A federal judge in North Carolina awarded Hyundai Motor America and Hyundai Motor Company a $5 million judgment against a Miami-based company accused of infringing Hyundai’s trademarks through the sale of illegal gray market service and collision automotive parts. In addition to monetary remedies covering Hyundai’s compensatory damages, statutory damages, enhanced damages, and attorneys’ fees and costs, the judgment also awarded Hyundai a permanent injunction against the defendant, Direct Technologies International, Inc. (DTI).

The multi-million dollar judgment stems from Hyundai’s federal trademark lawsuit against DTI, in which Hyundai claimed that DTI was guilty of importing Hyundai-branded service and collision parts intended for sale and use in foreign countries and palming off those parts as if they were Hyundai Genuine Parts sourced through Hyundai’s U.S. authorized chain of distribution. Despite superficial similarities in the appearance of DTI’s non-genuine parts, expert analysis in the case revealed that many of DTI’s parts were counterfeits or defective parts that were sourced from unscrupulous trading companies in the Middle East, Vietnam, and Russia.

In the lawsuit, DTI admitted that its parts were obtained from trading companies outside the U.S. and did not know where those companies were obtaining the parts. Virtually all of DTI’s parts came in containers with identifying labels removed to avoid detection.

In 2016, one of DTI’s suppliers was criminally investigated by law enforcement and prosecutors in Dubai, United Arab Emirates for alleged counterfeiting of Hyundai replacement parts. The unknown supply channels for companies like DTI poses a serious risk to the consuming public which expects Hyundai-branded replacement parts sold in the U.S. to be approved by Hyundai Motor America and backed by its parts warranty.

“This case is a win for Hyundai owners who want peace of mind that Hyundai-branded parts used on their cars are approved by Hyundai Motor America and have gone through its quality control,” said Barry Ratzlaff, chief customer officer, Hyundai Motor America. “These days, it is easy for owners and even dealers to be confused by the sales tactics of gray market parts sellers. The internet is filled with examples of listings that appear to be for Hyundai Genuine Parts, but in reality, those parts are not coming from Hyundai Motor America and are subject to unsecure supply chains without appropriate safeguards against introducing counterfeit, reject, and defective parts. Especially in the context of collision parts, we are seeing clever ways of deceiving customers and body shops by companies that describe their non-genuine parts as ‘optional OE’ or ‘OEM surplus.’ If the deal looks too good to be true, it is probably an indication to look carefully at whether the parts are truly Hyundai Genuine Parts sold by an authorized Hyundai dealer and backed by Hyundai in the U.S.”

The parts sold by DTI did not come with a Hyundai warranty and were never authorized for sale and use on Hyundai vehicles in the U.S. As such, Hyundai argued that any failures of DTI’s parts would not be covered by the Hyundai parts warranty nor would damage to another vehicle component be covered by the Hyundai vehicle warranties. DTI argued it provided disclaimers regarding its parts, but evidence in the case revealed that DTI solicited parts managers with offers of “genuine original” Hyundai parts covered by Hyundai’s warranty.

Addressing the safety concerns and consumer confusion caused by gray market and counterfeit parts sellers has been a growing focus for Hyundai. In 2016, Hyundai Motor America informed vehicle owners of the dangers of counterfeit airbags bearing the company’s trademarks, which during crash tests failed to perform the critical function of saving lives in an accident. Since then, Hyundai has partnered with the Automotive Anti-Counterfeiting Council (A2C2), through Mobis Parts America, to increase consumer awareness regarding counterfeit automotive parts and operations. In order to better assist the public and dealers concerned about non-genuine parts, Hyundai Motor America has a Brand Protection team that can be reached at BrandProtection@hmausa.com.

Hyundai’s victory in federal court is the first component of the company’s win against DTI, and a parallel investigation with the U.S. International Trade Commission (ITC) in Washington, D.C. is also expected to conclude in Hyundai’s favor. The ITC case by Hyundai is the first of its kind where a U.S. automaker has sought an exclusion order against a gray market parts seller and its foreign suppliers suspected of infringing federal trademarks. Hyundai expects the ITC to issue an exclusion order against DTI and its suppliers, and following that order, Hyundai will work with U.S. Customs on enforcement to stop trademark infringing service and collision parts at the nation’s borders and ports.