Monday, 30 July 2012

A bumpy ride for BMW

The South African public is fond of BMW – in fact, some parking lots look like BMW dealerships. But the South African IP community is equally fond of the brand – thanks to BMW we have a number of valuable decisions on the limits of IP protection. The most recent decision can be described as merely the first heat in a Grand Prix event, as appeal will no doubt be noted. The eventual prize for the winner will be the control, or otherwise, of the supply of spare or replacement parts. Given the expertise of South African road users, the market for vehicle replacement parts is enormous, and growing. The history of attempts to use various provisions in IP legislation to prevent the unauthorised manufacture and sale of spare parts stretches over three decades, and can be traced in decisions from Schultz v Butt 1986 (3) SA 667 (A) onwards.

In this most recent decision, BMW AG v Grandmark International (Pty) Ltd and another (available here), the High Court was asked to make a number of orders, dealing with different areas of law. In the first instance, BMW requested an order declaring that Grandmark was in contempt of an earlier court order. This failed, the court finding that, for contempt, wilful mala fide non-compliance had to be proved.

Secondly, BMW alleged infringement of its registered designs. Most of these registrations could not be relied on, as the registrations were not properly before the court. However, four registrations for a specific vehicle, referred to by its BMW code as the E46, were before the court. These registrations were for ‘aesthetic designs’ (unlike the position in most jurisdictions, the South African Designs Act 195 of 1993 distinguishes between functional and aesthetic designs, but section 14(6) excludes protection for spare parts from the protection granted by functional design registration). The court felt that the registrations, for the configuration of a bonnet, headlight, grill and fender for the E46 BMW model, were of a functional nature, and that the registrations as aesthetic designs were merely to circumvent section 14(6). In addition, the designs failed the novelty test, because they were anticipated by previous designs for BMW automobile body parts. This blogger is no design expert, but, to put it bluntly, the court seemed to find that the designs were merely progressions on existing BMW body part shapes, and were purely functional as they all served a specific purpose – they had to look and fit a certain way to serve their purpose.

The third aspect of this decision that is of interest is the allegation of trade mark infringement. BMW alleged section 34(1)(a) primary infringement. Here, the court could turn to previous BMW litigation for assistance. Our Supreme Court of Appeal has already held that section 34(1)(a) only protects the registered mark as a badge of origin (BMW AG v Verimark (Pty) Ltd 2007 (6) SA 263 (SCA) at 268), and that use of a mark in a descriptive manner does not constitute infringement. What is use ‘in a descriptive manner’? Fortunately BMW came to the rescue again: in Commercial Auto Glass (Pty) Ltd v BMW AG 2007 (6) SA 637 (SCA) para [9] the court held that, while a phrase like ‘BMW spare part’ by a third party would infringe, a statement such as ‘spare part for BMW vehicle’ would enjoy the protection of section 34(2)(c) - a trade mark is not infringed by ‘the bona fide use of the trade mark in relation to goods or services where it is reasonable to indicate the intended purpose of such goods, including spare parts and accessories …’. So, thanks to previous litigation by BMW, the court had no hesitation in finding that no trademark infringement took place.

Will another court come to a different conclusion? Possibly in respect of the designs – one man’s object of beauty is another’s car grill. But the trade mark infringement claim looks like a flat tyre, thanks to the previous BMW cases. It does not appear that a claim for unfair competition was included in the prayers. Might this have been successful? In Schultz v Butt the court held that using the actual mould of the complainant, and then selling the competitive product, did constitute unfair competition. On the other hand, Grandmark threatened a counterclaim for referral to the Competition Tribunal, so a successful appeal might not be the end of the saga.

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