The automotive aftermarket is the secondary market for the manufacture, sale and installation of vehicle parts and accessories after the sale of vehicles by original equipment manufacturers (OEM) such as Ford, Nissan and Toyota. It is a steadily growing business in Australia and, with the rise of automotive e-commerce websites, is estimated to reach approximately $11.48 billion in revenue by 2025.1
A large portion of the automotive aftermarket comprises of parts and accessories which are manufactured by third party companies (Aftermarket Sellers) to fit the specifications of different vehicle brands and models. This has meant that Aftermarket Sellers often make reference to the brands and trade marks held by OEMs to market their vehicle parts so that consumers can easily identify and purchase the parts which are compatible with their vehicles.
However, there is a fine line between advertising compatibility on one hand, and misappropriation of brands and trade marks on the other. Where brands and trade marks are used incorrectly, Aftermarket Sellers may find themselves engaging in trade mark infringement under the Trade Marks Act 1995 (Cth) (Trade Marks Act), misleading and deceptive conduct under the Australian Consumer Law (ACL), and passing off.
OEMs also need to ensure that they know the limits of their trade mark rights, as an unjustified threat against an Aftermarket Seller can expose an OEM itself to damages under the Trade Marks Act.
Trade mark infringement
When is a trade mark infringed?
The Trade Marks Act provides that a trade mark registration will be infringed if it can be shown that the allegedly infringing mark was:
- Used as a trade mark to indicate the origin of goods;
- Substantially identical with, or deceptively similar to, the registered trade mark; and
- Used in relation to goods that are the same as, or sufficiently similar to, the goods covered by the registration.
Where an Aftermarket Seller advertises its products with names such as ‘TOYOTA OIL FILTER’ and ‘DISC PADS FOR NISSAN’ it tends to indicate those parts are in fact from the OEM, rather than being a compatible aftermarket alternative. In serving as a false indication of the product’s origin, this is likely to constitute trade mark infringement.
Defence to infringement
The Trade Marks Act specifically contemplates circumstances where a mark may be validly used by a third party without infringing registered rights.
In the context of compatibility advertising, the Act relevantly provides that that there is no trade mark infringement if the mark is used in good faith to indicate the intended purpose of goods, in particular as accessories or spare parts, or services. In order to rely upon this defence, an Aftermarket Seller must act in good faith, without ulterior motive to take advantage of the goodwill built up by the registered owner.
The defence was explored in Nokia Corp v Mai where a mobile phone vendor had applied marks such as ‘NOKIA’, ‘NOKIA 2100’ and ‘FOR NOKIA’ to the packaging of phone accessories to indicate compatibility with various models of Nokia mobile phones.2 The Federal Court ultimately found that this gave rise to trade mark infringement as the ‘NOKIA’ marks were used as a badge of origin and therefore constituted unauthorised use of the trade marks held by Nokia Corp. According to the Court, more specific language, such as ‘SUITABLE FOR NOKIA’, would be needed in order to enliven the defence.3
Accordingly, Aftermarket Sellers that wish to use trade marks of OEMs and rely on the intended purpose defence may only use the marks in a manner which clearly indicates that the parts for sale are compatible with vehicles manufactured by the relevant OEM, rather than being made by the OEM. Following the Court’s reasoning in Nokia Corp v Mai, use of marks in statements such as ‘OIL FILTER SUITABLE FOR USE WITH TOYOTA’ and ‘DISC PADS COMPATIBLE WITH NISSAN’ are likely to be regarded as sufficiently clear to indicate compatibility of the parts with Toyota and Nissan vehicles without infringing registered trade mark rights held by those OEMs.
Unjustified threats
While Aftermarket Sellers need to be careful about the way in which they refer to OEM marks, OEMs also need to ensure that they do not overstep the bounds of their trade mark rights when policing use of their brands.
Under the Trade Marks Act, a party that makes unjustified threats regarding infringement can expose itself to injunctions and damages. As such, if an Aftermarket Seller is validly relying upon intended purpose defence, an OEM could expose itself to liability should it threaten the Aftermarket Seller with infringement claims.
This of course does not prevent an OEM from robustly defending its trade mark rights against genuine cases of infringement, but does mean it needs to carefully consider the circumstances before it does so.
Misleading and deceptive conduct
It is important to note that while Aftermarket Sellers may satisfy the requirements of the above defence against trade mark infringement, their conduct will still be subject to Australian consumer legislation. In particular, section 18 of the ACL prohibits any business from engaging in conduct that misleads or deceives, or is likely to mislead or deceive consumers or other businesses. This applies regardless of whether there was intention to mislead or deceive, or whether there was any loss or damage as a result of the conduct. Section 28 of the ACL also further prohibits any false or misleading representations made in connection with the supply of goods and services.
Unlike trade mark infringement, ACL prohibitions are not limited to misuse of trade marks and apply to a wide range of conduct, including ‘half-truths’ and technically correct statements which may give a misleading impression to consumers. Hence, Aftermarket Sellers must ensure that the manner in which marks are used does not convey any misleading impression that goods are produced by, endorsed by, or otherwise officially connected with the OEM.
Beyond this, Aftermarket Sellers also need to ensure that all representations made about their goods are accurate and not likely to mislead. Where an aftermarket part is advertised with claims about:
- Compatibility;
- Performance, durability and longevity, including relative to OEM parts; or
- Pricing, including value relative to OEM alternatives.
These claims need to be true, and able to be verified.
Passing off
Representations made by an Aftermarket Seller using OEM brands may suggest to consumers that there exists a connection between their goods and the OEM. For example, prominent placement of a mark associated with an OEM on the packaging of vehicle parts or at point of sale may represent to consumers that:
- The parts share similar qualities with the OEM’s products;
- There is some business connection between the seller and the OEM; or
- The OEM has endorsed or approved of the vehicle parts sold by the seller.
Where these suggestions turn out to be false, the Aftermarket Seller’s representations may amount to a misappropriation of the reputation and goodwill built up by the OEM. This could entitle the OEM to initiate a passing off action against the Aftermarket Seller, regardless of whether the brand or mark used in the representations has been registered as trade marks by the OEM.
Conclusion
There is plainly a balancing act to be struck between the ability of Aftermarket Sellers to advertise the compatibility of vehicle parts, and the trade mark rights of OEMs. There are significant legal consequences for Aftermarket Sellers that incorrectly use the brands and trade marks of OEMs to market their products, while OEMs need to ensure that they only assert their rights where this is warranted and justifiable. In striking this balance, consumers should be able to identify officially licensed OEM parts from aftermarket alternatives, while still being able to clearly determine the compatibility and suitability of products from Aftermarket Sellers.
HWL Ebsworth’s Intellectual Property team has extensive experience in advising parties on both sides of the automotive aftermarket how to maintain adequate protection of intellectual property rights while also ensuring the freedom to advertise compatible alternative parts. If you are in either of these positions and would like to discuss your legal rights and obligations further, please contact us for further information on how we can assist you.
This article was written by Luke Dale, Partner and Daniel Kiley, Senior Associate.
1 Frost & Sullivan, Australian Automotive Aftermarket Trends, 2018 (Report, 19 September 2018).
2 [2003] FCA 924.
3 Ibid [52].
P: +61 8 8205 0580
E: lcdale@hwle.com.au