Fashion and the First Sale Doctrine

By Palak V. Patel

Copyrights and trademarks have been one of the fastest changing areas of law. While most copyright and trademark law has expanded to provide stronger protection to holders, there is one notable exception.  The First Sale Doctrine (17 U.S.C. § 109) allows individuals who knowingly purchased a copyrighted or trademarked work from the holder the right to sell, display or otherwise dispose of that particular work, notwithstanding the interests of the copyright owner. In the fashion market, the Doctrine essentially allows individuals to sell branded goods without having a licensing structure in place.

In Kirtsaeng v. John Wiley & Sons, Inc., the Supreme Court held that the First Sale Doctrine protected an individual who was buying textbooks printed overseas for cheap, and selling them on eBay for higher prices. This expanded the concept of the First Sale Doctrine to apply to goods made internationally. Surprisingly, this ruling has had the greatest impact on fashion.

In recent years, people enjoy finding a bargain as much as they enjoy owning designer brands. Thus, much to the dismay of designers, the resale market has seen a recent uptick. Due to the First Sale Doctrine, high-end consignment shops like The RealReal are able to send copyrighted/trademarked goods at a much steeper price.

Furthermore, as ruled upon in Kirtsaeng, the First Sale Doctrine protects grey market goods. Grey market goods are goods that are manufactured overseas and sold in the international market (typically at a cheaper price), and then imported into the U.S. for resale. For example, Costco obtained designer Michael Kors bags on the grey market and sold them at a much lower price than other Michael Kors retailers.

Unsurprisingly, brands have pushed back on the wide protection provided by the First Sale Doctrine. For example. In Chanel v. The RealReal, Chanel alleges that TheRealReal is implying that they have a relationship with Chanel by advertising the sale of their goods. More importantly, Chanel states that it is likely TheRealReal is selling counterfeit goods since only experts at Chanel can truly authenticate a product. In Michael Kors v. Costco, Michael Kors goes as far as to say that Costco is diminishing their brand by lowering prices and setting up sloppy displays that aren’t representative of Michael Kors. In response, proponents of the First Sale Doctrine have stated that these are simply tactics to stop individuals from reselling authentic goods at discounted prices.

While the above-mentioned matters are still pending, it is clear that in recent times Courts have favored a broader interpretation of the First Sale Doctrine and will likely to continue to do so. However, it is important to note that the First Sale Doctrine does not extend to situations where the quality of the good is materially altered enough to be considered misleading. Furthermore, individuals cannot claim protection under the First Sale Doctrine if a material difference in the product being sold will create consumer confusion as to the source or brand of the product. For example, changing the packaging of a good can be a source of confusion.

If you’re concerned about navigating the world of copyrights and trademarks, contact Jayaram Law and we can help you comply with all current standards and laws.