TROY, Mich. — The Manufacturers’ Qualification and Validation Program, Inc. (MQVP) will ask a judge to grant it increased monetary damages from LKQ Corp. following a federal appeals court ruling in favor of the aftermarket parts certification firm. MQVP’s lawsuit had initially sought more than $2 million in a 2003 trademark infringement case originally filed against Mid-State, an Arkansas-based parts provider currently owned by LKQ. “Now it’s higher because a lot of companies started selling ‘MQVP parts’ that weren’t really MQVP parts,” says Ronald F. McNulty, MQVP’s lawyer. “All that infringement out there has significantly damaged MQVP, so the damages are higher now.” When contacted by ABRN, a spokeswoman for LKQ declined comment at press time, saying company executives may prepare a press release on the matter at a later date. “We’re a public company, so there are a lot of levels this has to go through” before a response can be offered, she says. Headquartered in Troy, Mich., MQVP maintains that Mid-State misrepresented its non-program parts as being the same as parts covered by the “quality validation, traceability, safety and warranty characteristics” of officially approved MQVP program parts. Mid-State was never admitted to the MQVP program, says McNulty. Mid-State was later acquired by LKQ, whose participating subsidiary was previously expelled from the MQVP program. In ruling for MQVP, the U.S. Court of Appeals for the Eighth Circuit declared that “[The] Lanham Trademark Act affords the trademark holder the right to control the quality of the goods manufactured and sold under its trademark…so MQVP may control the services sold under its service mark.” The three-judge panel has sent the case back to U.S. District Court Judge Leon Holmes for retrial. Holmes had initially ruled in favor of Mid-State/LKQ. MQVP appealed, because, according to McNulty, “he had a false understanding of trademark law, and the appeals court agreed with us.” Mid-State/LKQ subsequently filed an appeal to the appeal, which was recently denied in a one-sentence ruling returning the case to Holmes. A trial date is likely to be set in the next few months and McNulty does not anticipate a settlement prior to the court date. “I think there are a lot of hard feelings on the part of Mid-State and [others in] the industry,” says McNulty, adding that another trial will indeed be pursued if an agreement is not forthcoming. Meanwhile, the automotive industry as a whole can significantly benefit if the entire issue of certified aftermarket parts is amicably settled and a program widely enacted, according to Wall Street analyst Jerry Marks of the investment newsletter AutoRetailStocks. Marks, who holds a high opinion of LKQ’s future stock-price opportunities for the investment community, has conducted extensive research into aftermarket parts certification and its impact on the marketplace. “In my opinion, what matters is that the aftermarket [generic parts] industry move in some direction toward certification and/or standardization verification,” says Marks. “The folks at MQVP argue that they do the best job because of their ‘cradle to grave’ tracking approach. But they are not the only ones.” Marks suggests that CAPA (the Certified Automotive Parts Association), the vehicle manufacturers themselves or other respected industry representatives unite to implement a suitable certification program that everyone can agree upon. “It actually seems to make the most sense to me that it be done by some non-profit organization that is sponsored by all of the insurance companies and automakers,” says Marks. “I have not found many body shops eager to use alternative [particularly generic] parts. So it is a bit misleading for me to say ‘force repair shops to use more costly new OEM parts.’ But there is a price advantage of alternative parts, anywhere from 30 percent to 50 percent. [However,] body shops price from cost. So they are not really sensitive to pricing, and more determine their parts procurement [who and where they get their parts from] on availability, deliverability and reliability [quality].” Consumers usually are immune to pricing, says Marks, because it is the insurance company that has to pay for the repair (although they pay for it in the end with their insurance premiums). “I have argued this dynamic led to a rather high cost proposition to repair the vehicle [because of excessive parts prices],” says Marks. “But now insurance companies that see the lower cost potential are encouraging the repair shops to use more alternative parts. And this is what I have been a big fan of. Up until the last five or ten years, insurance companies [who do care about price] had little control over where parts were procured from and what type of parts were used.” Marks adds, “As a result, you ended up with the majority of these parts being ‘new OEM’ parts [around 70 percent of all collision work]. I therefore have felt the insurance companies’ DRP programs are now allowing them to become the voice of the consumer [as they control mass volumes of business] and lower the overall cost of the repair. And this is why I have been such a proponent of the shift from new OEM parts to alternative parts.” |
