Monday, 27 August 2012 15:51

PARTS ACT Heard in House of Representatives

The House Judiciary Intellectual Property Subcommittee heard testimony on Aug. 1 regarding the Promoting Automotive Repair Trade and Sales (PARTS) Act, which is carried by California Reps Darrell Issa (R) and Zoe Lofgren (D).

H.R. 3889 is designed to significantly reduce the time allowed to carmakers for design patent protection on collision parts from 14 years to just 2.5 years.

Supporters of PARTS say the measure would expand consumer choices and cut costs paid by insurers on collision repair parts, a dubious benefit according to those opposed to the legislation who warn of a slippery slope that would stifle innovation by inhibiting patent protection.

“Competition is the hallmark of our free market system,” Issa said. “For decades Americans have been used to having choice when it comes to the component parts that they use to repair their vehicles after an automobile accident. My bill ensures that this choice will remain intact.” Issa is himself the holder of some dozen automotive patents, largely related to his family’s car alarm business.

“The PARTS Act is intended only to deal with auto collision repair [parts]. In recent years, auto companies have been increasingly seeking design patents on these parts which creates a 14 year window of exclusivity. The PARTS Act does not deal with interior parts, the engine, transmission or undercarriage, parts covered by utility patents,” Rep. Issa said. “This difference is important because utility patents are generally what we associate with the invention or discovery of a new and useful process or machine. Design patents, on the other hand, are generally granted to those who invent a new, original and ornamental design for an item, the underlying invention is not new, only its appearance,” Issa added.

Insurers generally support the measure.

W. Neal Menefee, President and CEO of Rockingham Group, testified on behalf of National Association of Mutual Insurance Companies (NAMIC), the Property Casualty Insurers Association of America (PCI), and the Quality Parts Coalition (QPC), a group supported by aftermarket parts manufacturers and suppliers.

“Consumers benefit from the lower costs created by the competition of alternative suppliers of collision repair parts,” said Menefee. “However, some car companies appear to have formulated a new business strategy to eliminate competition and expand their already dominant share of the market by obtaining 14-year design patents on their collision parts and enforcing them against alternative suppliers.”

“At its core, this is a consumer issue; the costs of auto body repair are borne by consumers, either reflected in their insurance costs, or directly when they pay for repairs themselves,” said Menefee.

Kelly K. Burris, a patent attorney and adjunct professor of intellectual property law at Thomas M. Cooley Law School testified against the measure.

“From a practical perspective, the proposed legislation will not accomplish its objective because I think most consumers can agree that there is serious doubt that our insurance premiums will actually be reduced,” Burris testified.

“And on the topic of trademarks or trade dress, non-OEM parts will likely be lower quality and present safety risks without any controls on their specifications. In fact, testing has shown that non-OEM parts do not perform as they should and do present safety risks. Even the Chief Research Officer for the Insurance Institute for Highway Safety (IIHS) acknowledged that ‘You can’t willy nilly change those parts, because the system won’t work the way it was designed.’ And when I asked my students about this proposed legislation, that was one of the first responses, that their personal experience involved inferior replacement parts, and that they know now to ask for OEM parts.

Burrus continued, “What sub-standard non-OEM parts translates to for the brand owners, such as Ford, Chrysler, and GM, is a tarnishment of their image because the replacement part is presumed to be made by the OEM once the vehicle is back on the road. When the plastic is crazing or the chrome is rusting, consumers will likely think that the OEM does not make quality vehicles. And when the air bag does not deploy because a cheap imitation bumper beam was used in a repair, consumers will also conclude that the OEM does not make safe vehicles.

Jack Gillis testifying on behalf of the Consumer Federation of America, Advocates for Highway and Auto Safety, the Center for Auto Safety, Consumers Union (the policy and advocacy arm of Consumer Reports), and Public Citizen, approached the subject of automobile safety from a different perspective. “On the safety side, tragically, as the cost of needed repair parts rises, many consumers will be forced to forgo or delay needed repairs, leaving them with a vehicle that may not offer needed safety. Delaying or ignoring the replacement of a head light, side mirror, or brake light could have serious safety implications. Consumers with low incomes, seniors on fixed incomes and those consumers who pay for crash repairs out of their own pockets may not be able to afford needed repairs.

Gillis said he was not representing the Certified Automotive Parts Association (CAPA)—where he is executive director—at this meeting, but perhaps hinted at the need for aftermarket parts certification programs when he said, “The consumer organizations supporting this effort do so with the insistence that all parts, whether they be service parts sold by the car companies or parts made and sold by independent companies, must not compromise the integrity or safety of the vehicle. Not only do consumers have the right to competition, but they have the right to safe and high quality competitive parts.”

The committee did not take a vote on the measure.

 

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