Insurers to enjoy knock-on benefit from landmark infringement ruling

A landmark legal battle between local automotive parts importer and distributor, Grandmark International and BMW SA is set to directly benefit the local motor insurance market by increasing the availability and use of lower cost, quality-assured, replacem

This on-going dispute culminated in an application being brought before the North Gauteng High Court in August 2011 by BMW SA, who claimed that Grandmark had infringed on certain of its intellectual property rights by importing and selling spare parts that were fitted to BMW models. BMW claimed that Grandmark had infringed four specific aesthetic designs, another 150 less clearly defined designs and certain of BMW’s trade mark registrations.

Grandmark challenged the legitimacy of BMW’s design registrations in a counter-application, saying they did not qualify as aesthetic designs as the parts are functional in nature and lack 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.

On the 18th July 2012, Judge Natvarial Ranchod handed down a landmark judgement in favour of Grandmark International. In addition to various rulings pertaining to the alleged intellectual property rights infringements, the court held that BMW had not proved any aesthetic features of its parts that warranted protection in the aesthetic register under the Designs Act. As such, Judge Ranchod said it was not clear what merited the monopoly right BMW had sought to enforce over its design rights.

“This ruling has the potential to loosen the monopolistic stranglehold that OEMs currently have on the parts market, should it be upheld through the appeals process,” said Steven Ongchin, Chief Operating Officer of Grandmark International. “This would open up the market as established parts distributors could stock a greater variety of replacement parts for various OEM brands and models, while a more open market would encourage new entrants, which would drive further competitiveness in the market based on price.”

Ongchin explains that reduced pricing on quality-assured replacement parts would lower replacement costs, which has the potential to lower the cost of insurance claims and minimise write-offs. “This conceivably means that insurers could pass these savings back to consumers in the form of lower premiums or waiving excess payments. In fact, a number of insurers already offer excess-free claims when consumers choose to replace windscreens with our quality-assured automotive glass products.”

Lowering insurance premiums would have the additional benefit of increasing the insurability of the growing number of low-to-middle income road users.

“Only about 30% of South African road users currently have adequate insurance, so this is an important step towards making insurance more attainable for the broader market,” continues Ongchin. “This would benefit all South African road users, while also helping to drive growth for short-term insurers.”

“As such, 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. Following the favourable judgement we feel vindicated in our decision to dispute the legality of the design rights and seek to have them revoked and we are excited about what lies ahead for the local motor industry, short-term insurers and South African consumers,” concludes Ongchin.