GM Global Technology Operations LLC v S.S.S. Auto Parts Pty Ltd [2019] FCA 97

Designs – infringement – defences – use of a component part of a complex product for the purposes of repair – proof of knowledge that a part to be used for a non-repair purpose – unjustified threats – whether potential availability of repair defence to be taken into account

As Justice Burley astutely observes in the opening paragraph of this decision, “car enthusiasts, particularly young men, like to upgrade, enhance or ‘up-spec’ the appearance of their standard vehicles to make them look different and, in their view, better”. His Honour is to be commended for avoiding the phrase “pimp my ride”. Apparently this is a desire particularly prevalent among drivers of Holden Commodores. Like the decorator crab, these young drivers add to their modest vehicles parts designed for more expensive Holden models, much to the disapproval of owners of genuine HSV and VE Commodores. The applicant (for simplicity, GMH) implements controls over the sale of HSV and VE parts with a view to discourage drivers of more humble Holdens from using such parts as a form of automotive bling.

But looks matter more than substance to these young drivers: there exists a trade in replica body parts for HSV and VE models that lack GMH’s quality controls. In 2013, GMH traced the source of these replica parts to the respondents (collectively SSS Auto Parts), and sent letters of demand to SSS Auto Parts and its direct customers (parts resellers) alleging infringement of designs registered under the Designs Act 2003 (Cth).

It was not in dispute that GMH’s parts fall within section 71 of the Act. SSS Auto Parts relied, however, on the relatively untested section 72 of the Act as providing a complete defence. That section provides that certain repairs do not infringe registered designs. SSS Auto Parts also cross-claimed for unjustified threats, based on GMH’s letters of demand.

The structure of section 72 is worthy of note. In particular, under section 72(1), the use or authorisation of a product that embodies a registered design does not infringe that design if (1) the product is a “component part” of a “complex product” (a matter not in dispute in this case), and (2) the use or authorisation is for the purpose of the “repair” of the complex product so as to “restore” its “overall appearance” in whole or part (for convenience, the “repair purpose”). Section 72(5) provides an inclusive definition of “repair” that includes restoring or replacing a “decayed or damaged component part” of the complex product or “necessarily replacing incidental items” in the course of such a restoration or replacement, and carrying out maintenance on the complex product. Section 72(3) elaborates on the application of the “repair purpose” by specifying that repairs that (a) result in the complex product having an overall appearance immediately after the repair that is not materially different from its original appearance, or (b) result in a material difference in overall appearance that is solely attributable to the fact of repair, both satisfy the repair purpose so far as it relates to overall appearance in “whole” or in “part” respectively. The standard of the “informed user” is to be applied when considering section 72(3): section 72(4).

Prima facie one might expect that supply of replica car parts to cater to the vanity of financially challenged car enthusiasts has little to do with the statutory definition of “repair” (or the ordinary meaning of the word, for that matter). Indeed, the purpose for some users of SSS Auto Parts’ products was not to restore their vehicle’s original appearance, but to alter it. However, section 72(2) provides that where a respondent invokes the defence afforded by section 72(1), “the registered owner of the design bears the burden of proving that [the respondent] knew, or ought reasonably to have known, that the use or authorisation was not for the [repair purpose].” Accordingly, the onus fell on GMH to prove that SSS Auto Parts knew, or should have known, that its replica parts were not going to be used to repair (in the relevant sense) HSV or VE Commodores.

Of the over 1,000 transactions pleaded by GMH as infringement by selling, 26 representative transactions were the subject of detailed evidence. Of these, GMH succeeded in discharging the burden of proof imposed by section 72(2) in relation to a small number. In the main, GMH’s lack of success overall reflected what his Honour described at [24] as GMH’s “unrealistic expectations as to what individuals (whose knowledge could be attributed to an SSS party) knew or ought reasonably to have known about a transaction”.

For example, GMH was only able to identify a very small number of SSS Auto Parts’ other products as being promoted for customisation rather than repair (none of these covered by registered designs) and isolated incidents of junior salespeople at SSS Auto Parts observing that some VE Commodore products might also fit lower specification vehicles. His Honour declined to find that there was a general view within the SSS Auto Parts businesses that their relevant aftermarket parts were intended for anything other than repair.

Further, SSS Auto Parts’ witnesses gave positive evidence that the business had a policy of selling parts for repair only. Although some of those witnesses conceded that some of SSS Auto Parts’ customers might not use its products for that purpose, that did not make good GMH’s case. His Honour noted at [82] that section 72 does not require a party to “maintain control over the part after its importation, sale or keeping to make sure it is ultimately applied to a vehicle for repair or to track the progress of goods it sells through the supply chain”. The focus is on the intention of the importer or seller, not the buyer.

In addition, after GMH’s initial letters of demand but before litigation commenced, SSS Auto Parts made the repair focus of its business explicit. For example, it began including express statements to its customers that its products were for “repair only”, initially on invoices and later also on the outer packaging and labelling of its products. A directive to the same effect was circulated to SSS Auto Parts sales staff, including a script for dealing with customers who obviously intended to use a product for customisation rather than repair.

The cross-claim by SSS Auto Parts for unjustified threats under section 77 of the Act also met with limited success, however. The thrust of SSS Auto Parts’ argument was that GMH’s letters of demand to it and its resellers were unjustified primarily because of the operation of section 72: GMH lacked evidence to discharge its onus under section 72(2) to prove the parts were being supplied for a non-repair purpose, especially since in most cases the relevant parts had yet to be applied to an end-user’s vehicle.

Under section 78 of the Act, relief may be granted in respect of a threat unless the respondent (in this case, GMH under the cross-claim) satisfies the Court that the relevant acts infringe, or would infringe the registered design. The flaw in SSS Auto Parts’ argument was that but for the application of section 72, the relevant acts of the recipients of GMH’s letters of demand would infringe GMH’s designs. It is not enough that the infringing articles are potentially a component part of a complex product to which section 72 might apply; section 72 only applies if a purported infringer invokes that section as part of infringement proceedings. His Honour held at [560] that the “evident legislative intention is that a registered owner is not expected to assume that the repair purpose will be asserted.”

Accordingly, SSS Auto Parts’ success on its cross-claim was limited to a small subset of threats in GMH’s letters of demand that related to designs that had never been certified.

The matter now continues for hearing in relation to the application of his Honour’s findings on the representative transactions to the remaining transactions and what declaratory, injunctive and pecuniary relief, if any, should flow from his Honour’s findings.