A significant victory for the short-term industry

The ruling has major implications for short-term insurers who now have more scope to recommend after-market replacement parts in an effort to lower the costs of vehicle repairs.

 

The dispute between BMW and Grandmark started as early as 1999 when BMW South Africa accused Grandmark of infringing on certain design rights BMW held over its vehicle body parts. The ongoing dispute culminated in an application, which was brought before the North Gauteng High Court in August 2011 by BMW South Africa, who claimed that Grandmark had infringed on certain of BMW’s intellectual property rights by importing and selling replacement body parts that were fitted in particular, to BMW E46 models.

Grandmark challenged the legitimacy of BMW’s design registrations in a counter-application, saying that the designs of the headlight assembly, front fender, grille and bonnet did not qualify as aesthetic designs, since the parts were functional in nature and lacked novelty or originality. Grandmark also stated in court papers that BMW’s practice of registering designs for many of its vehicle parts, as well as aggressively pursuing replacement parts suppliers who allegedly infringed its design rights, could be deemed to be anti-competitive.

In October 2012, the North Gauteng High Court ruled in Grandmark’s favour, saying that the parts in question did not infringe on any of BMW’s intellectual property rights in regards to the designs of the BMW replacement parts that Grandmark import and sell. BMW South Africa took this on appeal, and on 18 September, the Supreme Court of Appeal in Bloemfontein again ruled in Grandmark’s favour, effectively ending the legal debate.

 

Grandmark COO Steven Ongchin points out that the ruling is a significant final victory, not only for the company, but for the automotive and insurance industries.

"Our decision to continue with this protracted legal battle has been driven by our desire to create a more competitive marketplace in the local motor industry, which would directly benefit short-term insurers and their customers,” he says.

 

Ongchin adds that the ruling could have far reaching, positive effects.

 

"The ruling is important as it preserves the whole after-market motor componentautobody parts sector. If the Supreme Court ruled in BMW South Africa’s favour, it may have set a precedent for other car manufacturers to apply the same pressure on the after-market sector. This could have effectively killed an industry,” says Ongchin.

 

The ruling could potentially have a significant impact on the short-term insurance industry. It is common practice in the industry for insurers to recommend that clients replace their original parts with high quality replacement body parts that meet local and international manufacturing standards.

 

"If the court ruled in favour of BMW South Africa, the price of replacement parts on cars could have remained high, or might even have increased further, if there wasn’t a viable after- market. This may have forced insurers into a position whereby they would have had to increase their premiums or effectively change their rules when it comes to writing off vehicles that have been in serious accidents. In the long run, these savings could be passed onto the clients,” says Ongchin.

 

He adds that only about 30% of South African road users currently have adequate insurance. So the court’s finding is an important step towards making insurance more attainable for the broader market. "This would benefit all South African road users, while also helping to drive growth for short-term insurers,” concludes Ongchin.