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Wednesday, 8 August 2012

The wheels on the car go Round and ... Metal

In what could be a new trend for this Kat, following her posts on food and slightly naughty things, she seems to be developing another niche in intellectual property: IP in the automotive industry. First, there was the alleged misuse of confidential information and copyright infringement relating to the design of a half-size wind tunnel model of a Formula 1 racing car: see Katpost here -- and now there is BMW's claim that a manufacturer of replica alloy wheels infringed its registered design and trade mark rights.

Facts

BMW owned four Community registered designs for wheels for motor vehicles (RCD 000032438-0004, RCD 000304274-0004, RCD000609458-0006 and RCD 000936281-0005). Round and Metal Ltd (R&M) imported into the UK and sold replica alloy wheels which were essentially of the same appearance as each of the designs. BMW claimed that R&M infringed its Community registered designs. R&M denied infringement on the basis that Article 110(1) of the Community Design Regulations (CDR) applied. Article 110(1) is a transitional provision which provides that, until amendments are made to the CDR, there shall be no protection as a Community design 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".

BMW also advanced subsidiary claims that R&M infringed a number of BMW's Community trade marks containing the words BMW and MINI, as well as passing off when R&M supplied adhesive stickers with the replica wheels which reproduced these CTMs, and posted certain listings on its eBay store called "Alloy wheel shop". R&M denied that its acts amount to either trade mark infringement or passing off.

Decision

The case came before Arnold J in Bayerische Motoren Werke Aktiengesellschaft v Round and Metal Ltd and another [2012] EWHC 2099 (Pat) (27 July 2012). The learned judge found in favour of BMW.

Design rights

Arnold J noted that the principal issue in these proceedings concerned the interpretation of Art 110(1) of the CDR. This involves four main sub-issues as follows: ·

* Did Art 110(1) exclude the relevant features of designs to which it applies from protection or does it amount to a defence in respect of certain acts which would otherwise be infringements? For Arnold J, the relevance of this question went to the burden of proof: does the onus lie on BMW to establish that Article 110(1) did not apply to the circumstances of the present case (as R&M argued) or did it lie on R&M to establish that it did apply (as BMW argued)?

* Did Art 110(1) only apply where the design of the component part is dependent on the appearance of the complex product?

* What was meant by "used … for the purpose of the repair of that complex product": how does one determine what the purpose is?

* What is meant by "so as to restore its original appearance": is this restricted to the appearance of the car when originally manufactured?
Burden

Although the wording of Art 110(1) was not entirely clear in this respect, Arnold J considered that it was much more consistent with BMW's interpretation than that of R&M's. His reading of Art 110(1) was supported by the legislative history of the provision and interpretation by the UK government when amending the national Registered Designs Act 1949. Arnold J therefore concluded that the burden was on R&M to establish that the exception applied in the circumstances.

Dependency

This issue arose because of a discrepancy between the drafting of Recital 13 and Art 110(1). Recital 13 refers to "a component part of a complex product upon whose appearance the design is dependent" but, as Arnold J observed, the italicised words did not appear in Art 110(1). In response, BMW contended that Art 110(1) was to be interpreted in accordance with Recital 13, and therefore restricted to component parts whose design is dependent on the appearance of the complex product. R&M contended the opposite, namely that the inclusion of the italicised words in Recital 13 was an accidental result of the legislative history and that what mattered was the wording of Art 110(1) itself.

Arnold J stated that, according to the principles of interpretation of EU legislation, Article 110(1) had to be construed in accordance with Recital 13. Consequently, as BMW argued, Art 110(1) should be interpreted as being restricted to component parts which were dependent on the appearance of the complex product. In the present case, Arnold J considered that the designs of alloy wheels of the kind in issue were not dependent on the appearance of the car, because it was clear from the evidence that replacement of wheels of one design with wheels of a different design is a perfectly realistic option. Indeed, it was not disputed that BMW aimed to market wheel designs that were sympathetic to the design of each model of car, however, some designs were marketed by BMW as being suitable for more than one model. Further, R&M sold its replicas as being suitable for multiple models.

Purpose

Art 110(1) only applies to component parts "used … for the purpose of the repair of that complex product".

BMW submitted that the question to be asked was how the component part in issue was normally used in practice: was it normally used to repair the complex product when the part was broken, damaged or worn, or was it normally used for another purpose, such as upgrading the complex product (ie improving its appearance)? R&M submitted that the test was simply one of considering the intrinsic properties of the component part, and that it was sufficient if the component part was suitable for use for repairing the complex part. According to R&M, Art 110(1) would apply even if (say) 75% of the replica wheels sold by it were used for upgrades and only 25% for repairs.

For Arnold J (at [73]) the language of Art 110(1), particularly the words "is used … for the purpose of", directed attention to what the part was normally used for. Consequently, Arnold J considered that BMW's interpretation was the right one. He then found that R&M's replica wheels in issue were not normally used for the purposes of repairing cars, but rather for the purposes of upgrading them. This conclusion was supported by the following evidence: invoices showed that the replica wheels were sold in sets of four; R&M did not sell replicas of BMW's factory wheels, only larger designs; R&M sold replicas which also differed in the width of the wheel; and many of R&M's replicas contained logo stickers which would not be necessary if a damaged wheel was being replaced.

Original appearance

Art 110(1) only applies where the part is used to restore the complex product to "its original appearance". BMW submitted that this meant the appearance which the complex product had when it was sold by the manufacturer or fitted by its authorised dealers. R&M submitted that the "original appearance" included parts fitted by previous owners of the car, including upgrades. Arnold J again preferred BMW's interpretation. It was clear that the purpose of Art 110(1) was to prevent consumers being locked into a captive market for spare parts when they purchased a car. They were not locked in where a previous owner has upgraded the car.

Arnold J concluded that R&M's replica wheels were not normally used to restore the car to its original appearance when it was supplied by the manufacturer or its authorised dealer, but to improve the appearance of the car. He thus concluded that R&M had infringed BMW's registered designs.

Trade marks

As noted above, BMW complained of the use by R &M of its CTMs on its adhesive logo stickers and the eBay store. In relation to the logo stickers, R&M argued that purchasers of the wheels would know that they did not emanate from BMW and that subsequent purchasers of the vehicle to which wheels bearing the stickers were fitted would not take the stickers to denote the origin of the wheels, but rather the origin of the car.

Arnold J rejected both of these arguments. He accepted that garages would not be confused as to the origin of the wheels. However, R&M had not established that there was no possibility that the first purchasers would not be and there was a real likelihood of subsequent purchasers of cars to which wheels bearing the stickers are fitted being confused.

In relation to the eBay store, Arnold J found that R&M had not demonstrated that there was no possibility that the average consumer would be confused. On the contrary, Arnold J considered that there was a real likelihood of confusion, since the manner of use in this instance was such to give the impression that the wheels in question were genuine BMW wheels. Accordingly R&M had infringed BMW's CTMs.

Passing off

As Arnold J had concluded that the acts in question infringed BMW's CTMs, it was not necessary for him to reach a conclusion on the passing off claim in the absence of full argument.

A good decision?

This case is pretty handy because of Arnold J's clear interpretation of Art 110(1) in this difficult area of spare parts protection. The purpose of the spare part is an important factor. In his judgment, Arnold J differentiated between spare parts where there are no realistic alternatives, such as body panels, bumpers and windows, and those where there are aesthetic considerations at play, such as R&M's wheels in this case.

Merpel comments

Isn't this one of those cases where, when you read the facts, even if you're not a lawyer you have a fairly strong hunch as to how it's all going to end -- in tears, for the defendant? If the interpretation of Article 110(1) had led to any other conclusion, wouldn't someone be shouting out that Community designs law wan't fit for purpose?

1 comment:

Anonymous said...

I agree that the outcome here was the likely one.
The replica wheel market is huge in Europe so the implications are massive, particularly if the intrepretaion were to be applied to unregistered Community design rights also.

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