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Tuesday, 31 January 2006 17:00

ITC institutes investigation on aftermarket parts

The U.S. International Trade Commission (ITC) has voted to institute an investigation of certain automotive parts designed to be used for the Ford F-150 pickup truck. 

The investigation is based on a complaint filed by Ford Global Technologies, LLC, of Dearborn, Michigan, in December 2005. The complaint alleges violations of section 337 of the Tariff Act of 1930 in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain automotive parts that infringe patents owned by Ford.

The notice, which names several Taiwan manufacturers and U.S. distributors, including Keystone Automotive Industries, involves 14 design patents for the 2004 model year F-150 Ford truck covering its grilles, head lamps, bumpers, bumper lower valences, hoods, fenders, side view mirrors and tail lamps. Ford is seeking a general exclusion order preventing the importation of these parts into the U.S.

"This legal initiative represents an ongoing campaign by original equipment manufacturers to deny consumers an alternative product for automotive collision repair. This case could have far reaching consequences beyond just the automotive industry and we intend to vigorously defend our right to distribute aftermarket parts," said Richard Keister, president and chief executive officer of Keystone.

The matter will be heard by an ITC administrative law judge, probably in the late summer or early fall of 2006, with an opinion expected by the end of the year. The judge's ruling is subject to review by the ITC, then to a 60-day Presidential review period and ultimately an appeal may be lodged with the U.S. Circuit Court of Appeals for the Federal Circuit.

To date, Keystone's sales of these parts have been minimal, but as the design for the 2004 model is incorporated into later year models of the F-150 and these trucks have been on the road longer, the sale of aftermarket replacement parts will increase substantially. If the ITC were to uphold each of the 14 design patents in question, it is not anticipated that the aggregate sales of these parts over time would be materially adverse to the financial condition or results of operations of Keystone, according to the company.

However, depending upon the nature and extent of any adverse ruling, other car manufacturers may attempt to assert similar allegations based upon design patents on a significant number of parts for several of its models, which over time could have a material adverse impact on the entire aftermarket parts industry.

In May 2005, Ford filed a similar complaint with the ITC involving a design patent on its Expedition grille. A notice of investigation was issued by the ITC but was promptly dismissed after Keystone advised Ford and the investigative staff of the ITC that the design had been published more than one year before Ford had applied for the design patent.

 

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