Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council amending Directive 98/71/EC on the legal protection of designs (COM(2004) 582 final — 2004/0203 (COD))
Date: 2005-06-08
Institutions: European Economic and Social Committee
Subjects: competition law, designs and models, industrial property, liberalisation of the market, motor vehicle industry, spare part

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Official Journal of the European Union

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Opinion of the European Economic and Social Committee on the Proposal for a Directive of the
European Parliament and of the Council amending Directive 98/71/EC on the legal protection of
designs

(COM(2004) 582 final — 2004/0203 (COD))

(2005/C 286/03)

On 6 December 2004 the Council decided to consult the European Economic and Social Committee,
under Article 95 of the Treaty establishing the European Community, on the abovementioned proposal.

The Committee Bureau instructed the Section for the Single Market, Production and Consumption to
prepare the Committee's work on the subject. At its meeting of 20 April 2005, the Section for the Single
Market, Production and Consumption rejected the draft opinion presented by Mr Ranocchiari.

Given the urgent nature of
the European Economic and Social Committee appointed
Mr Ranocchiari as rapporteur-general at its 418th plenary session, held on 8 and 9 June 2005 (meeting of
8 June). The draft opinion was rejected in favour of the present counter-opinion tabled by Mr Pegado Liz
and Mr Steffens. The counter-opinion was adopted by 107 votes to 71, with 22 abstentions.

the work,

1. Introduction — background to the question

fulfilled the requirements for protection, i.e. ‘novelty’ and ‘indi-
vidual character’ (Article 3), while emphasising that ‘interfaces’
or ‘interconnections’ could not be protected (Article 7(2)).

1.1
The present proposal for a directive sets out to amend
Directive 98/71/EC. The purpose of the amendment is to rule
out the possibility of asserting design rights anywhere in the
European Union relating to components of complex products
vis-à-vis third party independent suppliers who manufacture,
use and/or sell such components for the purpose of repairs in
the complex
order
products.

to restore the original appearance of

1.2
Among the sectors affected by the proposal (domestic
electrical appliances, motorcycles, watches, etc.), the greatest
impact would clearly be in the automotive sector.

Directive 98/71/EC (‘the directive’) was preceded by the
1.3
publication, on the part of the Commission, of a Green Paper
on the Legal protection of industrial designs which, as well as
revealing the results of a wide-ranging study on the matter,
also contained a preliminary draft proposal for a directive on
the approximation of Member State legislation, together with a
preliminary draft proposal for a regulation.

The green paper also discussed the eligibility or other-
1.4
wise for protection of components of complex products, parti-
cularly those connecting one product to another. The green
paper stated that components which fulfil in themselves the
requirements for protection should be protected, specifying
however that those essential features (known as ‘interfaces’ or
‘interconnections’) ‘which would have to be reproduced necessarily in
their exact form and dimensions in order for the component part to fit
intended’ should be
into the complex product
for which it
excluded from protection.

is

1.6
The proposal contained another important provision,
under which the exclusive rights to protected designs could not
be exercised against third parties who, after three years from
the first market placement of a ‘complex’ product incorporating
the design, used (copied) the design, provided that the design
was ‘dependent’ upon the ‘appearance’ of the complex product
and that the purpose of the use was ‘to permit the repair of the
complex product so as to restore its original appearance’ (Article 14).
In practice, this created an important exception from protec-
tion for designs for spare parts or repairs (‘spare parts excep-
tion’ or ‘repair clause’).

1.6.1
Regarding this aspect of the 1993 proposal for a direc-
tive, in its opinion IND/504 of 6 July 1994 (rapporteur: Mr
Pardon) the EESC argued as follows:

Like all other

industrial property rights, design
1.6.1.1
protection results
(monopoly rights).
However, the monopoly granted to the owner of a design
pertains solely to the appearance (the 'design') of a product, not
to the product itself.

in exclusive

rights

Design rights therefore grant a monopoly of forms,
1.6.1.2
but not a product monopoly.
‘Protection of the design of a
watch does not hamper competition in the watch market’
(Explanatory Memorandum 9.2.).

1.5
The proposal for a directive formally presented by the
Commission in December 1993 (1) confirmed that a compo-
nent of a complex product could also be protected if ‘as such’ it

(1) OJ C 345 of 23.12.1993.

1.6.1.3 With regard to spare parts (e.g. a fender or a front
lamp of a car) covered by the repair clause, the situation is
different. The appearance,
the ‘design’ of such spare parts
cannot be made different as compared with the original
component to be replaced.

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1.6.1.4
Thus product monopolies are created if design
protection is extended to such spare parts; design rights in a
spare fender or a spare lamp totally eliminate competition in
this product area.

1.6.1.5
This falls foul of the essential purpose of design
protection which the legislator is authorised to define in detail.

1.10
Strong disagreements also arose in the course of the
Council and European Parliament's co-decision procedure: the
conciliation procedure had to be invoked, concluding in 1998
with the attempt to harmonise relevant Member State legisla-
tion being effectively abandoned, a ‘freeze-plus’ (as it is known
to specialists) being applied to existing national legislation, and
resolution of the issue being postponed.

1.6.1.6
The repair clause contains such a definition: it does
not affect the acquisition and the exercise of design rights
where they operate as they should; it only stops the exercise of
design rights where — as is the case in the repair sector —
they cannot operate as they should. In this way the repair
clause prevents monopolies
from coming into existence,
competitors from being driven from the market and consumers
from being subjected to the dictate of pricing by a sole
supplier.

At the same time it prevents the development of
1.6.1.7
monopoly premiums, since the essential precondition for a
design premium — that a market exists and consumers can
exercise preferences — does not apply if design protection is
extended to the spare parts covered by the repair clause.

1.6.1.8
therefore supported by the Economic and Social Committee.

The repair clause proposed by the Commission is

This exception, or repair clause, went some way to
1.7
meeting the demands of certain industrial sectors,
including
those imitating car parts, particularly manufacturers of ‘crash
parts’. These ‘independent’ suppliers had already sought a dero-
gation from design protection arrangements under existing
legislation, taking their case unsuccessfully to the Court of
Justice (see the CICRA v. Renault (2) and Volvo v. Veng (3)
cases).

1.8
The repair clause contained in the 1993 proposal for a
directive was criticised by sectors of industry having interests
differing from (or opposing) those of the independent parts
producers — in other words, the vehicle manufacturers. The
Commission therefore tried a new approach, with an amended
proposal (4).
In brief, the new proposal provided that third
parties interested in copying the design of a given complex
product for repair purposes could do so immediately (without
waiting for three years from the first placing on the market of
the complex product), provided they paid a ‘fair and reasonable
remuneration’ (Article 14).

1.9
The ‘fair and reasonable remuneration’ solution was not
however deemed acceptable by either the independent produ-
cers (5), or the vehicle manufacturers holding design rights (6).

(2) Case 53/87, judgment of 5 October 1988.
(3) Case 238/87, judgment of 5 October 1988.
(4) OJ C 142 of 14.5.1996.
(5) R. Hughes, Legal Counsel ECAR ‘The legal protection of designs’,
1996; and Briefing Notes (1 to 6) of the European Campaign for the
Freedom of the Automotive Parts and Repair Market, 1996.

(6) ‘ACEA comments on the proposed directive regarding industrial
design protection’, ref. 97000622, and ‘Key questions about design
protection for car parts’, ref. 97000517.

2. The provisions of Directive 98/71/EC (7) concerning

components

2.1
Under the terms of the directive, the protectable design
may relate to the appearance of the whole or to a part of a
product (Article 1(a)).

2.2
Designs of component parts may also be protected, if
they fulfil the requirements for protection laid down for each
type of ‘product’: they must be ‘new’ and have ‘individual char-
acter’ (Article 3(2)). A component design will however only be
recognised as protectable:

a) if the component part, once it has been incorporated into
the complex product, remains visible during normal use of
the latter, and

b) to the extent that those visible features of the component
part fulfil in themselves the requirements as to novelty and
individual character (Article 3(3)).

‘Normal use’ within the meaning of paragraph (3)(a) shall mean
use by the end user, excluding maintenance, servicing or repair
work (Article 3(4)).

In practice, the consequence of applying these provisions to the
automobile sector is that none of the component parts ‘under
the bonnet’, and therefore not visible during normal use of the
vehicle (for example, the appearance of the engine's cylinder
head), can be protected by design rights.

It is also provided,

in relation to component designs,
2.3
that those features of a product which are solely dictated by its
technical function may not be protected (Article 7(1)). Simi-
larly, those features of appearance (of a component) which
must necessarily be reproduced in their exact form and dimen-
sions in order to permit their connection or interconnection to
another product
cannot be protected
component)
(Article 7(2)). One of the consequences in the car sector is, for
example, that while the shape of a bumper or rear-view mirror
may be protected by a design right, the configuration of the
attachments to fix the part to the vehicle may not.

(or

(7) OJ L 289 of 28.10.1998.

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2.4

Lastly, it should be remembered that:

industry, particularly

the directive lays down that

three years after the
2.4.1
implementation date (i.e. by October 2004) the Commission
must submit an analysis of the directive's consequences for
Community
the manufacturers of
complex products and component parts, for consumers, for
competition and for the functioning of the internal market. At
the latest one year after this date (i.e. October 2005), the
Commission must propose to the European Parliament and the
Council any changes to the directive needed to complete the
internal market in respect of component parts of complex
considered necessary
products,
(Article 18);

and any other

changes

2.4.2
until such time as these amendments are adopted,
Member States must maintain in force their existing legal provi-
sions relating to the use of protected designs of component
parts used for the purpose of the repair of a complex product
so as to restore its original appearance. The Member States
may introduce changes to these provisions only if the purpose
is to liberalise the market for such parts (Article 14 — Transi-
tional provision, referred to earlier as ‘freeze plus’). All the
Member States have now implemented the directive. Of the
EU-25, nine have introduced some form of repair clause,
Ireland,
thereby effecting ‘liberalisation’
Italy, Latvia, Luxembourg,
the Netherlands, Spain and the
United Kingdom), but the majority (16 Member States) also
extend protection to components for spare parts or repairs.

(Belgium, Hungary,

2.4.3 With regard to liberalisation of the secondary market,
Article 110(1) of Regulation (EC) 6/2002 of 12 December
2001 already provides that ‘protection as a Community design
shall not exist for a design which constitutes a component part
of a complex product used (…) for the purpose of the repair of
that complex product so as to restore its original appearance’.

2.4.4
Commission Regulation (EC) 1400/2002 of 31 July
2002 on categories of vertical agreements and concerted prac-
tices in the motor vehicle sector works to similar effect,
although without removing the need for the present Commis-
sion proposal.

3. The content of the proposal for a directive

the proposal

The ‘mandatory’ content of

is quite
3.1
straightforward. It provides that Article 14 (Transitional provi-
sion) of Directive 98/71/EC is to be amended, in effect estab-
lishing that protection cannot exist for designs for component
parts of a complex product which are used to repair the
complex part so as to restore its original appearance.
In
essence, this is the ‘free repair clause from day one’ which
some of the interested parties had long been calling for, as seen
above.

— protecting designs for which there is no practical alternative
would lead to a de facto product monopoly; such protection
‘would come close to an abuse of the design regime’;

— if third parties are allowed to produce and distribute spare

parts, competition is maintained;

— if, on the other hand, protection is extended to spare parts,
then third parties become guilty of infringing design rights,
competition is eliminated and the holder of the design right is
given a de facto product monopoly.

It is also emphasised that, at present, the Member States'
3.3
legal regimes concerning designs differ, jeopardising the opera-
tion of the internal market and possibly distorting competition.

Additional, more detailed reasons are contained in the
3.4
explanatory memorandum, substantially repeating or encapsu-
lating the conclusions of the EIA and, in part only, of the EPEC
report. In brief, among the various options reviewed only ‘liber-
alisation’ would seem to offer a range of benefits without any
serious disadvantages. It would ‘improve the functioning of the
Internal Market, allow for more competition in the aftermarket,
bring down prices for consumers and create opportunities and
jobs for SMEs’ (point 2.2, page 7).

In contrast, the other options would not be advisable,

3.5
mainly because:

— maintaining the status quo, with the existing disparities
between the different national laws, would hamper comple-
tion of the internal market;

— protection of short duration could allow right holders to
raise prices during this period (no specific information is
provided to back this up);

— a system of authorisation for third parties to use designs
held by others, against ‘remuneration’, would raise problems
in verifying ownership of rights, adequacy of remuneration
and, lastly, the willingness of third parties to pay;

— a combination of the two preceding systems, i.e. a short
period of protection and a system of remuneration for the
ensuing period, would entail relatively high costs, and prob-
ably few independent producers would make the necessary
investment (cf. Legislative financial statement, point 5.1.2,
page 17).

4. Comments on technical aspects

The EPEC report, mentioned several

times above,
4.1
accepts that non-original spare parts are not guaranteed to be
of the same standards as originals (point 3.7). This is because IS
frequently lack the specific manufacturing, quality and techno-
logical expertise of the VMs.

3.2
The recitals in the proposal's preamble describe the
fundamental reasons for a regime of complete, immediate and
free ‘liberalisation’:

— the sole purpose of design protection is said to be to grant
exclusive rights to the appearance of a product, but not ‘a
monopoly over the product as such’;

4.2 Modern cars are the complex result of an assembly of
independent highly technological components (for example,
high-resistance steels) whose specifications include not only
shape and size, but also quality of assembly (soldering and
adhesive techniques used) and materials. It is therefore possible
that non-original parts may diverge from the original specifica-
tions.

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4.3
Vehicles awaiting type-approval are subjected to a series
of frontal or lateral crash tests to check that they comply with
the requirements laid down by the specific directives on the
protection of occupants in the event of collision. These are
supplemented by the recent directive on the protection of
pedestrians,
the purpose of which is to reduce the conse-
quences of vehicle impact on pedestrians. This latter obliges car
manufacturers to design the front of the car according to given
safety requirements and to perform specific crash tests.

In contrast,

4.4
independent spare parts suppliers are not
subject to any prior technical tests on the parts they place on
the market, insofar as there is no provision for a type-approval
system for individual car components, with the particular
exception of ‘separate technical units’. Where car parts are
concerned, these are the windows, rear view mirrors, headlights
and rear lights. For other parts (bonnet, bumpers etc.) there are
no technical test requirements prior to placing them on the
market and, in consequence, no certainty that they have the
same characteristics as those produced for the original equip-
ment.
to general
product safety standards and are liable for losses caused by
product defects.

suppliers are only subject

Independent

4.5
The proposal also seems to contradict the important
directive on ‘End of Life Vehicles’ (ELV), which obliges manu-
facturers to remove heavy metals from vehicle components and
to indicate what substances they contain in order to facilitate
recycling. Manufacturers are also required to design vehicles in
such a way as to facilitate dismantling at the end of their life
and subsequent recycling. Since such obligations of course do
not apply to independent suppliers, where there are compo-
nents (such as bumpers) the composition of which is unknown,
there is a potential risk of jeopardising the end-of-life proces-
sing cycle, with possible repercussions for the environment and
further cost increases.

The Commission is right to say that design protection is
4.6
meant to reward the intellectual effort of the creator of a
design, and not to safeguard its technical functions or quality
(see Explanatory Memorandum, page 9 of the proposal).
It
follows that it is right to describe design protection and safety
it is
as being on two different conceptual
evident
the liberalisation proposed by the
in practice,
Commission could lead to more components on the market
which have not been properly tested under the procedures
mentioned in point 4.3 above and which do not meet the
requirements of the ELV Directive. Consequently, the advan-
tages to consumers which the Commission claims will flow
from liberalisation should be balanced against the greater risks
which the same consumers may possibly run.

levels. However,

that

Brussels, 8 June 2005.

5. Final comments and recommendations

The Committee restates

5.1
its position, expressed in
previous opinions, in favour of recognising the growing impor-
tance of intellectual property rights in commercial transactions,
including legal protection of industrial designs as a fundamental
element
innovation and the ensuing need to
in technical
combat counterfeiting.

5.2
The Committee however reaffirms its understanding that
the monopoly conferred on the owner of the design applies
only to the external form of the product, not the product itself.

5.3
The Committee thus confirms its view, expressed in
previous opinions, that to subject the spare parts covered by
the repair clause to the design protection regime would be to
establish a product monopoly on the secondary market,
legal protection of
contrary to the fundamental nature of
designs.

the

regime

5.4 Moreover,
introduced under Directive
98/71/EC has permitted differing and even opposing national
to
regimes
multiply in a crucial area of a sector of enormous economic
weight in the European market.

to survive and, with recent EU enlargement,

5.5
The Commission's proposal therefore seeks to achieve
an internal market in this field by aligning national systems,
based on liberalisation of use of protected designs for the
purpose of repair of a complex product so as to restore its
original appearance (secondary market).

The Committee supports the Commission's proposal,
5.6
which comes in the wake of earlier
legislative initiatives
welcomed by the Committee and which may contribute to
greater competition, lower prices and the creation of new jobs,
particularly in SMEs.

5.7
However, the Committee considers that the proposal
would benefit from being better grounded in terms of a clear
demonstration of its compatibility with the TRIPS Agreement,
from more illustration of its effects on employment and, in par-
ticular, from a guarantee that consumers — quite apart from
the right to information which seems to have been secured —
will not be affected in their choices, either directly in terms of
the safety and reliability of products used by independent
suppliers, or indirectly by the consequences of the use of such
parts in the repair of complex products for which they are
intended (basically, motor vehicles) on either their residual
market value or on indirect costs (e.g. insurance).

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND