France: Autorité de la Concurrence publishes sector inquiry report on car maintenance and repair

The Autorité aimed to conduct a full appraisal of the sector, and to issue recommendations to boost competition and bring down prices. The report is available from 12a21_en.pdf. I have provided a link to the English version, and look forward to the day when our Competition Commission provides its reports in French! However, the following summary is based on what the Autorité says in its annual report.

Its main proposal is a gradual and controlled opening up of the market in visible spare parts, which it says are protected by industrial design rights in France. This gives vehicle manufacturers a monopoly over more than70 per cent of sales of visible spare parts, and a duopoly with the original equipment manufacturer over the remaining 30 per cent. This means, of course, that repairers must have recourse to the manufacturer's network more often than they might like.

The Autorité observes that there is a difference between protecting visible original equipment parts and such parts destined for repairs - aftermarket parts - and it proposes removing the restriction in the aftermarket, in the gradual and controlled manner referred to earlier. It says that eleven EU Member States have already adopted this approach, "which also prevails in the United States and Germany where much lower prices can be observed". I think that means that Germany already had such a law, not that it is not to be included among the EU Member States where this approach is taken.

Its suggestion is that the principle be enacted by law and the timescale set by decree, with a transition period so that the market can be opened up gradually, one type of part at a time. This would enable players in the market to adapt their business models and for French parts makers to prepare for the new open market. And what about parts makers from other EU countries? Is this the French doing exactly as we expect them to?

Whether removing protection from visible parts is a good or a bad thing (and the UK's experience appears to be that it has forced prices down, which cannot be an altogether bad thing, and has not brought about the end of civilisation as we know it, which the car makers suggested would be the case back in 1988 when the Copyright, Designs and Patents Act made the big changes), retaining it for original equipment parts seems like no sort of sop to the manufacturers. The aftermarket is highly competitive: I can buy spares from many different sources. The original equipment market, by definition, cannot be competitive, because the intellectual property rights in the visible parts invariably belong to the vehicle manufacturer (it is often different with internal parts) and the vehicle manufacturer is not only able to control supply using its intellectual property, but as a monopsonist, it controls the market completely. Even if the IP rights were removed, it would still be the only customer.

Among other proposals, the Autorité says it wants to see original equipment manufacturers, the companies best-placed to serve the aftermarket, able to put their parts on the market freely. It also addresses the matter of repair and maintenance information, threatening where necessary 'to sanction, in a dissuasive manner, any restrictions' on access to such information on the part of independent repairers.

It also proposes to draw up clauses for warranty (including extended warranty) contracts, making them as clear and explicit as possible regarding the consumer's right to use the services of an independent repairer without losing the benefit of the warranty. This follows the furrow ploughed years ago by the OFT.

Finally, it wants to ensure that the retail prices for parts recommended by vehicle and parts manufacturers do not lead to a restriction of competition between operators - presumably it means factors, wholesalers and retailers, as well perhaps as independent repairers. Well, retail price maintenance is pretty well covered in French law, as in ours, I imagine.

Beetle design invalid

Alicante News, the organ of the Office for Harmonisation in the Internal Market, reports a decision of the Invalidity Division (ICD 7100) declaring invalid VW's 2003 registration of the Beetle shape as a Community design.

The application was filed as soon as registered Community designs became available. Unfortunately for VW, they had already obtained international design registrations for the original full-size model of the new Beetle and the first production model, which meant that there can never have been much chance of convincing anyone that the 2003 application was for a design that had individual character compared to the earlier designs. Indeed, I find it hard to see how it could have been considered novel, but it was for want of individual character that the design was declared invalid.

The invalidity proceedings were brought by model car maker Autec, which previously obtained a judgment from the Court of Justice, Case C-48/05 Adam Opel v Autec, controversially allowing toy manufacturers to use the trade marks of the real things on their own products. So, 2-0 to the toymakers so far - and should this hopeless-looking registered Community design be counted as an own goal?

Deja vu all over again

In my regular perusal of the blawgs, especially the IP ones, I came across a rather heated discussion on Dennis Crouch's excellent Patently-O on the use of design patents (the US equivelant, roughly, of our registered designs) to protect designs for car parts. It's hard to believe that the Americans are only now tearing each other apart over this as we did in the 1980s ...
Each to their own, and the US law in this area is sufficiently different from ours as to make comparisons difficult. But I hope they don't make the same mistakes we made, pruning the duration of (unregistered) protection so there's hardly anything left, carving out exceptions to protection that are almost as wide as the protection was to start with, and capping it all off with compulsory licensing and licensing of right provisions. I always thought that the vehicle manufacturers lost the battle by overstating their case. And it wasn't a battle that should have been fought out in the intellectual property arena anyway: it raised important product liability and safety issues which should have been addressed as such.
I believe that US law on dealer protection has a great deal to teach us, so perhaps it's only right that we should offer them the benefit of our experience in dealing with design protection for parts.

US repair parts legislation: Automotive Services Association weighs in

The repair industry in the States is getting excited about a proposal that would do much the same as our legislation on spares: details of the Automotive Service Association's reservations about it are here. The legislation is the Access to Repair Parts Act, H.R. 3059, which will be considered shortly in the House of Representatives Committee on the Judiciary.

The ASA opposes this legislation because it contains no assurances about the quality and safety of non-OEM parts, and because it would deny businesses the ability to protect their intellectual property. ASA, along with other associations, wrote on 18 November 2009 to state their opposition to the bill. The letter is available on ASA’s legislative Web site, www.TakingTheHill.com. The letter says:

Manufacturers of unlicensed automobile parts have to meet only one basic threshold, to produce a copy that looks similar to an original part. Those who produce such parts incur no costs attributable to original design, research and development and most importantly, product safety testing. Accordingly, the manufacturer of the original product for whom such unlicensed replacement parts are made does not know how these parts will perform and how their use will impact the quality and integrity of the original product. Automotive collision repairers are very concerned about the quality of replacement crash parts. Permitting this intellectual property infringement also exposes consumers to significant safety, performance or durability risks.

All this is familiar to those of us who listened to the arguments on the Copyright, Designs and Patents Act back in 1987-8, or the EU designs legislation, or indeed the block exemption. Surprising, really, that the US has taken so long to have its own debate, although design protection has always been rather weaker there than here. It will be interesting to see how it turns out.

Car design protection in China

Not directly to do with the Block Exemption, but worth passing on: my friend Paul Jones tells of a design case in China between Fiat and Great Wall Motor Company. Fiat claimed that Great Wall's Peri infringed its design patent protecting the appearance of its Panda model.  The two cars can be seen here and here.

Last year an Italian court upheld a similar claim, but Fiat have had less success in the Chinese courts, with a decision of the Hebei Province Higher People’s Court going against it.  As the report of the judgment is in Chinese, I will defer to Paul's formidable language skills and quote his report:

The test for infringement of a design patent in China is very similar to the test in the United States. In the U.S.  as a result of the decision in Egyptian Goddess (Comment and link to decision: http://thettablog.blogspot.com/2008/09/design-patent-owners-will-worship-cafcs.html) the test is that of the eye of the ordinary observer giving such attention as a purchaser usually gives the two designs are substantially the same, such that the resemblance is such to deceive such an observer, inducing the observer to one product supposing it to be the other ( see a Congressional Research Service paper on the topic at p. 16: http://assets.opencrs.com/rpts/RL34559_20080701.pdf) .

In China a design patent registration does not require the submission of claims, but only of pictures. To obtain its design patent Fiat submitted four pictures – front, left right and rear. To support their contention of infringement they commissioned a market research firm to interview people outside supermarkets, stadiums and other public places in Beijing, Shanghai, Guangzhou and Chengdu. The interviewers showed the people a display board with pictures of each of the two car models. They also had their Beijing lawyers purchase a Great Wall car to obtain access to the design parameters.



Both the Intermediate and the Higher Court rejected the survey. The Higher Court pointed out that no attempt was made to focus on potential car-buyers, who would pay much more attention to determining the origin of the car that they might buy. The participants in the survey were simply members of the general public. The court also said that looking at pictures was not the same a s looking at a three dimensional car.


Further the court noted that motor vehicles have been developing for over a hundred years and are being continuously refined and improved. The holder of  a design patent cannot stop others from improving on existing technology. Design patents protect only the unique aspects of the car design, in this case as shown in the side views, but average consumer of motor vehicles would be more  interested in the vehicles size, shape and technical parameters than in just the elements protected by the design patent. Thus differences in the design of the front of the car should thus also be considered. The test for infringement is whether the designs are the same or similar to the average purchaser. The court decided that in this case the car designs were not.