On the first day of Automechanika, Oliver Hurtz always strolls through the “China Hall” before customs turns up; after all, as a product manager, observing the market is part of his job. If a final ruling against a counterfeit product exists, and it’s still being marketed in Europe, “customs comes with several men and roller containers and dismantle the illegal supplier’s stand,” explains Hurtz. Their reputation is ruined. And rightly so, because counterfeiters make products that can’t live up to the performance claims. And while they’re at it, they save themselves the complete costs of development. “The penalties for repeat offenders are steep and often cost them their livelihood,” notes patent lawyer Jasper Eberlein from the law firm terpatent. He sees industrial property rights in Europe and especially in Germany as a “sharp sword.” “Taking action against product counterfeiters sends a strong signal to other market players,” insists Eberlein.
The case of the CWA 200
When Hurtz, who worked in the prototype construction of electric water and oil pumps at Pierburg, took a closer look at the CWA 200 electric coolant pumps at the show, he discovered that the Pierburg logo was missing. Otherwise everything looked exactly the same. “Naturally this got me thinking. After all, the CWA 200 is a big-selling item.” As a component of advanced thermo-management, the electrical coolant pump is a pioneering piece of technology. It provides demand-driven cooling, while its special design means that it keeps cooling the engine even after it’s been switched off. It is produced in series in various performance classes and currently offered by MS Motorservice International for the OE spare parts trade as well as on the open market for spare parts. Products that sell well in large numbers in Europe and America often attract the attention of product counterfeiters. Increasingly, these are also being offered on the Internet, which has developed into a platform for the global trade in spare parts. MS Motorservice International recognized the danger and took joint action with Pierburg. A request for one of the Chinese pumps was sent by e-mail, which resulted in dispatch of a sample along with a test report and a technical drawing—“and this despite the fact that the e-mail signature clearly showed it was from a Rheinmetall employee,” recalls Hurtz with a smirk. The pump was immediately sent off to the test bed, where the engineers’ fears were quickly confirmed. The electronics were defective and the pump didn’t meet the output volume listed in the manufacturer’s specification sheet. At full power, the original Pierburg pump has a volume flow of seven cubic meters per hour. The counterfeit pump managed only two cubic meters per hour—5,000 liters less! Moreover, the knock-off version failed under heavy stress. “Instead of displaying the usual emergency operating characteristics, the pump just seized up,” adds Hurtz. They didn’t give much thought to electromagnetic compatibility, either. This means that there’s a risk of the pump sending out signals that could interfere with other electric circuits in the vehicle. As Hurtz notes, “We assume that the Chinese counterfeiter didn’t have the technical ability to copy the pump in a way that matched the quality of the original.”
PIERBURG HAS ESTABLISHED A MONITORING SYSTEM FOR AVOIDING VIOLATIONS OF ITS PATENTS
Motorservice warns the customers
MS Motorservice International issued a two-page product information sheet to warn wholesalers of the damage that could result from the counterfeit product. If the cooling function fails, it damages the engine and all the components that need to be cooled, including for example the crankcase, pistons, crankshaft, and camshaft. If the worst comes to the worst, the engine can overheat. By this time, the repair shop will have contacted the responsible wholesaler. Although the wholesaler is not obliged to explicitly mention the Chinese origin of the pump during a sales pitch, it has to be listed on the invoice. Because they wanted to avoid the negative consequences of selling an inferior product, the wholesalers reacted to the product warning positively. This way, MS Motorservice International was able to bolster its image as a legitimate supplier of quality parts—and also avoided a dip in sales.
Pierburg took legal action
Aided by the law firm terpatent, Pierburg filed a patent infringement suit in Germany. The complaint was presented to the Chinese product counterfeiter at Automechanika 2016. Founded almost ten years ago, the terpatent law office, whose origins lie in the Pierburg patent department, specializes in industrial property rights, i.e. patents and patent infringements. In the first instance, the Munich District Court handed down a judgement by default against the Chinese counterfeiter, who failed to appear in court. “But we would have won in any case,” insists Eberlein: “The structural design completely copies the CWA 200, which makes it a patent violation.” The Chinese counterfeiters measured the pump’s external geometry using a 3-D scanner, taking over the Pierburg part number and even built the logo of the castings supplier into the pressure casting tools. If someone consciously seeks to create the impression that a copy is the genuine article, this is also a violation of Germany’s fair completion rules (UWG). First, because no attempt was made to exploit the technical scope for altering the optical appearance to differentiate it from the original (avoidable deception of origin); and second, because the counterfeiter illicitly benefitted by avoiding the development costs. Therefore a second patent infringement suit was filed with the Düsseldorf District Court based on the UWG criteria.
PATENTS AND RULES AGAINST UNFAIR COMPETITION PROTECT COMPANIES FROM IMITATIONS
Facts and Figures
Product and brand piracy have grown into a globespanning, multibillion Euro phenomenon in the meantime, with major socioeconomic implications. In Germany alone, the German Chamber of Industry, Commerce and Trade puts the annual damage at € 30 billion. The Ministry of Justice estimates that some 50,000 jobs are lost in Germany every year as a result of product piracy.
No fakes! Only real stuff
The counterfeiters also turned their hand to the packaging. Though they didn’t completely imitate the box, they imitated the label with the barcode. The article number is also identical to the MS Motorservice International number. Not a minor matter when you consider the wholesaler’s database. Under the motto “No fakes! Only real stuff,” MS Motorservice International has introduced a comprehensive security system to protect itself against counterfeit products. The underlying message: greater protection from fake products means greater protection for the customer. The original packaging of Kolbenschmidt, Pierburg, and TRW Engine Components, brand partners of MS Motorservice International, now boasts a presumably counterfeit-proof system of six security features, including a label with a closure seal, a four-digit tesa® Holospot SecurityCode with a 2-D matrix code on the label and the Motorservice MicroCode.
Do you expect global manufacturers to be more aggressive in protecting their products against unauthorized copies in the future?
As I see it, there are going to be more and more intercontinental legal battles. Especially in the USA, we’ve noticed a tendency for companies whose products have been counterfeited to act aggressively and not to seek an out-of-court settlement.
In Asia, companies are now generating industrial property rights that are also being registered in Europe. What consequences will this have for patent disputes?
In recent years the Chinese market has become far more important for the automotive industry, and with it, cross-border patent protection. Since the Chinese are increasingly self-confident, the number of Chinese companies initiating legal action will probably rise. Conversely, in the next 20 years we also expect to see good prospects for success in pursuing patent violations in China.
In the CWA 200 case, Pierburg and MS Motorservice International have gone to court in response to the violation of a German patent by a Chinese product counterfeiter. How would you assess the trend in legal security in China?
Experience shows that Chinese law makes a qualitative leap roughly every three years. This translates into greater legal security for us. We haven’t reached the European level at this point, but I assume that the day will come when this will be the case.