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In this study, we investigate the best remanufacturing strategy for the Original Equipment Manufacturer (OEM) and Independent Remanufacturer (IR) in an innovative industry where the valuation of consumers for the products increases with the level of innovation and characterize how the best strategy changes with the identity of the remanufacturer. Our work differs from the existing articles which investigate the remanufacturing strategy in the presence of quality decisions by the need to actively include the innovative features in the remanufactured products as opposed to quality that is passively carried to the remanufactured products. We consider three remanufacturing strategies: (i) not remanufacturing, (ii) remanufacturing without adding innovative features, and (iii) remanufacturing with adding innovative features (upgrading). To analyze the problem, we create a single-period model where the OEM determines the level of innovation and new product quantity in both competitive settings and either OEM or IR determines the remanufacturing quantity depending on the competitive setting. We investigate how the environmental impact of the firms and the consumer surplus are affected by the competition and the remanufacturing strategy.