Secondary markets for luxury goods have expanded rapidly, driven by digital platforms, changing consumption patterns, and sustainability narratives. These markets have simultaneously become focal points for IP challenges, including counterfeiting, information asymmetries, and declining consumer trust. This contribution examines how IP law and emerging authentication technologies jointly govern innovation, competition, and trust in luxury watch resale markets, using the Swiss watchmaking industry as an empirical case study. The paper presents a condensed and adapted version of a broader doctoral research project examining the role of IP law in secondary luxury markets.
The paper advances a central claim. In secondary markets, IP increasingly operates as a form of innovation governance rather than solely as a mechanism of exclusion or enforcement. Indeed, as traditional legal tools struggle to address the scale, speed, and transnational character of digital resale, brands have turned to private ordering through certified resale programs and blockchain-based authentication systems. These mechanisms extend the functional reach of IP beyond the first sale by embedding legal and reputational controls directly into market infrastructures. While they mitigate potential fraud and should restore consumer confidence, they also reshape downstream innovation incentives.
The analysis draws on forty-three semi-structured interviews with watch brands, resale platforms, blockchain authentication providers, enforcement actors, and policymakers across Europe, Asia, the Middle East, and the Americas. This qualitative dataset enables a granular examination of how legal doctrines, technological architectures, and market practices interact in practice, beyond their formal articulation in law.
The paper first situates luxury resale markets within the IP framework. Although trademark law and the principle of exhaustion limit post-sale control in theory, enforcement in online resale environments has become increasingly ineffective. The rise of high-quality “superfakes” and composite “frankenwatches” has further eroded visual and technical heuristics of authenticity, intensifying lemons dynamics and discouraging legitimate market participation.
In response, brands have pursued two dominant strategies. The first is the expansion of Certified Pre-Owned (CPO) programs, which re-internalize segments of the resale market through brand-controlled authentication and authorized distribution channels. Interview evidence suggests that CPO programs substantially reduce consumer risk and enhance trust, but also generate competitive effects by diverting transactions away from independent resellers and contributing to vertical integration of secondary markets.
The second strategy involves blockchain-based authentication systems. These systems aim to stabilize trust by embedding provenance and ownership data into digital certificates. While they promise to reduce information asymmetries, the paper identifies persistent challenges related to consumer adoption, interoperability, and the linkage between digital records and physical goods. More critically, some architectures allow brands to technically restrict certificate transfers, raising concerns that technological controls may function as de facto post-sale restraints and effectively circumvent exhaustion principles through code rather than law.
The paper concludes that these developments may lead to excessive restrictions on secondary markets. Historically, secondary markets have operated as semi-regulated “gray zones” that enable experimentation, customization, and decentralized innovation. As authenticity governance becomes increasingly centralized through IP-backed technological infrastructures and platform gatekeeping, opportunities for downstream innovation diminish. The paper closes by highlighting policy implications for European IP governance, emphasizing interoperability, safeguards for exhaustion, and the role of emerging EU initiatives in shaping innovation outcomes in secondary markets.
