What you need to know
- The Federal Court has handed down the first decision dealing with the scope of the repair defence under the Designs Act 2003 (Cth).
- The repair defence applies where a person uses a product that would otherwise infringe a registered design where the product is a component of a complex product and was used for the purpose of repairing the product.
- In order to overcome the defence, the design owner is required to prove that an alleged infringer knew or ought to know that the product was not used for the purpose of repair. As this case demonstrates, this can be a difficult onus to discharge and will depend on a detailed analysis of the facts.
Background
Holden markets and sells a range of premium motor vehicles in Australian under the Holden Special Vehicle (HSV) brand. The supply of parts for HSV vehicles is controlled by Holden, in part to discourage customers from fitting HSV parts to standard Holden vehicles (known as "up-speccing").
GM Global Technical Operations LLC (GMGTO), a Holden entity, owns registered designs relating to various aspects of the exterior of HSV vehicles (eg, bumper bars, lights and grilles). S.S.S. Auto Parts Pty Ltd, together with various associated entities (together, SSS), imports and sells replica body parts for HSV vehicles.
In July 2015, GMGTO commenced proceedings against SSS alleging that, by importing, keeping and offering for sale and selling certain of its replica parts, SSS infringed GMGTO's registered designs under the Designs Act 2003 (Cth) (Designs Act). GMGTO sought various remedies including injunctions, pecuniary remedies and delivery up.
SSS filed a cross-claim for unjustified threats of design infringement and breaches of the Australian Consumer Law.
The repair defence
SSS accepted that, but for the repair defence in section 72 of the Designs Act, its conduct would infringe the designs owned by GMGTO.
Section 72 provides that a person does not infringe a registered design by using, or authorising another person to use, a product that would otherwise infringe a registered design if the product:
- is a component part of a complex product; and
- was used for the purpose of the repair of the complex product so as to restore its overall appearance in whole or part.
If an alleged infringer asserts the repair defence, the design owner is required to prove that the alleged infringer knew or ought reasonably to have known that the use of the product was not for the purpose of repair. The key question in this case was whether or not GMGTO was able to discharge this onus.
The problem of knowledge
GMGTO argued that there were various factors from which an inference could be drawn that the respondents had the required knowledge (whether actual or constructive). These include the consumer demand for up-speccing (and limited demand for repair products), the nature and name of SSS' customers (eg, Instant Vehicle Enhancement) and the types of products sold (eg, in "kits" that included components to be used across the vehicle).
Justice Burley held that, other than in relation to a small number of sales, GMGTO failed to establish that SSS' conduct was not for the purposes of repair within the meaning of section 72. His Honour relied on a detailed factual analysis of the 26 sample transactions that GMGTO based its case on (out of the more than 1,300 transactions particularised). As part of this factual analysis, his Honour gave significant weight to steps taken by SSS to ensure that its employees only sold parts for the purpose of repair, including having staff sign declarations acknowledging the company's policy to only sell for this purpose.
Importantly, Justice Burely also noted that, contrary to GMGTO's submissions, section 72 does not allow for the actual or constructive knowledge of multiple people to be aggregated for the purpose of establishing the knowledge of a corporate infringer. Rather, the knowledge to be attributed to the company must be based on a specified individual with sufficient connection to (and seniority within) the company so that their state of mind can be treated as the state of mind of the company.
Unjustified threats
SSS' cross-claim related to letters of demand sent by Holden and its lawyers to various retailers supplied by SSS.
SSS argued that, since Holden was unable to know whether or not the parts were being used for a non-repair purpose, any threat of proceedings was necessarily unjustified. Its ACL claims were based on Holden's failure to refer to various matters in its correspondence, including the existence of the repair defence.
Justice Burley largely rejected the cross-claim on the basis that, under the Designs Act, a design owner is entitled to proceed with an infringement claim without having regard to the repair defence. Rather, the repair defence will only become known to the extent it is asserted by an alleged infringer.
Regarding the ACL claims, his Honour held that Holden was under no duty to disclose the repair defence to part retailers as a reasonable recipient of the legal correspondence would expect it to set out Holden's position, possibly at its highest. Any available defences are a matter for the recipient, including on the basis of its own legal advice.
Authors: Ted Talas, Lawyer; and Anita Cade, Partner.
