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The Repair Defence against infringement of registered designs

Date: 22 May 2019
Author: Michael Chin Quan
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We examine the Design law ‘Repair Defence’ provisions, and the resultant difficulties faced by registered design owners in enforcing their rights.

The Repair Defence

The repair defence provisions are contained in Section 72 of the Australian Designs Act 2003. The government introduced these provisions to encourage greater competition in the spare parts market, thereby leading to lower prices for consumers. The effect of these provisions is to provide a defence for aftermarket part suppliers against infringement of registered designs that cover spare parts. The use of the spare part is specifically limited to where the part is a part of a ‘complex product’, and where the supply of that part is for the purpose of the repair of the complex product so as to restore its overall appearance in whole or in part. In other words, this allows a person other than a design owner to sell a spare part covered by a registered design, if the spare part was supplied for the purpose of repair of a complex product such as a motor vehicle.

The GM case

The repair defence provisions were for the first time judicially considered in GM Global Technology Operations LLC v S.S.S. Auto Parts Pty Ltd [2019] FCA 97. GM GlobalTechnology Operations LLC (“GM”) had initiated legal proceedings against S.S.S. Auto Parts Pty Ltd (“S.S.S.”) for the infringement of a number of their registered designs. These registered designs covered a variety of different vehicle body parts including vehicle front grille, bonnet and lamp surrounds used in their HSV and VE Commodore range of upmarket vehicles. A popular activity of some car enthusiasts is to ‘up-spec’ the appearance of standard vehicles to make them appear as more expensive models within the range of the motor vehicle company. GM sold HSV and VE Commodore vehicles, which were essentially standard vehicles with upgraded equipment including higher-powered engines and improved sports suspensions. These vehicles used different external body panels, grilles and so on to distinguish them from the standard vehicles in the GM range. Owners of genuine HSV or VE Commodore vehicles would object to the existence of these up-spec vehicles. Therefore, GM sought to control the supply of spare parts that allowed for this activity by obtaining registered designs for these spare parts. GM also managed the supply of these parts such that they could only be used in the repair of genuine HSV and VE Commodore models. This system required that the Vehicle Identification Number (‘VIN’) be provided to enable a check to be conducted on whether or not it was a genuine vehicle before any such part could be sold.

S.S.S. is a supplier of aftermarket spare parts for the motor vehicle repair industry. Most of their business is in relation to the supply of spare parts to customers involved with the repair of motor vehicles. They have also on numerous occasions sold spare parts that were covered by registered designs of GM, the sale of which therefore technically infringed those registered designs.

GM alleged that S.S.S. had sold spare parts covered by their registered designs knowing that they were not being used for the purpose of repairing genuine HSV and VE Commodore vehicles, but were rather to be used for up-spec purposes.

The repair defence provisions places the onus of proving that a person knew, or ought reasonably to have known, that the supply of the spare part was not for the purpose of repair on the registered owner of the design. The onus was not placed on the spare parts supplier since it would act as a disincentive for new participants to enter the spare parts market, because it would force them to track their entire inventory to ensure that they were all being used for genuine repair purposes. This however makes it difficult for design owners to prove infringement, as they need to rely on documentary or circumstantial evidence to support their claim.  In the present case, GM had to rely on such evidence to support their claim. They provided detailed submissions for 29 separate transactions between S.S.S. and their customers. GM was in the end only successful in proving their claim in a limited number of these transactions.

S.S.S. did help to minimise their potential exposure to infringement by instituting a series of internal measures within the company. Their initial measure was to mark all their invoices with the notice, ‘All parts authorised only for use in repairs’. They subsequently had all their sales staff sign a directive that required their compliance when selling to customers that spare parts for Commodore and Falcon vehicles were to be sold ONLY for the purpose of replacing parts in the repair of DAMAGED vehicles, and not for the purpose of upgrading or enhancing. Their most recent measure required customers to provide a VIN number to allow S.S.S. to verify that the customer had a genuine HSV or VE Commodore vehicle.

However, GM was able to support their infringement claim in transactions where S.S.S. had sold parts to companies having a name or having an email footer or website that explicitly indicated that they were in the business of enhancing and upgrading vehicles. For example, they had sold parts to a company named ‘Instinct Vehicle Enhancement’, and this was held to be an infringing action. Another successful claim was in relation to a sale made for a VE part, where it was proven that the VIN number that was provided was in fact for an HSV, and not a VE vehicle.

GM had also argued that the sale of a large quantity of parts at one time to a customer that relied on online sales should be held to be an infringing action because S.S.S. would have been aware that the parts would likely be resold for up-spec purposes. It was however considered by the presiding Judge that this was not in itself sufficient to prove that S.S.S. was aware that the parts would not be used for repair purposes.

Take home points

It is still worthwhile to seek design protection for spare parts that can used to improve or enhance the appearance of a complex product, as this can dissuade third parties from copying and selling that spare part design. However, there may be difficulties in proving infringement of registered designs for spare parts that could also be used for repair purposes.

Aftermarket parts suppliers of parts protected by third party design registrations need to ensure that their sales staff are aware of the requirement for spare parts to be sold for repair purposes only. Measures such as including a notice on their supplier invoices to this effect, and educating sales staff of this requirement including signing of such a directive should also be considered.

Tags:  Repair Defence, Australian Designs Act, GM Global Technology Operations, SSS Auto Parts, design law

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