods is generally permitted and distinguishable from counterfeiting.
The more difficult question is what happens when the original product has been materially changed?
This issue is situated at the intersection of two competing objectives. On the one hand, environmental law promotes the idea of keeping products and materials in circulation to reduce waste. On the other hand, luxury brands argue that although ownership transfers to the consumers once they purchase the products, they should not be allowed to create and market new products that continue to benefit from the brand’s reputation and trademark.
Luxury brands have a well-reasoned interest in preventing consumers from mistaking the new and significantly altered products to be associated with the original trademark. Trademarks serve a greater purpose of protecting the goodwill associated with the brand rather than only identifying the source of the goods. In the luxury brand sector, reputation and quality are key to a brand’s established value.
Given the government’s requirements to find alternatives to destruction of unsold inventory and encouraging repair, reuse, and upcycling, courts may eventually have to decide the extent of control trademark owners retain once authentic goods have entered the marketplace.
Canadian perspective and conclusion
As these developments unfold in the EU, the issues presented are likely to become relevant in Canada. Currently, Canada does not have an equivalent broad restriction on destruction of unsold inventory for fashion.
It remains to be seen whether Canada will follow a similar framework as the EU. Nonetheless, the EU’s regime provides a useful example of the direction that law can take given greater emphasis on sustainability and circular economy.
Canada generally holds a more reactive legislative approach. It is yet to be determined how our courts will react if restrictions on destroying unsold inventory are introduced and similar questions arise.
Namely:
- What will Canadian luxury retailers do with excess inventory?
- How will Canadians trademark law treat independent upcycling?
- Where will Canadian courts draw the line between lawful resale of goods and creation of a new trademark-bearing product?
These are some issues we can find Canadian courts grappling with as the market for circular fashion grows. This will largely require reconciliation of legitimate interests of trademark owners in protecting their goodwill with the broader policy objective of promoting use of products and materials to prevent waste.
Though EU’s rule on prohibiting destruction of unsold goods may seem like a sole environmental measure, it carries the potential to alter the relationship between intellectual property law and environmental and sustainability laws. It raises a much broader and fundamental question: once a luxury product has been sold and the law wants it to remain in circulation, how much control should the original brand owner continue to have over its second life? The answer to this will largely shape how we deal with the evolution of fashion law with increasing interest in reducing waste.
[1] https://www.complir.io/resources/guides/espr-ecodesign-regulation-explained#:~:text=The%20Ban%20on,to%20do%20so.
[2] https://www.complir.io/resources/guides/espr-ecodesign-regulation-explained#:~:text=The%20Ban%20on,to%20do%20so
[3] https://environment.ec.europa.eu/news/ban-destruction-unsold-clothes-and-shoes-enters-application-2026-07-17_en
[4] New EU rules to stop destruction of unsold clothes and shoes – Environment
[5] EU Ban on Destroying Unsold Clothing Forces Fashion Groups to Rethink Excess Stock – https://eutoday.net
[6] EU’s unsold-goods destruction ban puts luxury scarcity model under strain
[7] The Difference Between Recommerce, Upcycling, Resale, and the Circular Economy – RE.STATEMENT
[8] GUCCI’s Circular Vision & Fashion | GUCCI® CA
[9] Upcycling and Trade Mark Law: The Chanel v. Kamad Reworked Decision – IP Twins
[10] Chanel vs Kamad: Upcycling and Trademark Law – Lux Juris
