Luxury Beyond the First Sale: Navigating New Rules, New Challenges

Oct 13, 2026 | Blog

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:

    1. What will Canadian luxury retailers do with excess inventory?
    2. How will Canadians trademark law treat independent upcycling?
    3. 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

[11] Exhaustion Doctrine in Trademark Law: Complete Guide

Who Owns the Flower? 🌸 A China–Canada Perspective🌸 

Aug 10, 2026 | Blog

By Yixian Chen, Partner – Intellectual Property

The recent first-instance decision in Louis Vuitton v. Molly Tea (茉莉奶白) by the Suzhou Intermediate People’s Court, has sparked significant discussion and controversy regarding intellectual property rights in China and beyond. The court found infringement arising from Molly Tea’s adoption and use of a four-petal floral motif that it considered sufficiently similar to one of the floral design elements incorporated into Louis Vuitton’s well-known composite monogram pattern and several of its registered trademarks in China. Much of the public conversation has centred on a compelling question: 

Can a global luxury brand claim exclusive rights over a flower design that appears to have its origins in traditional Chinese motifs such as 宝相花 (baoxiang flower) and 柿蒂纹 (persimmon-calyx motif)? 

At the time of writing, the written reasons for the first-instance decision do not appear to be publicly available, and Molly Tea has already indicated that it intends to appeal. Any commentary must therefore be understood from this perspective. 

One of the more interesting perspectives was from an article published in Procuratorate Daily (《检察日报》) by China’s Supreme People’s Procuratorate (最高人民检察院) titled “Why was the thousand-year-old baoxiang flower “reverse harvested” by LV?” (《千年宝相花，为何被LV反向收割？》) discussing the broader implications of the case. One observation that was particularly insightful is that the public debate and the legal analysis are not always asking the same question. 

There is a genuine policy question about whether traditional cultural motifs deserve stronger defensive protection against adoption by commercial brands for exclusive commercial purposes. Public interest in shared cultural experience and historical resources could gradually be eroded in favour of private enterprises usurping culturally significant symbols through private trademark rights. 

The countervailing argument would be that trademark law generally does not protect an abstract flower, star or traditional pattern, but rather recognizes rights in a symbol that has been created using a traditional cultural motif only as inspiration, and this creative adaptation, long-term use and consumer recognition has developed a secondary meaning that has come to identify a particular commercial source. 

The competing interests of private brand owners in protecting their artistic works and commercial symbols versus the public interest in preserving cultural motifs as a shared artistic resource are potentially incapable of being reconciled. Cultural appropriation has been a lightning rod for public protests centered on the use of exquisite historical artistry that has been converted into commercial symbols by international brands. The brand owners are typically able to assert their significant financial clout and intellectual property rights by employing trademark lawyers in many jurisdictions, even if each legal system approaches these questions differently.  Arguments about cultural appropriation and the protection of the body of work of historical artistry are no match for industry.  However, on occasion, public sentiment can swing in favour of artists and cultural treasures in a way that can significantly damage brand value and create a firestorm of criticism.  This case threatens to enter that space as Molly Tea adopts the role of David in standing against LVMH’s Goliath. 

This leads one to wonder how this dispute might be treated in Canada. Would we likely see the same result? 

While it is always difficult to divine how a Court may rule in a trademark dispute because these cases are fact-driven, there is ample precedent for similar disputes that have made their way to Canada’s top court. The Supreme Court of Canada’s 2007 decisions in Mattel and Veuve Clicquot both involved famous brands seeking to prevent the use of similar marks in entirely different industries. In both cases, the famous brand owners were denied any relief on the basis that the famous champagne house VEUVE CLIQUOT and a low-brow women’s clothing boutique were “as different as chalk and cheese”, thus avoiding any confusion or false association.  Similarly, BARBIE was found to be capable of distinguishing a Montreal barbecue restaurant without infringing Mattel’s trademarks for its iconic doll.  

The takeaway, however, is not that famous marks should only receive a narrow scope of protection. Rather, the Supreme Court emphasized that fame alone does not answer the question of whether there is likely confusion or damage to goodwill and reputation. Whether consumers are likely to be confused remains a contextual, evidence-based inquiry, which is not eclipsed by any trademark, no matter how famous. 

The Supreme Court of Canada’s observations from 2007 feel significantly less relevant today. Modern consumers are increasingly accustomed to luxury brands extending into hospitality, cafés, restaurants, beauty, lifestyle products and experiential retail. Industry channels are converging on the Internet, and differences in origin or core business may therefore carry less weight where an earlier mark has developed a particularly broad commercial aura or footprint. The Supreme Court may yet be forced to revisit its earlier rulings on this subject if the case of LVMH v. Molly Tea makes its way to its doorstep in Canada, and there is no telling whether the precedents will fall in light of the evolution of the brand extensions we are witnessing today.  The case will still be decided on its own factual matrix and strength of evidence presented. 

In Mattel, the Supreme Court noted circumstances suggesting that the restaurant operator may have intentionally chosen the BARBIE name with reference to the Mattel trademark, because it first used signage and displays featuring the iconic BARBIE doll, but the Court dismissed this transgression as irrelevant, ultimately finding that mens rea was not part of the legal test for confusion. 

Along a similar fact pattern, public reports in China suggest that Molly Tea had previously sought to register versions of its four-petal device, and had encountered objections based on Louis Vuitton’s earlier marks, yet continued using the branding commercially. If accurate, that history may be relevant factual context, but awareness alone does not determine infringement. The legal analysis still turns on resemblance, consumer perception, goodwill and marketplace context. For those familiar with Chinese trademark practice, however, these facts may also evoke the long-standing jurisprudence surrounding bad-faith trademark filings and trademark squatting, which have been recurring issues in China for many years. Canada now also recognizes a relatively new cause of action for bad faith registration, where this fact pattern would find relevance in determining if the alleged infringer was in the habit of adopting other parties’ marks in bad faith. 

For businesses expanding internationally, they should not confine trademark clearance to a single class, a single jurisdiction or a side-by-side comparison of logos. Any proposed design that draws inspiration from cultural references may also create trademark risk because of the potential backlash against cultural appropriation and monopolizing cultural symbols could introduce a variable that the trademark adopter did not consider. 

Perhaps the most interesting question is therefore no longer: 

Who owns the flower? 

But rather: 

What does the flower mean to consumers and is anyone entitled to monopolize it? 

For anyone interested in reading further (in Chinese), Yixian Chen attached screenshots of the article as originally published in Procuratorate Daily (《检察日报》) by China’s Supreme People’s Procuratorate (最高人民检察院) on her LinkedIn article, published on August 7th, 2026. The original webpage no longer appears to be publicly available, but we have included the original URL below for reference: 

https://www.spp.gov.cn/spp/zdgz/202607/t20260708_731506.shtml

Saskatchewan’s new franchise law: where it aligns and where it favours franchisors

Jul 21, 2026 | Blog, FAQ

From June 30, 2026, Saskatchewan will officially join six other Canadian provinces (Ontario, Alberta, British Columbia, Manitoba, New Brunswick and Prince Edward Island) in having franchise legislation when the Franchise Disclosure Act (Saskatchewan) (“FDA”) comes into effect. The summary below provides a brief introduction on the key features of the FDA and specific examples which make the FDA somewhat favourable for Franchisors, in comparison with similar legislations in Alberta and Ontario:

Application of the FDA (Section 3(3))

Unlike the Arthur Wishart Act (Ontario (“AWA”), which excludes the application of the law to any service contracts with the Crown, the FDA does not exclude service contracts with the Crown or an agent of the Crown.

Service or delivery of notices and documents

Section 6(3) and 7(3) of the FDA currently only provide for personal delivery of the FDD or any notices to be provided under the FDA which is restrictive compared to the AWA which allows for other forms of delivery of documents, including electronic and registered mail. The FDA makes reference to other prescribed methods to be introduced through the Regulations to the FDA. The Regulations have not yet been promulgated.

Effective Date of a Rescission Notice

The effective date of a notice of rescission is on the day it is personally delivered or in accordance a prescribed method provided for in the Regulations according to Section 7(4) of the FDA. This is different to the AWA which has multiple ways of determining the effective date of a rescission notice, depending on the delivery method used.

Additional Defense to a Misrepresentation Claim

The FDA provides two additional defences against a misrepresentation claim made by a Franchisee as compared to the AWA in Sections 9(2)(d) and (e). Section 9(2)(d) allows the Franchisor to defend against the misrepresentation claim by stating that they mistakenly relied on statements made by a public official. Section 9(2)(e) applies if the Franchisor took reasonable efforts to investigate the information extracted from public reports or the statements of public officials. The AWA does not contain these additional defenses.

Substantial Compliance

Section 10 provides a defence for Franchisors against a rescission claim, if the FDD or SMC is compliant with the section on the Franchisor’s disclosure obligation (Section 6 of FDA) and has a technical irregularity or a defect in form, such defect or error is not sufficient to affect the validity of the FDD or SMC. Similar clauses are found in the franchise acts in Manitoba and British Columbia. The AWA in Ontario does not have a similar clause.

No derogation of other rights

The FDA goes further than the AWA by stating in Section 12(2) that a Franchisee is not required to elect between a rescission claim and a statutory action for damages. Section 12(3) states that a Franchisee is not entitled to be indemnified by way of damages for loss recovered through rescission.

Attempt to affect jurisdiction void

Section 13(2) provides that any clause in a franchise agreement that forces submission of disputes for arbitration is void to the extent that it excludes the courts in Saskatchewan.

Waiver of Rights

Section 14(2) of the FDA provides a useful qualification that any waivers or releases of a right under the FDA by a Franchisee in favour of a Franchisor are not automatically void if they are made in settlement of a claim, dispute or action. The AWA does not have the same qualifications , any waiver or release by a franchisee is deemed as void.

The FDA is comparable to the AWA and the franchise legislation in other provinces with some differences that more of than not, are quite favorable for the Franchisor. It remains to be seen how the FDA will be interpreted by courts in Saskatchewan, which will inform how the FDA is applied in practical cases.

Clear As Mud – The Rub On Trade Secrets

Clear As Mud – The Rub On Trade Secrets

Mar 27, 2026 | Blog

Written by Zach Nickels and Nicolas Auger

Opening day is right around the corner, you smell fresh cut grass, you hear the ballpark franks sizzling on the grill and see the baseballs rubbed in mud. Yes, a little-known fun fact about baseball is that each baseball is rubbed with mud before play to remove the gloss and slick feel of the ball. This seems like the tradition of a bygone era, but there is reasoning behind it and a story of ingenuity.

Originally, baseballs were rubbed with either infield soil or sometimes even tobacco juice to give them grip and remove their glossy finish. Then, in 1938, Lena Blackburne, a third-base coach for the Philadelphia Athletics, set out to find a better substance that could achieve these results without damaging the leather surface of the ball.

Blackburne discovered the perfect substance: mud from a secret location in New Jersey on the banks of the Delaware River. This special mud, once aged and subjected to secret processes, provides the perfect composition for grip on the ball and an appropriately tinted finish when rubbed onto the surface of the baseball. The mud makes the ball perfectly grippy for the pitcher while reducing its shine so that batters can still see it.

After coming across this discovery, Blackburne founded the company “Lena Blackburne Baseball Rubbing Mud” and proceeded to gather and sell this mud to Major League teams. By the 1950’s, it was used by every single team in the League.[1]

So, what makes this mud so special? Well, according to a 2024 study from the National Academy of Sciences, the mud works because it fills the pores in the ball’s leather surface leaving a residue that almost doubles its cohesion with human skin with tiny clay particles that create a “studded” surface, thereby enhancing friction between the baseball and a player’s hand. Even today, this proprietary mixture has not been replicated elsewhere.[2] To this day, the Lena Blackburne Baseball Rubbing Mud company is the only source of this special mud for the MLB.

The obvious question on every baseball fan’s mind: how is this protectable? Can this even be considered intellectual property? Blackburne didn’t invent the mud, nor can you trademark the signature texture and feel of the ball. This is where the humble, yet potentially powerful trade secret goes to bat.

Trade secrets can be a very formidable tool in protecting what could otherwise be protected by traditional forms of intellectual property (such as inventions protectable by patents), or subject matter which cannot be considered intellectual property in the traditional sense (such as a recipe). However, trade secret efficacy depends on knowing how to “use” trade secrets.

The trade secret framework in Canada is regulated by common law (i.e., jurisprudence) as opposed to statute, and those who misappropriate trade secrets can be liable for breach of confidence, breach of fiduciary duty or breach of contract. Critically, once a trade secret is publicly known, it loses its protection. This is why it is of the utmost importance to have guidelines in place for keeping the trade secret… a secret.

To qualify as a trade secret, (1) the information must have commercial value, (2) the information must be secret (not publicly known), and (3) the business that “owns” the trade secret must take reasonable steps to keep it confidential. There are also various other factors a court may consider as to whether information is a trade secret such as: the value of the information, the cost in creating it, whether misuse resulted in detriment to the owner, and others. In Canada, trade secrets are treated much the same as confidential information. Courts can imply the duty of confidentiality and the tort of breach of confidence to provide monetary and importantly, injunctive relief and restrain use of the confidential information. The test to establish breach of confidence is set out in Lac Minerals Ltd. V International Corona Resources Ltd., consisting of three elements:  that the information conveyed was confidential, that it was communicated in confidence, and that it was misused by the party to whom it was communicated.[3] 

In the case of Lena Blackburne’s mud, the precise site of the mud harvesting, the layer of sediment it is taken from or any proprietary treatment of the mud could all be the subject of trade secret. Any related formulas, recipes, supplier/customer lists, specialized techniques and more could all be kept in confidence in protected as a trade secret.

Protecting a trade secret is no small task, but there are best practices to using them. For example, implementing a formal trade secret policy with your business or organization supported by technical and legal safeguards can help protect your trade secret. Internal controls such as restricted access, contractual protections and document management are also essential measures to incorporate in protecting a trade secret. Ultimately, effective guidelines and management of trade secrets preserve a company’s competitive advantage and can assist in reinforcing the information’s status as a trade secret when enforcement is needed.

The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.

[1] Lena Blackburne rubbing mud a secret of the game | Baseball Hall of Fame

[2] Soft matter mechanics of baseball’s Rubbing Mud – PMC

[3]  1989 CanLII 34 (SCC), [1989] 2 SCR 574 at para 129.

When You Don’t Have To Tell All: Ontario’s Disclosure Exemptions and Exclusions Explained

Mar 4, 2026 | Blog, FAQ

By Gregory M. Prekupec and Rahul Gupta

Franchise disclosure is one of those topics every franchisor thinks they understand, until they realize the rules aren’t quite as black and white as they seem. In Canada, only the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Ontario, Prince Edward Island, and soon, Saskatchewan, require franchisors to provide a disclosure document.

But even in Ontario, the Arthur Wishart Act (Franchise Disclosure), 2000 (“AWA”) includes several instances where disclosure may not actually be required.

In plain terms: sometimes the obligation to disclose simply doesn’t apply at all (these are exclusions), and in other cases, franchisors are legally allowed to skip disclosure in specific situations (these are exemptions).

Why It Matters

Getting this wrong can cause more than just a paperwork headache. Missteps can delay closings, invite rescission claims, and leave both parties in a tricky position-imagine paying rent on a location you can’t yet operate because the cooling-off period hasn’t expired. On the flip side, properly relying on an exclusion or exemption keeps transactions efficient and compliant, while still protecting everyone involved.

That’s why clear legal guidance is essential. A franchise lawyer can confirm whether disclosure is required, explain how exclusions and/or exemptions apply, and help avoid pitfalls that could derail a deal.

The Key Categories

Exclusions – The AWA doesn’t apply at all in these cases:

  • Certain employment or partnership relationships
  • Trademark or certification-style licensing arrangements
  • Shared retail spaces where the smaller tenant isn’t required to buy from the larger retailer
  • Agreements involving the Crown or its agents

Exemptions – Disclosure rules apply generally, but these scenarios are excused:

  • Short-term or small-investment franchises (less than one year or under $15,000)
  • Large initial investments over $3 million
  • Experienced insiders or existing franchisees expanding their operations
  • Multi-level marketing structures
  • Franchise renewals or extensions
  • Estate sales or bankruptcy proceedings
  • Existing franchisee acquiring another unit
  • A sale of a franchise by an existing franchisee for the franchisee’s own account, where the franchisor’s involvement is limited and specified conditions are met.

The Takeaway

Relying on an exemption doesn’t mean a franchisor is cutting corners! It means they’re operating within the law’s boundaries. Still, many choose to disclose anyway for transparency, consistency, and peace of mind.

When in doubt, consult a franchise lawyer early. Understanding when disclosure isn’t required can be just as strategic as knowing when it is.

This article was first published on February 25th 2026 on elitefranchisemagazine.com

 

 

 

Canada Strong, Artists Stronger? The Case for an Artist’s Resale Right

Feb 24, 2026 | Blog

By Zach Nickels, Harneet Gill

 

Jean-François Millet - L'Angélus

Jean-Francois Millet’s “The Angelus” Painting https://www.musee-orsay.fr/en/artworks/langelus-345

 

On November 4, 2025, the Federal Government delivered Budget 2025, entitled “Canada Strong”, in which it expressed its intent to amend Canada’s Copyright Act to protect artists’ and creators’ copyrights. Specifically, the Federal Government has proposed creating an “Artist’s Resale Right”, which it describes as aiming to ensure that Canadian visual artists benefit from the future sales of their work.

Artist’s Resale Right Background

The Artist’s Resale Right concept was first borne-out in France in 1920 as droit de suite after Jean-Francois Millet’s The Angelus painting soared from its initial sale of 1,000 francs to a record 553,000 francs at auction, while his heirs lived in poverty sparking the Artist’s Resale Right movement.

In 1948, the Artist’s Resale Right was later added to Article 14ter of the Berne Convention. Article 14ter essentially states that an author, or after their death, the persons authorized by national legislation, shall with respect to original works of art and manuscripts of writers and composers, enjoy the “inalienable right to an interest in any sale of the work subsequent to the first transfer by the author of the work”. However, the entitlements under this right vary between jurisdictions, with some countries offering artists 5% of the total sale, others applying a sliding scale (2%-10%), and others yet allocating only the profit made on sales of the subject work.

As a practical example, let’s assume a Canadian painter sells their artwork for $5,500 in 2025. If resold at auction a decade later for $48,000 in France (an implementing nation), the artist receives approx. 4% ($1,920) via a collecting society, provided Canada’s law permits reciprocal claims. This real-world scenario highlights the importance of Canada’s pending reforms for artists globally.

A Canadian Proposal for an Artist’s Resale Right

In Canada, the Canadian Artists’ Representation/Le Front des artistes canadiens (“CARFAC”) and Le Regroupement des artistes en arts visuels du Québec (“RAAV”) jointly recommended that the federal government introduce an Artist’s Resale Right in Canada to apply to eligible secondary sales of artwork. Under their proposal, the right would cover the resale of original visual artworks during the artist’s lifetime and continue to benefit the artist’s estate for the duration of copyright protection. They further suggested that the royalty rate payable to rightsholders be set at 5% of the resale price and apply only to works sold on the secondary market for at least $1,000.

In terms of administration, the recommendation provides that both the art market professional (such as the gallery, dealer, or auction house) and the seller of the artwork should be jointly responsible for ensuring payment of the royalty. Finally, CARFAC and RAAV proposed that the management and distribution of these royalties be administered by the Canadian Artists’ Representation Copyright Collective (“CARCC”), which currently operates under the business name Copyright Visual Arts – Droits d’auteur Arts visuels.

Tension with Personal Property Rights

The creation of this right, however, has sparked debate since it extends beyond mere copyright to personal property rights, which fall under provincial jurisdiction. Section 3(1)(j) of the Copyright Act only captures the very first authorized sale or transfer of a physical copy of a work. Once the first sale is made, the buyer owns the tangible asset and subsequent sales of the work do not infringe the author’s copyright despite copyright in the work remaining with the author or assignee.

This concept is known as the doctrine of exhaustion (or first sale doctrine in the United States). Canada’s Copyright Act contains provisions that can be construed as embodying the doctrine of exhaustion, and its applicability has been confirmed by the Supreme Court of Canada in Théberge v. Galerie d’Art du Petit Champlain inc. Consistent with the doctrine of exhaustion, critics of the Artist’s Resale Right have argued that movable property must circulate freely and without hidden charges, and that the proposed legislation risks impeding that flow.

A Potential Detrimental Impact on Artists’ Initial Sales?

There is also an argument to be made about the potential for detrimental effects on artists’ financial interests resulting from an Artist’s Resal Right. For example, an anticipated resale royalty obligation under the Artist’s Resale Right could motivate the initial purchase to lower their offer on the initial sale, as buyers may speculatively discount what they are willing to pay to account for a future royalty.

Emerging artists often depend heavily on the initial sales of their works, and the potential downward pressure created by the Artist’s Resale Right could disproportionately affect them by reducing both the prices that their works attract and their potential volume of sales volume. In theory, this ripple effect could create difficulties for emerging artists to gain a foothold in the market, as their works could become comparatively less attractive than assets not encumbered by future royalty obligations.

Concluding Thoughts

In sum, a durable framework for Artist’s Resale Rights must work in practice across the full life of a work, for all players involved including artists, intermediaries, and collectors; Like all things copyright, a balance must be struck with respect to artists and owners alike.

In a balanced copyright ecosystem, artists should be able to participate in the long-term success and appreciation of their creations, and owners should have their expectations safeguarded when freely dealing with their personal property. Whether Canada’s proposed Artist’s Resale Right actually satisfies this balance has yet to be tested, but copyright owners and art collectors will certainly be watching with great interest.

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