Dealer fined for illegally selling Hyundai and Kia car parts in Malta

A local auto parts dealer that had been selling goods in Malta that were destined for the Korean market, has been ordered to stop and to pay €60,000 in damages to three foreign companies for breaching their intellectual property rights.

Daniel Zerafa and his company DMD Autoparts were sued by Hyundai Motor Co. Ltd, Kia Motors Corp. Ltd and Mobis Parts Europe NV for importing and selling on the local market ‘grey market’ goods that were not destined for the European market.

A number of test purchases by ‘mystery shoppers’ proved that Zerafa had continued to sell such car parts even after being targeted by a warrant of prohibitory injunction issued by the court back in 2014, the court was told. 

The crux of the issue stemmed from the fact that spare parts for Kia and Hyundai fell under two distinct categories, namely those destined for the European market and those intended for sale on the Asian market.

Mobis Parts Europe, a subsidiary of Hyundai Mobis Co. Ltd within the Hyundai Automotive Group, was the exclusive distributor for the European market, having various branches throughout Europe.

A high-ranking official of the company testified that there were only two Maltese companies officially authorized to act as exclusive distributors of Kia and Hyundai “genuine spare parts and accessories”, namely Cars International Ltd and Meridian Enterprises Ltd.

Products destined for the European market bore various features which made them easily distinguishable from others destined for the domestic Korean market.

There were variations in logos, packaging, labeling, colours as well as the type of plastic used.

While those intended for the Korean market bore a silver hologram marking the Mobis logo and were accompanied by Korean text, products meant for the European market only carried the Hyundai or Kia mark.

When testifying in the proceedings, Zerafa confirmed that he had not obtained authorisation from the Korean car companies to import Hyundai and Kia parts directly to Europe.

The applicant companies had never given their consent for DMD Autoparts to use those trademarks nor sell trademark products on the local market, observed the court.

But Zerafa did not deny doing so, insisting that this was a “normal practice” adopted by various local businesses.

After setting up his own business, having previously spent decades working in the spare parts department of a local car company, he engaged the service of various local agents to supply him with car parts.

In light of all evidence the First Hall, Civil Court, presided over by Chief Justice Mark Chetcuti, held that this was a classic case of parallel imports in clear violation of Maltese intellectual property laws as well as EU laws.

The applicants’ trademark rights were all duly registered with effect in Malta and could be availed of regardless of any contractual arrangement establishing exclusivity among the applicants.

Since the respondent was making use of such trademarks and importing trademark goods directly from outside the Single European Market without the consent of the trademark proprietor, he was breaching the applicants’ intellectual property rights.

The court thus ordered him to stop and the goods to be seized.

Since the applicants failed to produce sufficient evidence to prove the actual financial damages suffered, the court liquidated damages to the tune of €60,000, excluding costs and expenses, basing its calculations on equity.

The applicants were represented by lawyers Antonio Ghio and Deo Falzon.

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