Cosmos Director Offers Roadmap into European Auto Parts Market

Klaus Jungmann, managing director of Cosmos Autoteile, travels a long way from his native Germany to Taiwan to show auto parts suppliers on the island how they can succeed in the European market. As part of his gospel, Jungmann says that spare parts suppliers can sell parts with emblems in Europe, so long as it's done honestly.

Cosmos was founded in Essen, Germany 45 years ago. Twenty-five years ago the firm began specializing in body and lighting parts for German cars. The company sells such components in Germany through its headquarters and five branches. Currently, Cosmos offers more than 6,000 items. The firm also cooperates with worldwide manufacturers under an intensive quality control system to provide a comprehensive range of parts at reasonable prices.

Jungmann travels with copies of legal documents and court judgments in various languages to let people know that he has won every suit brought against him by automakers such as Audi and Opel. His main intention in doing so is to inform parts suppliers around the world of developments in Europe and what they should or should not do.

"More than 10 years ago, the making and sale of spare parts with automaker emblems was allowed if the maker faithfully marked the source of these parts. Even the OEM number is okay because it identifies where the part is going to be installed," Jungmann said. "The so-called 'fake', or the typical counterfeit items have the same numbering and descriptions as their original equipment (OE) counterpart."

Car manufacturers incorporate more and more their trademarks in the external body parts, once for advertising but especially in order to avoid competition by replacement manufacturers, the managing director said.

"Many Taiwan body-parts manufacturers are intimidated by the car manufacturers and the local government authorities," he explained. "But Taiwan manufacturers and official authorities ignore the fact that in countries of the European Community (EC) there is a new harmonized trademark law which allows the production and distribution of spare parts if they can be sold only with the brand of the car manufacturer, so long as the rules are respected."

This new harmonized trademark law, according to Jungmann, is based on the EC regulations 89/104, promulgated in December 1988. All old members of the EC had brought their laws into conformance with the law by 1995.

Cosmos has successful defended parts suppliers against actions by German automakers VW and Audi. Cosmos has also successfully defended out-of-court the interests of suppliers against Opel and BMW.

"Taiwanese spare-parts makers are very intimidated by the IP issue," Jungmann said. "But actually they do not know what they are afraid of."

Fair Use of Trademarks

According to Jungmann, the EC has tried to harmonize with national laws in the community, especially in regards to trademark law.

All member states of the EC were required to bring the 89/104/EEC directive into force by the end of 1992.

The fundamental changes concerning spare-parts in which the emblem was incorporated was regulated in the Article 6 of the 19/104/EED directive, according to Jungmann, is the limitation of the effects of trademark, including

a) The trademark shall not entitle the proprietor to prohibit a third party from using it in the course of trade.

b) Indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of goods or services shall be allowed.

c) Trademarks may be used where necessary to indicate the intended purpose of a product or service, particularly on accessories or spare parts provided that one uses them in accordance with honest practices in industrial or commercial matters.

In this spirit, Jungmann said, German legislators rewrote the century-old German trademark law. The new German law was introduced with a new article (Article 23), which explicitly states exceptions under which the trademark could be used, Jungmann explained.

In Italy, he added, the new EC regulations on trademark were introduced in the old law by additions or modifications to existing articles.

Honesty is the Best Policy

"According to the different judgements of various national courts in Europe, and especially of the European Court in Luxemburg," Jungmann said, "a trademark can legally be used on spare parts if the usage is done honestly. Concerning 'necessity,' if a car has four wheel covers with an emblem, it would be aesthetically undesirable to fit one cover without the emblem. Or, if the emblem is part of the original radiator grill, it is impossible to replace the grill without the emblem. The key point here is that the emblem is used in accordance with honest industrial or commercial practices."

That means it must be clear during the different distribution stages up to the final consumer that that the manufacturer of the spare parts is not the car manufacturer (OE parts) but a replacement producer non-OE parts), the Jungmann stressed. This must be clearly visible on both the parts and the packaging, for instance, by incorporating the name of the real maker on the backside of the item.

"Many legal problems in the past resulted from the fact that spare parts manufacturers did just the opposite--they tried to give the impression that the parts were produced by the car manufacturers, either by using the wrong packaging or by using the OE-brand on the backside," Jungmann pointed out.

However, when the new trademark laws became effective in Europe, most spare parts makers, including those in Europe, had been so intimidated by their past experiences that they continue to avoid such products today. Furthermore, the managing director added, carmakers ignore completely the new legal situation and continue to threaten everyone with costly legal actions (a party losing a case has to pay the legal expenses of the winning party), so in most cases small companies accept the conditions required by the "big brother." "There are many lawyers even in Europe who do not quite understand the situation here," Jungmann said.

Winning Cases

Cosmos has been involved in several trials involving emblems on automotive spare parts in the past years, and the company has won each time, Jungmann said.

In 1998, BMW tried to block Cosmos from selling BMW kidney-shape gills in Germany. "We fought the case based on Article 23 of the new German trademark law, and BMW backed off," Jungmann said. He backed his story by showing a letter written by the company's lawyer to BMW on October 1, 1998.

In 2002, Jungmann continued, the custom office at the Frankfurt airport confiscated a sample consignment shipped from Taiwan with replacement grills for VW and Audi cars. These grills, however, had no emblems on them but some items where shaped for fitting with the emblems.

VW and Audi lost the case at the district court in Frankfurt. In its ruling, the court referred to the Article 23 of the new German trademark law. VW accepted the judgment, but Audi has taken the case to the court of appeal in Frankfurt.

According to Jungmann, shortly before the court's decision on this case, Audi's top management learned about the intended final judgment against Audi and decided to withdraw the appeal in order to avoid a judgment that might lead to negative publicity for car manufacturers. "Though Audi finally gave up the appeal," Jungmann said, "the intended judgment is included in the court transcript."

In this case, VW and Audi had to pay the legal expenses of Cosmos (amounting to over 50,000 euros), Jungmann pointed out, because the automakers based their trial on a very high damage amount in order to intimidate Cosmos at the outset.

Cases in Italy

Another very noteworthy court judgment in Italy was the case of Fiat versus ISAM, which sold radiator grills with the Fiat emblem. ISAM took the case to the highest court in Roma, which ruled on the distributor's side.

According to Jungmann, the judgment was made on the basis of the Article six of the EC regulation in conjunction with other arguments. The core spirit of the judgment, according to Jungmann, was that the function of the trademark is to distinguish one product from another, which is described as the "typical function" of the trademark. The function of trademarks on spare parts, however, is not to distinguish a Mercedes-Benz from a BMW, but to indicate the intended purpose of the product. As such, such products have an "untypical function."