Repurposing copyrights and trademarks: the first sale doctrine

Dear Rich: I have a question. Can a copyrighted or trademarked item be reused or "repurposed," as they like to say in the recycling circles, into a new product for sale without permission? For example, can someone take a cereal box, cut it up, use the front of the box as a notebook cover and legally sell that notebook? Can someone tear a page from a magazine or calendar, fold that page into an envelope and legally sell that envelope? How about a bottle cap? Can someone fashion a piece of jewelry from a bottle cap that is identifiable in the finished piece? I'm so glad you asked. The short answer: Making jewelry from a bottle cap is probably okay, ripping pages from a magazine and selling envelopes could be fine (but ripping pages from a book or calendar may not), and making notebook covers from cereal boxes may lead to trademark problems.
The long answer (zzzzzz) is a bit more nuanced. Here goes: Copyright law permits the purchaser of a copyrighted work to resell, destroy, or do whatever they want to that work, as long as they don't step on any of the copyright owner's exclusive rights. This principle is known as the first sale doctrine, and that's why people can sell used books, movies, and music on eBay and Amazon. The term "first sale doctrine" comes from the fact that the copyright owner maintains control over a specific copy only until it is first sold. (One exception: If it's a limited edition artwork or fine art work -- for example, signed and numbered photographs created in limited editions of 200 or fewer copies -- you can't destroy it.)
Naturally, things aren't always so simple. For example, two cases involving the resale of artwork seem to have arrived at different results. In one case, a company purchased a book of prints by the painter Patrick Nagel and cut out the individual images in the book and mounted them in frames for resale. A court of appeals in California held that this practice was an infringement and was not permitted under the first sale doctrine. (Mirage Editions, Inc. v. Albuquerque A.R.T. Co., 856 F.2d 1341 (1988).) (A similar result was reached in Greenwich Workshop Inc. v. Timber Creations, Inc.,932 F.Supp. 1210 (C.D. Cal. 1996).) In a different case, a company purchased note cards, mounted them on tiles, and resold them. A federal court in Illinois determined that this practice was okay. (Lee v. Deck the Walls, Inc., 925 F.Supp. 576 (N.D. Ill. 1996.) (The same result occurred in C.M. Paula Co. v. Logan, 355 F.Supp. 189 (D.C. Texas 1973).) So, under these rulings, a person cannot rip individual images from an art book and resell them, but a person can mount individual note cards and resell those. Another case added further confusion when a federal court ruled that the purchaser of a bundle of software programs could resell the individual components (separate programs on CDs). (Softman Products Co. LLC v. Adobe Systems Inc., 171 F.Supp. 2d 1075 (C.D. Cal. 2001).)
You definitely want to take some care selling repurposed items that contain trademarks. Although you're free to sell empty cereal boxes, you want to avoid implying that the cereal company is endorsing or is associated with your notebook products. That's going to be tough to do if the cover of your notebook is identical to the cover of the cereal. Consumers will necessarily confuse the two and likely think the cereal company is selling notebooks (not a major leap, considering they sell to kids). A prominent disclaimer may help -- for example, a statement that your business is not affiliated with or endorsed by the trademarked company. But who's going to want to look at a big disclaimer on the cover? Whatever you do, don't play up the trademarks you use in your company's marketing or business name. For example, it's not a good idea to name your website "Cheerios Notebooks." Finally, as with all issues like this, the lower you are on a company's radar -- that is, the less you sell -- the more likely you are to avoid any hassles.