On September 10th the long-awaited “Act for Strengthening Competition” was passed by the German Government. This has enormous impact on German design law. The law makes it necessary to include in German design law a provision, which excludes spare parts from design protection in certain circumstances and will therefore limit design protection in Germany in the future. Although there is typically a close link between spare parts and the automotive sector, the “repair clause” will have effect beyond this sector, from household electronics, sanitary ware to airplanes or trains.
Legal situation within Europe and Germany
Although the European legislator excluded protection for spare parts used for the purpose of repair to restore the original appearance of a complex product from the scope of EU-wide designs (RCDs) with the objective of strengthening competition as early as 2001, the landscape regarding the national protection of spare parts in individual EU countries has stayed completely unharmonised.
In Germany, for example, original manufacturers have for many years enjoyed a privileged treatment as the German law did not limit the design protection of spare parts, but provided the opportunity to build up a monopoly in spare parts with a comprehensive design portfolio. The consequence is that original manufacturers have dominated the spare part market and achieved significant turnover with comparably expensive spare parts for many years in Germany. As a result, they not only had market dominance, but could also regulate the price and could successfully keep third party manufacturers of spare parts at bay.
The new regulation
With the adoption of an amended version of the original bill to strengthen fair competition in the interest of consumers and other market participants by the German Bundestag, it is now confirmed that a new repair clause needs to be implemented into German Design Law. The new law will exclude design protection for component parts of complex products which are used solely with the aim of enabling the repair of the complex product and restoring its original appearance, provided that consumers are informed about the origin of the spare part, so that they can freely choose between competitors. It is important to emphasise that the new regulation will only cover designs which are filed from the time the implementation has been finished and enters into force, which is expected to be January 2021.
We recommend considering the various ways to adapt to the new situation:
- Existing registered designs are unconcerned
The repair clause applies to all designs registered from the time the implementation enters into force (expected January 2021). This means already registered designs are not covered by the new provision. This is of course highly criticised and some groups demand adjustments, arguing that otherwise the positive effects for fair competition will only start in 25 years (when the last design rights registered before implementation expire).
- Review your portfolio strategy but keep on filing
Although a portfolio review and adjustment of the filing strategy is recommended, please keep in mind that national designs should continue to be registered, including those parts which may fall under the repair clause. There are three good reasons: i) The new regulation covers spare parts used for repair purposes, but your designs will continue to secure the primary market and therefore protect you from imitation by competitors. ii) Some uses of spare parts will not fall under the new provision iii) Spare parts manufacturers must fulfil their legal obligations to provide information in order to benefit from the new regulation, and design registrations will still be enforceable where they do not do so.
- Consider flanking IP rights as trade marks and copyright
Trade marks and copyright can be great flanking IP rights which are sometimes underestimated but can now have significant relevance to strengthen your position.
- The German Unfair Competition Law provides various options for original manufacturers
Remember that the German Law against unfair competition provides various options for original manufacturers and their suppliers in the form of specific restrictions on imitations and advertisement, e.g. regarding the use of the original manufacturer`s name or assertion of compatibility with the original product, comparative advertisement rules and the general prohibition of misleading advertisement.
In summary, it can be expected that the new repair clause will change design strategy and it will be interesting to see how courts and IP owners will handle the situation. Interesting times ahead; stay alert!