The Gauteng High Court recently heard a case that'll have serious implications for the vehicle and insurance industries. The issue – can a vehicle manufacturer (in this case BMW) use design registrations to stop the sale of 'replacement parts', in other words cheaper replica parts that are manufactured by other companies? Two questions arise:
First, are design registrations for car parts like bonnets, grills and fenders valid? No, say the sellers of replacement parts, car parts are excluded from Functional Design registration, which is why vehicle manufacturers like to register them as Aesthetic Designs, designs that 'appeal to and are judged solely by the eye'. But, although a Beemer might look OK and may be validly registered as an Aesthetic Design, the individual parts aren't judged visually but are rather dictated by function – a BMW bonnet can only look one way to perform its function as a spare for a BMW. Nonsense say the Bavarians, in the luxury car market outer body design is everything and this extends to parts. Our registrations are legit.
Second, even if the designs are valid, is BMW contravening the
Competition Act? BMW, it's said, has a cunning plan. It makes
sure that for the first few years BMW drivers only use genuine
parts by providing that the warranty lapses if replacement parts
are used. And to keep its customers buying the more expensive
genuine parts beyond the warranty period, BMW eliminates the
competition. It does this by abusing the design registration system
through the wholesale registration of parts, and the legal system
by bullying competitors into accepting blanket court orders
stopping them from supplying any BMW replacement parts. That's
an abuse of a dominant position in the BMW spare parts market. One
that can't be justified on grounds of quality, because the
replacement parts are of a high quality, and are in fact
manufactured by Chinese companies that also manufacture genuine car
parts. So the matter should go to the Competition Tribunal. More
nonsense says BMW, if our design registrations are valid, we're
not abusing any rights, so there's no competition law issue. In
any event, we don't have market dominance because the relevant
market is the car market in general, not just the BMW parts
market.
Roll on judgement! It's high time the courts examined the
relationship between IP and competition law because, on the face of
it, there's a clash – one creates monopolies, whereas the
other seeks to destroy them. They can, of course, co-exist,
provided IP rights aren't abused in ways that exclude
competition.
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