Design Patent Protection of Auto Parts Will Prevent Manufacture and Sale of Compatible Replacement Parts: “Mercedes-Benz vs. Depo” Automotive Headlight Infringement Case Judgment Rendered by Taiwan Intellectual Property Court September 2019

Daimler AG is the holder of the Taiwanese design patent D128047 “HEADLIGHTS FOR VEHICLES”, with which several E-class vehicles are equipped. Taiwanese company Depo Auto Parts Ind. Co. Ltd. manufactures and sells headlights that are compatible with the aforementioned E-Class vehicles. Daimler has filed a patent infringement complaint with the intellectual property court, asserting its design patent against Depo’s manufacture and sale of compatible headlights. The intellectual property court then ruled in August 2019 in favor of Daimler AG. In addition to the NT $ 30 million damages awarded to Daimler, Depo is now strictly prohibited from manufacturing or selling automotive flagship products compatible with the patented design.

Although the amount of damages awarded in this case is not particularly high, compared to previous patent litigation cases in the Intellectual Property Court, this was the actual judgment of the injunction, in particularly the restriction of the manufacture and sale by Depo of counterfeit products. that shocked the industry as a whole. Local media have predicted massive repercussions among auto parts makers around the world. According to the court ruling, design patent protection could completely prevent the manufacture and sale of compatible second-party replacement parts in the future. Participation, however, greatly increases the value of Taiwan’s design patents. If patentees are able to strategically exploit the court’s decision, they might be able to effectively enhance the service quality of the entire parts and maintenance market. Given Taiwan’s position as a major hub for global auto parts manufacturing, the court ruling promises a profound impact on patent application strategies for patent holders in Asia and around the world. Not only the automotive industry, but any field involving the assembly of systems and components would be wise to reflect on the case law of this holding company and take full advantage of the resulting enforcement strategy to secure intellectual property based on it. design for their products, strengthening and securing their global patent. wallets accordingly.

Apart from traditional legal questions such as the validity and infringement of patents, the most important and remarkable aspects of this judgment lie in the determination of whether the denial of license by the patentee would violate the Fair Trade Act, the antitrust law. from Taiwan. According to the holding, Depo does not in fact rule out the possibility of paying royalties in exchange for Daimler’s consent to continue producing and selling aftermarket automotive flagship products; Daimler, however, disagreed with the license.

In order to analyze the issue of license denial, the court first defines the “relevant market”. Depo seeks to define its business as the “auto parts maintenance aftermarket,” an arena it sees as completely separate and independent from the auto manufacturing and sales market. Daimler claims that the automotive manufacturing and sales market is the primary market, with the maintenance market being secondary, the two being inseparable. The parties build their arguments on the basis of their own market definitions. Depo cites the lockdown theory, claiming that once consumers buy automobiles, they will inevitably buy either original aftermarket parts or aftermarket parts with completely identical shapes and specifications to the original. . Therefore, if Daimler wins, consumers have no choice in the parts purchasing market, with Daimler monopolizing the secondary maintenance market simply because it has obtained design patents. Further, Daimler argues that with Taiwan’s limited auto market, with small market size and fierce competition between brands, Daimler’s market share in Taiwan auto sales market is only 6 to 8%. Under full competition in the primary market, even if the secondary maintenance market has what is known as the consumer foreclosure effect, a significant restriction of competition will not really occur. The court ultimately agrees with Daimler’s argument.

The conclusion of the market definition has a crucial impact on the outcome of this lawsuit. Despite Depo’s efforts to illustrate that the commodity manufacturing, marketing and maintenance markets should be completely independent of each other, citing examples of photocopier, elevator and talkie product markets -walkies, arguing that this case should be based on the secondary maintenance market alone, the Court is still not convinced. Once the court decides to accept the principle of the nexus between the primary and secondary markets, Daimler’s position and market power will be significantly reduced, and the anti-competitive effect that may result from the denial of a license will cease to exist. The definition of the market therefore takes the whole object of the legal analysis of this case.

Depo repeatedly points out that Daimler promised during the German legislative process in 2003 that it would not use design patents to impede competition in the aftermarket. Therefore, Depo argues that Daimler’s undertaking should be treated in substantially the same way as that of FRAND and should be subject in the same way to the relevant case law. Depo therefore claims that Daimler is obligated to grant a license. Nevertheless, the Court agrees with the decision of the Cologne District Court in Germany on May 9, 2017 and the subsequent decision of the Düsseldorf Second Instance Court in this case. In first and second instance disputes in Germany, courts have refused to adopt Depo’s request for a similar application of the FRAND case law. The holding companies in both cases interpret Daimler’s statement during the German legislative process as a political commitment, which generates no effect like that of FRAND.

Carefully disentangling the full text of the judgment, I believe that this is undoubtedly one of the most representative legal acts of the Taiwanese intellectual property court dealing with patent infringement in recent years, and that ‘it will certainly have a tremendous impact and influence on the practice of applying the design. patents. Those who can make good use of ownership and revise their design patent application strategy will see a unique opportunity to gain a competitive advantage.

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