Aftermarket automotive parts remain a contentious issue

The Court found against BMW in a matter that centred on design patent rights on aftermarket automotive parts such as bonnets, headlight assemblies, grills and front fenders. While BMW has already indicated its dissatisfaction with the ruling (they intend to appeal) other stakeholders are watching proceedings with renewed interest.

Top among these stakeholders are the Original Equipment Manufacturers (OEMs). They would surely want BMW to successfully fight the ruling because it is now common practice for them to not only register design patents on their motor vehicles, but also on the parts and components used in manufacture.

On the other side of the "fence” manufacturers of aftermarket parts, importers, insurers and consumers are holding thumbs that the original decision is upheld.holding thumbs that BMW is thwarted in its appeal bid. These stakeholders welcomed the ruling as an important step towards encouraging competition in the automotive aftermarket environment.

The ruling can also be considered a mini victory for both consumer and insurer, who want to use affordable parts – of similar quality and design to OEM parts – when repairing accident damaged motor vehicles

There are two sides to every debate. From an OEM perspective we must ask: Is it "fair” to prevent an OEM – the company that has invested many years and millions of dollars in designing a motor vehicle – from becoming the sole provider of parts for this vehicle into the future?

We can colour our debate by considering the scenario in which a musician, songwriter or composer writes an original piece of music. The creator of the music can only register copyright on the complete song or piece of music and not on the individual notes. Anybody else is free to create original works by arranging the individual notes as they see fit.

An individual "note” does not make the music unique – nor does an individual part or component make a motor vehicle unique. If we argue that a motor vehicle’s uniqueness vests in the sum of its parts then it must hold that the design patent rights should apply to the final product as a whole, just as design patent law intended.

The "design patents on spare parts” issue is not uniquely South African. The US House of Representatives is in the process of considering a Bill (HR3889) that would amend the current US design patent law by reducing the number of years during which car companies can enforce their design patents on collision repair parts.

We cannot assume that this Bill will be passed and it is worth noting that previous attempts to pass similar legislation have been unsuccessful. However, what we can take from these legislative initiatives is that competitiveness in the automotive aftermarket is of global concern.

The US Patents and Trade Office (and similar offices worldwide) used to limit patents to the vehicle only. OEMs could not patent individual parts and third party vendors could manufacture replacement parts that were of equal quality but cost less.

Patenting procedures were amended in recent years to allow OEMs to patent individual replacement parts. And they have been taking advantage of the situation ever since, by patenting parts to assist them with strengthening their hold onpatenting parts with the sole intention of strengthening their hold on the aftermarket parts market.

HR3889 proposes to change the period applicable to patents from the current 14 years to just 30 months. The Bill would prevent the selling or importing of affected parts during the period. It would, however, be entirely acceptable for manufacturers of same-quality parts to begin manufacturing these parts before the 30 months were up. (These "rules” apply to parts if the purpose of such parts is for the repair of a vehicle so as to restore such a vehicle to its appearance as originally manufactured).

Ben McKay, senior vice president of federal government relations for the Property Casualty Insurance Association of America summarises the issue: "Auto manufacturers already recoup the costs they spend in researching and developing their product when they patent the entire vehicle and enforce those patents.

"We understand that it is costly to develop a new vehicle – and they should get a return on that investment – but when a fender falls off, they should not get a second payment at the expense of insurers and consumers”.

In the US, collision repair parts are between 26% and 50% less expensive than OEM equivalents. And this "discount” applies in South Africa too. From a domestic insurance perspective the most important issue remains to encourage competition. Competition is important to protect the right of consumers (including insurers) to access quality, low-cost alternative collision repair parts.

The cost savings that can be achieved are extremely relevant to insurers. Collision repair parts allow insurers to repair vehicles in a more cost effective way without compromising on the quality of the parts used. The savings achieved will in turn enable insurers to offer more affordable motor insurance products to a wider range of consumers.

Consumers have a right to choose the parts for use in their motor vehicle accident repairs as well as to shop around for alternatives to expensive OEM parts. They also need access to affordable motor insurance.

One of the US House of Representatives members, Darrell Issa, supports the bill by saying: "Competition is the hallmark of our free market system. Consumers have dozens of choices in electronics, food, service, clothing and other products – and this same array of choices, across all price points, should extend to automotive repair parts”.

Competition is the best protection for consumers against excessive prices and must be encouraged. Another local shortcoming is that we have no legislation to restrict the use of warranties by the OEMs to lock in consumers over increasingly lengthy periods of time. Although the court decision went against BMW we still have a long way to go before local OEMs reconsider the way they do business in the aftermarket environment.