Focus on the automotive industry: Application of the “repair clause” to replica alloy wheel rims by the German Federal Court of Justice

On 26 July 2018, the Bundesgerichtshof (Federal Court of Justice, Germany) handed down its judgment in a case regarding the application of Article 110(1) of the Community Design Right Regulation (the ‘Regulation’), the so-called “repair clause”, to replica alloy wheel rims, which imitate the design of original alloy wheel rims protected by Community Design Rights. Following the preliminary ruling dated 20 December 2017 by the Court of Justice of the European Union (CJEU), the Bundesgerichtshof followed an arrow interpretation of the legal requirements of the “repair clause”.

Background

Before said preliminary ruling by the CJEU, the prevailing opinion of European courts and legal practitioners was that replica alloy wheel rims did not fall within the scope of the “repair clause”. Consequently, on the basis of their Community Design Rights, a manufacturer of original alloy wheel rims was able to prevent manufacturers of replica alloy wheel rims from copying the design and distributing or marketing the replicas, as the replica manufacturers and sellers were unable to rely on the “repair clause”.

However, on 20 December 2017, the Court of Justice of the European Union (CJEU) took a different view in response to two requests for a preliminary ruling by the Corte d’appello di Milano (Court of Appeal, Milan, Italy) and the Bundesgerichtshof, stating that the so called “repair clause” under Article 110(1) of the Regulation did apply to replica alloy wheel rims.

In summary, after stating that the “repair clause” applies to replica alloy wheel rims, the CJEU provided guidance on the application of the “repair clause” as follows. In its preliminary ruling, the CJEU emphasised that the application of the “repair clause” is subject to the condition that the replacement part (e.g. replica alloy wheel rim) must have an identical visual appearance to that of the part which was originally incorporated into the complex product (e.g. car) when it was placed on the market. The CJEU also stated that a manufacturer or seller of a component part of a complex product (e.g. replica alloy wheel rim) is obliged to take any precautionary measures in order to guarantee that downstream users of the component part only use it for the purpose of repair. The preliminary ruling by the CJEU was previously discussed in DesignWrites. You can read the article here.

Narrow interpretation by the German Federal Court of Justice

Referring to the preliminary ruling of the CJEU, the Bundesgerichtshof’s judgment stated that the “repair clause” is applicable to replica alloy wheel rims, but only on a limited basis. However, in order for the “repair clause” to apply, the Bundesgerichtshof held that the use of the replica alloy wheel rims must be necessary to repair a motor vehicle that has become defective due to loss or damage of the original wheel rims and that the replica wheel rims match the wheel rims that were originally mounted on the vehicle, in color and size. The imitation of alloy wheel rims for reasons of taste or the tendency to, for example, exchange the wheel rims for aesthetic reasons or to individualize the complex product, which may be the case in vehicle tuning, do not fall within the scope of the “repair clause”.

Furthermore, manufacturers or sellers of replica alloy wheel rims have to comply with their duty of diligence and to ensure that the requirements of the “repair clause” are met by downstream users. Manufacturers and sellers of replica alloy wheel rims must inform the downstream user by means of a clear, easily visible sign on the product, packaging, in the catalogs or on the sales documentation, that the replica alloy wheel rim in question incorporates a design, of which he or she is not the holder, and that the use of the replica alloy wheel rim is intended exclusively to be used for the purpose of the repair of the complex product so as to restore its original appearance. This information must be provided in the languages usually understood by the residents of those countries targeted by the manufacturers’ or sellers’ offer. For example, with regard to Germany, an information text in English on the replica wheel rim manufacturers’ or sellers’ homepage would not be clear enough, since not every German customer has sufficient knowledge of the English language.

Given the requirement to reference the external design rights, the mere use of an independent trademark on the replica alloy wheel rims is insufficient. Similarly, the affixed sign “Not O.E.M.” on the replica alloy wheel rims is also not adequate to fulfill the duties of diligence, as this merely means that they are not manufactured as original parts.

The Bundesgerichtshof also noted that manufacturers and sellers of replica alloy wheel rims must ensure by all appropriate means, in particular of contractual nature, that downstream users use the replica wheel rims for the purpose of repairing motor vehicles only. With regard to the kind of means that are considered “appropriate”, the Bundesgerichtshof made no particular recommendations, as this question was irrelevant for the outcome of the present proceedings.

Where the manufacturer or seller is aware that the downstream user intends to use the replica wheel rims for purposes other than repairing a motor vehicle (or where the manufacturer or seller must have reasonably assumed this after a thorough assessment of all the relevant circumstances), they must refrain from the sale. Unfortunately, the Bundesgerichtshof does not make any further remarks in this respect, again due to lack of relevance for the merits of the present case.

Outlook

Although the Bundesgerichtshof does not provide clear guidance regarding several requirements of the “repair clause” as they are not relevant for the present case, the privileged status under the “repair clause” is tied to high demands. The “repair clause” only applies in “genuine” repair cases and whoever wants to rely on it has to undertake high due diligence and information obligations.

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