Replica alloys seller infringes BMW Community design and trade mark rights, High Court rules

Out-Law News | 31 Jul 2012 | 11:51 am | 5 min. read

A company's claim that its sale of replica BMW alloy wheels did not infringe on design rights owned by the car manufacturer has been rejected by the UK High Court.

Round and Metal Limited (R&M) had argued that it did not infringe the rights because the parts it supplied were components of vehicles and used for repairing damaged and worn wheels.

The Court disagreed and said that R&M had infringed four Community registered designs held by BMW. The car maker's rights to five Community trade marks were also infringed by the company, it found.

Mr Justice Arnold, ruling in the case, reviewed whether R&M could rely on a specific defence under EU design rights legislation to remove itself from liability for infringing on BMW's Community designs, but ruled that the defence could not be relied on by the company.

Under the EU's Community Designs Regulation businesses do not need the consent of rights holders in order to make use of Community designs where the design "constitutes a component part of a complex product" and where the use of the mark is "for the purpose of the repair of that complex product so as to restore its original appearance."

Mr Justice Arnold said that the onus was on R&M to show that the provision provided it with a defence to acts which would otherwise infringe on BMW's rights but ruled that the defence only applied to "component parts which are dependent on the appearance of the complex product".

R&M had disputed the finding, claiming, among other things, that such a finding went against the wording of an international treaty on intellectual property rights to which a reading of EU law had to abide.

However, Mr Justice Arnold rejected the argument and said that because it would be a "perfectly realistic option" to replace wheels on a car with wheels that are differently designed, the designs of alloy wheels were "not dependent on the appearance of the car". Therefore, R&M could not rely on the 'spare part' defence against infringement of BMW's Community design rights, he said.

Mr Justice Arnold also ruled that the purpose of R&M's supply of the replica alloys was to allow for cars to be "upgraded" and not repaired, as the company had claimed, and that therefore R&M's sale of the replicas was not an act that could avoid liability for infringement under the 'spare part' defence.

The judge said that this finding was supported by evidence that R&M rarely sold the alloys in single supply, and that they usually came in a set of four. In addition, the company did not sell its replica BMW wheels in standard BMW sizes, but rather as "larger designs" of those standard models. Differences in the width of the wheel and the tyre, together with the fact the replicas were sold with BMW "logo stickers", also contributed to the finding.

In addition, because R&M's supply of replicas was not aimed at restoring the original appearance of cars, but rather "to improve" the appearance of the vehicles, its use of the BMW designs also could not be justified under the 'spare part' defence, the judge said.

Expert in design rights law Indradeep Bhattacharya of Pinsent Masons, the law firm behind Out-Law.com, said that the judge's ruling provided some "clarity" on the scope and the application of the 'spare part' defence for registered designs.

"Mr Justice Arnold's finding that the scope of the defence would only apply where the component parts are dependent on the appearance of the complex product is consistent with traditional understanding of the must-match exception in UK law," he said. "The idea behind the exception is to prevent companies from monopolising the aftermarket for component parts that 'must match' a particular design in order to fit in with the appearance of a more complex design."

"In this case the judge drew the distinction between some car component parts, such as body panels, bumpers and windows, which have to conform to specific designs in order to work, with alloy wheels which can differ and are not necessarily design dependent. The judge recognised that replacement of wheels of one design with wheels of a different design is a perfectly realistic option," Bhattacharya said.

"The judge also made clear that a question to be asked when assessing whether the defence applies is how the component part in issue is normally used in practice. That makes sense because R&M had argued that the defence applied because the alloys could be used to make repairs, whereas realistically they were using the replica designs to enable cars to be upgraded," he added.

Mr Justice Arnold also ruled that the "logo stickers" that R&M sold separately from its replica BMW alloy wheels infringed on BMW's rights to three Community trade marks, Mr Justice Arnold said.

Under the EU's Community Trade Mark Regulation trade mark owners generally have the right to restrict the use of signs that are identical or similar to the ones they hold rights to for identical or similar goods or services that the protected mark covers where the public is likely to be confused and link ownership of the sign to the trade mark holder.

The "logo stickers" R&M sold "reproduced" three of BMW's Community trade marks, the judge said. The stickers could be attached to the replica alloy wheels. The company claimed that BMW's trade mark rights did not extend to protect against others selling stickers where the marks were displayed, but Mr Justice Arnold said that it made "no difference that the stickers were supplied separately" from the wheels, to which the protection did apply, and said BMW's rights had been infringed.

R&M had also claimed that there would be no likelihood of confusion over its use of the BMW marks in the stickers. This was because garages it sold them to would know the difference between it and the car manufacturer whilst end-purchasers of those cars would associate the stickers with the make of the car and not the make of the wheels, it had claimed. However, Mr Justice Arnold dismissed the arguments.

"R&M rely upon the garages drawing it to the attention of the end users that the wheels do not emanate from BMW," the judge said. "There is no evidence that R&M itself takes any steps to ensure that this happens. While many garages would do so, and many consumers would realise this anyway e.g. from the price, there is no guarantee that this will happen in all cases. Accordingly, I do not consider that R&M has established that there is no possibility of confusion flowing from its use of the signs."

"Even if one assumes that none of the immediate end users are confused as to the source of the wheels, it seems to me that there is a real likelihood of subsequent purchasers of cars to which wheels bearing the stickers are fitted being confused. Seeing wheels of BMW's design bearing BMW logos, they will naturally assume that the wheels are genuine BMW wheels. I do not accept that such consumers will think that the logos merely refer to the make of the car and not to the make of the wheels," he added.

R&M also infringed on BMW's rights to two Community trade marks by using them in its 'Alloy wheel shop' store on online auction website eBay, Mr Justice Arnold ruled. He said there was a "real likelihood" that the average consumer would confuse the replica wheels sold by R&M for authentic ones made by BMW. This was because "the manner of use [of the trade marks by R&M] is such to give the impression that the wheels in question are genuine BMW wheels," the judge said.