Is it legal and what can be done to stop it?
It’s a common question: ‘can we make our own replacement parts or do we need to buy the parts from the Original Equipment Manufacturer (OEM)?’ The equipment might be a crusher or other heavy duty machinery with wear parts. The amounts of money involved can be significant, with a substantial price difference between the OEM and locally manufactured parts. Quality and local availability are also issues.
The answer may well be ‘yes’ but there are a number of issues to consider involving both:
- Intellectual property, including patents, registered designs and copyright.
- Contractual obligations.
Issues to address
Below is a checklist setting out a number of issues which need to be addressed when manufacturing replacement parts.
Is there any patent protection for the part in question? Generally, it is not an infringement of a patent to make and supply a replacement part for a machine even if the machine itself is subject to patent protection. But there may be patent protection for the part itself. Product documentation may give notice of patent rights. If in doubt, patent searches can be carried out.
2. Registered Designs
Are there any registered designs for the part in question? Manufacturers are known to apply for design protection, particularly where the shape of a part is dictated by where it fits in the machine and the function it performs. Again, if in doubt, registered design searches can be carried out. There is also a defence where a part is replaced for the purpose of ‘repair’ which may be available.
3. Confidential information
Is any confidential information being used in connection with the making of the part? For example, information on materials or details of tolerances contained in a drawing supplied by the OEM may be confidential information. Generally, information which can be obtained from publicly available sources or ascertained by analysis of the part itself is not capable of being confidential information. In some circumstances, it may be necessary to carry out and document the process of reverse engineering to avoid allegations of misuse of confidential information.
4. Contractual provisions
Are there any agreements which expressly or by implication prohibit the manufacture of spare parts by or for the party which owns the machine or equipment? A detailed analysis of relevant provisions may be required and there may be issues as to enforceability where provisions are anti-competitive or an illegal restraint of trade.
Generally, copyright subsists in engineering drawings and it can be an infringement of copyright for a person to make a three dimensional copy of what is depicted in a drawing (i.e. making a part in accordance with the drawing). However, there are provisions in the Copyright Act which provide, in effect, that it is not an infringement of copyright in an engineering drawing to make a part where the copyright owner (or a licensee) has itself made and sold the part in commercial quantities. Further, in such circumstances, any drawings made during the process of reverse engineering will not infringe copyright. There are exceptions to this and it is a tricky area of law. But the policy of the law is that copyright is not intended to protect the manufacture of mass produced machine parts.
6. Trade marks
A spare part manufactured by a person other than the owner of a trade mark (or a licensee) cannot be sold or supplied by reference to the trade mark. For example, a supplier cannot say ‘this is a Toyota part’. However, it is generally permissible to say, for example, ‘this part is made for use with a Toyota car’.
7. Misleading or deceptive conduct
Generally, a supplier must not mislead or deceive a customer or the public at large by making statements or omitting information which results in the customer or the public being misled or deceived in any way (or the likelihood of being misled or deceived). For example, representing that parts are OEM parts or are approved by the OEM, when this is not the case, is misleading or deceptive conduct. Similarly, omitting information or staying silent can be misleading or deceptive conduct if a customer or the public are misled into a false belief. A decision to source a part from a local supplier rather than the OEM is not to be taken without considering the rights of the OEM. But in the right circumstances, it can be done.
Actions for OEM
Looking at it from the point of the view of the OEM, a different question arises: ‘can I do anything to stop my customers making their own replacement parts?’. My lawyer’s answer to this is ‘yes’ and includes:
- Where appropriate, apply for patents, registered designs and trade marks.
- Protect your confidential information, with agreements and appropriate practices and procedures.
- Include contractual restrictions, but be careful of laws relating to anti-competitive conduct and illegal restraints of trade.
Strangely, where copying replacement parts is involved, the law of copyright can be of limited assistance to the OEM, except where there is direct drawing to drawing copying. If the copy drawings are produced by a process of reverse engineering, this usually does not amount to infringement (with some exceptions).
What can you do?
Ultimately, for both OEM and customer it is a matter of knowing the legal landscape and making informed decisions as to what can and cannot be done. Getting it right, or wrong, can have serious consequences.
Read more from other Wrays thought leaders in volume 4 of The Gatherer.