Australia's right-of-repair spare parts defence for registered designs

Australia lets you register the design of a spare part, such as a car bonnet. But section 72 of the Designs Act 2003 (Cth) means you usually cannot use that registration to stop copies sold for repairs. And if you sue, you carry the burden of proving the seller knew the part was not going to be used for a repair. Suppliers that sell for repairs, and can support that position with documentation, become hard to stop. Suppliers that sell parts for cosmetic upgrades are not protected by the s72 defence, and can be legitimately stopped in the usual way.

Key takeaways

• Legitimate repairs are allowed. Infringing a registered design for a vehicle spare part does not infringe if the copy is used to repair a vehicle so it looks the way it did before. This is the province of panel beating repairs that might be performed following an accident or collision.
• Body kit upgrades are not. Section 72 does not protect a part used to change or enhance how a vehicle looks. This includes vehicle body kits, as an example.
• The design owner must prove the seller's knowledge. The owner must show the seller knew, or ought reasonably to have known, that the part was not for a repair.
• A part that could go either way is still protected. A part that could be used for a repair or an upgrade stays inside the defence unless the owner proves what the seller knew.
• Paperwork matters. Invoices marked "for repairs only" helped the supplier win the leading case, but it is not a single determining factor.

What section 72 does in plain terms

Section 72 creates an exception to design infringement for repairs. It has been part of the Act since the Act commenced in 2004. A court asks three questions.

1. Is the part one piece of a larger product that can be taken apart? The Act calls the larger product a "complex product": one with at least two replaceable parts that can be taken apart and put back together. A vehicle is the most obvious example of a complex product. And a bonnet, bumper or grille are the types of replaceable parts most commonly envisaged here.
2. Is the part being used to fix that product? Repair is associated with replacing a damaged or worn part, replacing small items that must be swapped at the same time, and routine maintenance.
3. Does the repair or replacement put the product's appearance back as it was? After the repair, the product must look materially the same as it originally did. A partial repair also qualifies, provided the only visible difference is that the rest of the product has not been repaired.

If the answer to all three is yes, there is no infringement. The exception covers the whole supply chain: making the part, importing it, selling it, and keeping it in stock.

One bonnet, two buyers: an example from the Holden case

This scenario is illustrative and drawn from the facts of GM Global Technology Operations LLC v S.S.S. Auto Parts Pty Ltd [2019] FCA 97, or GM v SSS. Holden held registered designs for exterior body parts on its sports Commodores and HSVs, including bonnets, bumpers, grilles and fog light covers. SSS imported copies of these parts and sold them to panel beaters and retailers.

Suppose SSS imports a batch of replica sports bonnets and sells them to two buyers.

Buyer one is a panel beater. A customer's Commodore SS has a crumpled bonnet after a crash. The panel beater fits the replica SS bonnet, and the car looks as it did before the accident. That is a repair, so section 72 protects both the panel beater and SSS.

Buyer two is a car enthusiast. He owns a cheaper base-model Commodore and wants it to look like a more expensive model. Upgrading cheaper Holdens with parts designed for dearer models is a known practice. He fits the replica bonnet, and his car now looks different from how it left the factory. That is an upgrade, not a repair, so section 72 does not protect that use. Infringement here is actionable in the ordinary way.

The hard question is SSS's position. SSS sold the same product to both buyers. To succeed against SSS, Holden must prove that SSS knew, or should have known, that a particular sale was headed for an upgrade.

Why the burden of proof matters most

Section 72 reverses that the usual burden in infringement cases: the registered design owner must prove what went on inside someone else's business as regards repair vs upgrade.

The test looks at the supplier, not the end customer. The relevant question is what that supplier intended, whether it is an importer or seller . A registered design owner therefore needs evidence tied to specific sales: an order that mentions a conversion, a listing that advertises an upgraded look, or a customer who is clearly not a repairer.

What the court decided in GM v SSS

GM v SSS was the first time an Australian court tested section 72. SSS accepted that its parts fell within Holden's registrations but argued the repair defence. The court examined a sample of 26 transactions.

1. Parts with two possible uses are covered. The court found that section 72 contemplates a part serving either a repair or a non-repair purpose, and that this is why the knowledge requirement exists.
2. Each sale is judged on its own. The court assessed SSS's knowledge transaction by transaction. Holden lost on its claim, apart from a small number of infringing sales.
3. "Repairs only" invoices were persuasive. SSS marked its invoices with a notice that parts were authorised only for use in repairs. Burley J found it difficult to imagine a clearer indication of purpose.
4. Large orders alone prove nothing. Selling a large quantity to an online reseller was not, by itself, enough to show SSS knew the parts would not be used for repairs.
5. Uncertified designs cannot support threats. Holden's letters of demand were described as aggressive. SSS mostly failed to prove the threats unjustified, but succeeded where the threats concerned designs that had not been certified.

The lesson is that the defence turns on evidence rather than legal argument. The side with the better papertrail is perhaps more likely to succeed.

Europe puts the burden the other way

Suppliers who also sell into Europe face a stricter rule. Under the EU repair clause, a seller of spare parts must take care to ensure its downstream customers use the parts only for repair. In the Acacia litigation, marking wheel rims "not OEM" and stating they were sold for repair only was not considered enough, and the sales infringed. Europe also limits the clause to replacement parts that are visually identical to the originals.

Notices that helped SSS in Australia may fail in Europe.

s72 provisions in full

The provisions of s72 of Designs Act 2003 (Cth) as discussed above are reproduced below for reference. They certainly are a difficult read.

72 Infringement exemption—repairs

(1) Despite subsection 71(1), a person does not infringe a registered design if:
(a) the person uses, or authorises another person to use, a product:
(i) in relation to which the design is registered; and
(ii) which embodies a design that is identical to, or substantially similar in overall impression to, the registered design; and
(b) the product is a component part of a complex product; and
(c) 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.

(2) If:
(a) a person (the first person) uses or authorises another person to use a product:
(i) in relation to which a design is registered; and
(ii) which embodies a design that is identical to, or substantially similar in overall impression to, the registered design; and
(b) the first person asserts in infringement proceedings that, because of the operation of subsection (1), the use or authorisation did not infringe the registered design;
the person bringing the infringement proceedings bears the burden of proving that the first person knew, or ought reasonably to have known, that the use or authorisation was not for the purpose mentioned in paragraph (1)(c).

(3) For the purposes of subsection (1):
(a) a repair is taken to be so as to restore the overall appearance of a complex product in whole if the overall appearance of the complex product immediately after the repair is not materially different from its original overall appearance; and
(b) a repair is taken to be so as to restore the overall appearance of a complex product in part if any material difference between:
(i) the original overall appearance of the complex product; and
(ii) the overall appearance of the complex product immediately after the repair;
is solely attributable to the fact that only part of the complex product has been repaired.

(4) In applying subsection (3), a court must apply the standard of a person who is familiar with the complex product, or products similar to the complex product (whether or not the person is a user of the complex product or of products similar to the complex product).

(5) In this section:
repair, in relation to a complex product, includes the following:
(a) restoring a decayed or damaged component part of the complex product to a good or sound condition;
(b) replacing a decayed or damaged component part of the complex product with a component part in good or sound condition;
(c) necessarily replacing incidental items when restoring or replacing a decayed or damaged component part of the complex product;
(d) carrying out maintenance on the complex product.
use, in relation to a product, means:
(a) to make or offer to make the product; or
(b) to import the product into Australia for sale, or for use for the purposes of any trade or business; or
(c) to sell, hire or otherwise dispose of, or offer to sell, hire or otherwise dispose of, the product; or
(d) to use the product in any other way for the purposes of any trade or business; or
(e) to keep the product for the purpose of doing any of the things mentioned in paragraph (c) or (d).

What to do now

If you routinely register designs for vehicle parts

• Register the parts people buy to upgrade. Premium bonnets, body kits and styling packages are where section 72 stops helping copiers.
• Get your design certified before sending a letter of demand. You cannot sue without a certificate of examination, and a threat over an uncertified design is automatically unjustified.
• Collect evidence sale by sale before you sue. Useful material includes test purchases, screenshots of listings, advertising wording, and who the customers are.
• Tell the trade. Let suppliers know which parts are registered and that upgrade sales are not repairs. Simply notifying someone that a design is registered is not a threat, and it helps show what a supplier should have known.

If you supply vehicle spare parts

• Say "for repairs only" everywhere. Put it on invoices, packaging, listings and trade terms.
• Know who you are selling to. Panel beaters and insurers are safe customers. Be careful with bulk orders from resellers who advertise conversions.
• Watch your marketing language. Words like "upgrade", "conversion" or "the SS look" give the registered design owner their evidence.

If you are designing a product made of replaceable parts

Registering the design of a replacement part gives you limited control over the repair market. Protect how the whole product looks, and the parts customers buy for style rather than repair. Parts that match higher spec might give a quandry: some proportion of the supply of these parts will be directed to legitimate repairs, it could be a greater proportion are destined to channel towards upgrades you wish to control and discourage.