Repair clause in disputes over replacement parts
The new ruling by the Court of Justice on the “repair clause” gives more freedom to manufacturers of non-original replacement parts.
Acacia Srl v Audi AG and Porsche AG, judgment of the Court of Justice of 20 December 2017 (Joined Cases C-397/16 and C-435/16)
Protection of component parts of complex products, such as replacement parts for automobiles, is a field where the conflicting interests of automotive manufacturers and manufacturers of non-original replacement parts have collided for years. EU regulations include a “repair clause” enabling production and sale of replacement parts identical to the originals. But the clause is differently interpreted by the courts of the member states, generating numerous disputes. There have been fundamental doubts surrounding which replacement parts the repair clause applies to and the conditions that must be fulfilled by manufacturers and sellers of replica parts to effectively rely on the repair clause. The recent judgment by the Court of Justice provides guidelines in this area.
Original parts and replicas
Legal protection of original replacement parts is one of the most difficult and controversial issues of intellectual property law. Original equipment manufacturers have been squaring off over the scope of this protection for years with independent manufacturers of replacement parts for the secondary market. Individual member states of the EU regulate this issue independently and not uniformly, awarding broader rights to one or the other group. The remedy for this state of affairs was supposed to be legislation aimed at harmonising the scope of protection across the EU. Although work on this solution has been ongoing since the 1990s, no political and economic consensus has been reached and harmonisation has not occurred yet.
What is a “complex product”?
Under the Community Designs Regulation ((EC) 6/2002), either the appearance of the whole of a product, or only a part of a product, may be protected as a design. The regulation also recognises the category of “complex product,” defined as “a product which is composed of multiple components which can be replaced permitting disassembly and re-assembly of the product.” A component part of a complex product can be protected as a design only if, once it has been incorporated into the complex product, the component part remains visible during normal use of the complex product. It must also meet the requirement of being “new” and having “individual character.”
A classic example of a complex product is an automobile. Automakers thus register as designs not only the overall appearance of the vehicle as a whole, but also the numerous components parts, such as body, lights, wheel rims, cockpit, the arrangement of instruments on the dashboard, steering wheel, and grille. Indeed, the auto industry has exerted an overwhelming influence over the wording of the regulations governing the protection of complex products. Obviously, carmakers want to obtain the broadest possible protection for exclusive rights, covering not only the vehicle as a whole but also its component parts. The problem arises when the owner needs to make repairs: for the vehicle to regain its original appearance, the replacement part must be a copy of the original part. But if the appearance of a given component is registered as a design, an independent manufacturer of an identical replica part would unavoidably have to infringe the rights to the design. For consumers, lack of access to replicas would force them to use only original replacement parts from the carmaker or its affiliates. In practice this would limit competition on the replacement parts market and create a closed market.
Repair clause
To prevent this situation and to liberalise the replacement parts market, the drafters of the Community Designs Regulation decided to limit the exercise of the holder’s right to a protected design via the “repair clause” in Art. 110(1) of the regulation, which provides that “protection as a Community design shall not exist for a design which constitutes a component part of a complex product used within the meaning of Article 19(1) for the purpose of the repair of that complex product so as to restore its original appearance.” Thus, for example, production and sale of replacement parts for cars will not violate the holder’s rights if the aim is only to repair the vehicle by bringing it back to its original appearance. But such replica parts cannot be used for other purposes, e.g. to produce new vehicles. This means that the holder still has rights to the design, but exercise of the right is limited, and the holder cannot rely on its exclusivity and prohibit competitors from using the design for this purpose.
This was only an interim solution, intended to remain in force until a consensus was reached enabling full harmonisation of national regulations. But such harmonisation has not been reached in the 16 years since the regulation was enacted.
Court of Justice interpretation in Acacia v Audi and Porsche
In the judgment of 20 December 2017 in joined cases arising out of requests for a preliminary ruling by a German court and an Italian court, the Court of Justice addressed doubts surrounding the repair clause. The cases involved Acacia Srl, a manufacturer of aluminium automotive rims, on one side, and Audi and Porsche on the other, who sued Acacia for infringing their rights to Community designs protecting the appearance of rims produced by them as original equipment manufacturers.
- Rims covered by repair clause
The carmakers and the German government advocated for narrow application of the repair clause. According to them, the clause “applies solely to component parts of a complex product upon whose appearance the protected design is dependent, namely parts whose shape is fixed.” Examples would be lamps or body parts, which if they are to fit the given car cannot differ from the appearance dictated by the car as a whole. The rims in question did not fall within this category of products because their appearance was not determined by the appearance of the vehicle. In order to fit the car, they need not have a specific shape or dimensions dictated by the appearance of the car. Thus, in the carmakers’ view, manufacturers of replacement rims could not rely on the repair clause, and the carmakers could pursue claims against them for infringement of their protected designs.
One of the arguments for this interpretation was the wording of Recital 19 to the Designs Directive (98/71/EC), which expressly refers to “a complex product upon whose appearance the protected design is dependent.” But the Court of Justice did not share this view, citing among other things the wording of the provision governing the repair clause. Art. 110(1) of the Community Designs Regulation simply does not contain such condition, due to a deliberate decision by the drafters. Without that wording, the consensus enabling adoption of the current solution could not have been achieved.
Second, such condition is not included in the text of Directive 98/71/EC, which should be governed by the uniformly interpreted regulation.
Finally, the narrow interpretation of the repair clause proffered by the carmakers would not further the aim for which the provision in question was adopted, which was to liberalise the market for replacement parts, enable consumers to access cheaper parts (if necessary for repairs), and prevent exclusion or limitation of competition on the replacement parts market.
Consequently, the Court of Justice held that manufacturers of replacement parts could rely on the repair clause also to produce parts whose appearance is not dictated by the appearance of the vehicle, e.g. the rims in dispute in the Acacia litigation.
This interpretation of the repair clause came as a blow to carmakers, but represented a bow to the interests of manufacturers of non-OEM replacement parts, who will have more latitude in their operations.
- Clause applies to identical parts
The Court of Justice also took a view on how to understand the repair of a complex product “so as to restore its original appearance.” The practical dimension of this issue boiled down to the question of whether to effectively rely on the repair clause, the replacement part must be identical to the original part. This view was supported in the dispute by the carmakers. Non-OEM producers took the opposite view, favouring a broad application of the repair clause and arguing that they are entitled to produce replacement parts differing in appearance from the original parts, e.g. in colour or shape.
In this respect the Court of Justice inclined to the view of the automakers, holding that the repair of a complex product means that replacement of the component part “must be necessary for the normal use of the complex product.” This occurs when the part must be replaced because it is damaged or missing. Thus, the court found, “Any use of a component part for reasons of preference or purely of convenience, such as, inter alia, the replacement of a part for aesthetic purposes or customisation of the complex product is therefore excluded from the ‘repair’ clause. … It follows that, in order for the ‘repair’ clause to be applied, the component part must be used so as to restore the complex product to the appearance it had when it was placed on the market.” Thus, the court held that “the ‘repair’ clause applies only to component parts of a complex product that are visually identical to original parts.” Consequently, manufacturers of non-original replacement parts may not rely on the repair clause for example to produce rims with colours, dimensions or ornamentation different from the original parts.
The interpretive guidelines adopted by the Court of Justice should contribute to greater uniformity in the rulings issued in the member states.
- What to do to effectively rely on the repair clause
The last issue addressed by the Court of Justice concerned the conditions that must be met by a manufacturer or seller of replacement parts to ensure that the parts are used only for the purpose of repair, justifying reliance on the repair clause. Before it was not known how a producer of parts should show that the specific part was only a replacement for repair purposes. It was often asserted that the producer had no influence over how the part was used by the buyer, particularly further down the distribution chain.
The court began with the assumption that the manufacturer or seller “cannot be expected to guarantee, objectively and in all circumstances,” that the parts will be used in compliance with Art. 110(1) of the regulation. Nonetheless, to benefit from the repair clause regime, “such a manufacturer or seller is … under a duty of diligence as regards compliance by downstream users with those conditions.” In practice this means they should take steps to ensure that professional buyers as well as consumers use the components only for repairs. The court indicated three measures of this type:
‒ Clear and visible indication on the product, on packaging, in catalogues and sales documents that the component part incorporates a design of which they are not the holder and that the part is intended exclusively to be used for the purpose of the repair of the complex product so as to restore its original appearance
‒ Ensuring, particularly through contractual means, that downstream users do not intend to use the parts in a way that does not comply with the repair clause
‒ Refraining from selling such components where they know or, in the light of all the relevant circumstances, ought reasonably to know that the part will not be used in compliance with the repair clause.
These duties by parties relying on the repair clause are the most debatable portion of the judgment. While it is reasonable to expect that producers of replacement parts will clearly indicate their origin and intended use, going further than that would mean actually controlling the use of the product, which is dubious. Thus in practice the guidelines concerning these duties do not resolve the issue of the producer or seller’s responsibility for the customer’s use of replica parts. The interpretation adopted by the Court of Justice may provide guidelines for courts ruling on specific alleged infringements, but does not entirely remove doubts in interpretation. This means that effective reliance on the repair clause will largely depend on the evidence and legal arguments presented in each case.
What will the Polish courts say?
Although the Polish courts are not formally bound by judgments of the Court of Justice, in the quest for uniformity of legal protection within the EU, its rulings are taken into consideration when resolving Polish disputes. The Acacia judgment will no doubt be helpful for the Warsaw Regional Court’s 22nd Division for Union Trademarks and Community Designs when ruling on alleged infringements of Community designs in Poland. But considering that the national regulations governing industrial designs also contain a repair clause, the conclusions from this judgment may guide other Polish courts hearing cases involving infringement of rights to designs registered in Poland.
Dominika Kwiatkiewicz-Trzaskowska, Intellectual Property practice, Wardyński & Partners
