European Carmakers Use Home Courts To Block Alleged Chinese Copies

By Bruce Gain for Intellectual Property Watch
European carmakers are turning to European courts to urge enforcement of their intellectual property rights against Chinese firms, and they have a good chance of prevailing, legal experts say.

At issue are car models that European manufacturers Daimler, BMW, and Fiat say are made-in-China replicas of their models.

BMW, for instance, is seeking injunctions to prevent Shuanghuan Automobile from exporting its CEO model, which resembles the BMW X5 and is already distributed to Europe by Italy-based Martin Motors.

BMW X5

CEO

A BMW spokesman told Intellectual Property Watch that the firm will initiate legal proceedings against BYD Auto Co. if it opts to export what the company deems look-alike BMW cars to Europe. According to BMW, the BYD logo used on the alleged look-alike cars is similar to the BMW logo.

German carmaker Daimler AG successfully sued and won a preliminary injunction last year against Martin Motors prohibiting the import of the minicar called the Bubble or Noble to Italy; Daimler says the model is a look-alike of its Mercedes Smart car. Martin Motors is appealing the decision.

Italian company Fiat has sued in Italy and China to prevent the sale and production of the Peri, which is built by Great Wall Motor and is allegedly a replica of the Fiat Panda.

BMW and Daimler, by contrast, say they are not pursing their legal claims in China, while Fiat’s legal claims against Peri have lingered in Chinese courts for over a year.

“We can’t do much in China,” the BMW spokesman told Intellectual Property Watch, while declining to offer details about difficulties the firm might face if it were to seek legal remedies there.

BMW, Daimler, and Fiat’s decisions to target their legal proceedings in Europe reflect the expectation that European courts can be more receptive to the western carmakers’ claims compared to Chinese and US courts, said Taiwan-based attorney John Eastwood of Wenfei Attorneys-at-Law.

“The European courts are far more protective of designs and imitation products, and they can be more aggressive,” Eastwood said. “They have a lot of luxury brands they need to protect there. The companies that decided not to litigate in China decided to make the strategic withdrawal back to some of the key markets that they felt they needed to protect.”

However, Martin Motors said it will continue to fight the legal battle against Daimler in Italy, while it already distributes the CEO in nine European countries, Martin Motors President and Chief Executive Officer Guido Martinelli told Intellectual Property Watch.

Martinelli said he expected the Italian court to decide whether or not it will overturn the lower court’s decision granting Daimler an injunction to prevent Martin Motors from distributing the Bubble or Noble in Italy within 60 days.

However, Martin Motors will seek to distribute the models in Europe outside of Italy this fall even if it loses the appeal case, Martinelli said.

“But if we win,” Martinelli said. “Then we can win [our case] all over Europe.”

It is unclear whether the European Union might consider pursuing the matter at the government-to-government multilateral level, such as the World Trade Organization or World Intellectual Property Organization.

So-called Chinese look-alike cars have not yet prompted BMW, Daimler and Fiat to take legal action in the United States. Enforcing copyright claims for car designs in US courts would involve stringent legal tests in order for the plaintiffs to have a case.

“A car body is not protected by US copyright law unless its artistic elements are separable from the functional aspects of the design,” said Susan M. Kornfield, an Ann Arbor, Michigan-based intellectual property attorney who is a partner at the Bodman law firm.

“A car design (or particular aspects of the design) can be protected by trade dress law if and only if the design is distinctive and non-functional,” Kornfield said. “It can be protected by a utility patent if it is novel and functional, or, in very rare circumstances, by a design patent if the design is novel and purely ornamental.” Trade dress refers to a product’s total image or overall appearance.

A classic case that demonstrates the rule of law in the United States and the difficulty of enforcing product design claims there is the 1964 US Supreme Court case Sears, Roebuck and Co. vs. Stiffel Co. The case involved Sears’ sales of a product that appeared to be an exact copy of a so-called Stiffel lamp. The Supreme Court held that while Sears’ did copy Stiffel’s design, it said “a state may not, when the article is unpatented and ‘uncopyrighted,’ prohibit the copying of the article itself or award damages for such copying” and overturned a lower court’s decision that had ruled in favour of Stiffel.

“The bottom line is that US law permits the copying of goods that do not have trademark, trade dress, utility patent, design patent, or copyright protection,” said Kornfield, who uses the Stiffel case in a class she teaches.

BMW and Daimler spokespersons declined to specify the exact intellectual property claims they were trying to protect in Europe and what they were willing to protect in the United States.

So far, Chinese carmakers have not yet mass-marketed look-alike cars in the United States, though it is highly likely they will attempt to do so in the future, Eastwood said. Chinese industry representatives could not be reached for comment.

Meanwhile, as Chinese carmakers likely will increase the design and production of cars that resemble those of established brands, BMW, Daimler and Fiat should continue to focus on protecting their home markets, Eastwood said.

“European carmakers may have already abandoned the idea of enforcing IP claims against alleged counterfeit cars outside of their key markets,” Eastwood said. “So they are looking to defend their home turf where they think they have a viable market for themselves. Keep the Chinese products out, and the Chinese products will end up going to places like South America, or anywhere there are lovers of cheap cars.”

The alleged BMW and Mercedes Smart car look-alikes represent a first-ever development in that the imitation cars could be available in Europe for a fraction of the cost of the originals, Eastwood said.

“In the old days, if there was going to be a knockoff, then it was not going to be something in their prime, profitable markets,” Eastwood says. “I think it is very scary for [BMW and Mercedes], especially since there are scanning and other technologies that can make exact replications.”

Knockoff BMW, Mercedes, or other German luxury-cars cars can also be bad for brand image, Eastwood said, adding, “If you always see the back of an X5 with the blinkers on or with the hood up on the side of the road, then that is not good.”

Bruce Gain may be reached at info@ip-watch.ch.