    [House Hearing, 112 Congress]
    [From the U.S. Government Publishing Office]

                      PROMOTING AUTOMOTIVE REPAIR, TRADE,
                             AND SALES (PARTS) ACT

    =======================================================================

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                             INTELLECTUAL PROPERTY,
                         COMPETITION, AND THE INTERNET

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                       ON

                                   H.R. 3889

                                   __________

                                 AUGUST 1, 2012

                                   __________

                               Serial No. 112-144

                                   __________

             Printed for the use of the Committee on the Judiciary

          Available via the World Wide Web: http://judiciary.house.gov

                                   ----------
                             U.S. GOVERNMENT PRINTING OFFICE

    75-385 PDF                       WASHINGTON : 2012

    For sale by the Superintendent of Documents, U.S. Government Printing
    Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
    DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
    Washington, DC 20402-0001

                           COMMITTEE ON THE JUDICIARY

                          LAMAR SMITH, Texas, Chairman
    F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
        Wisconsin                        HOWARD L. BERMAN, California
    HOWARD COBLE, North Carolina         JERROLD NADLER, New York
    ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT,
    BOB GOODLATTE, Virginia                  Virginia
    DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
    STEVE CHABOT, Ohio                   ZOE LOFGREN, California
    DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
    MIKE PENCE, Indiana                  MAXINE WATERS, California
    J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
    STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
    TRENT FRANKS, Arizona                  Georgia
    LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
    JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
    TED POE, Texas                       JUDY CHU, California
    JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
    TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
    TOM MARINO, Pennsylvania             JARED POLIS, Colorado
    TREY GOWDY, South Carolina
    DENNIS ROSS, Florida
    SANDY ADAMS, Florida
    BEN QUAYLE, Arizona
    MARK AMODEI, Nevada

               Richard Hertling, Staff Director and Chief Counsel
           Perry Apelbaum, Minority Staff Director and Chief Counsel
                                     ------

      Subcommittee on Intellectual Property, Competition, and the Internet

                       BOB GOODLATTE, Virginia, Chairman

                       BEN QUAYLE, Arizona, Vice-Chairman

    F. JAMES SENSENBRENNER, Jr.,         MELVIN L. WATT, North Carolina
    Wisconsin                            JOHN CONYERS, Jr., Michigan
    HOWARD COBLE, North Carolina         HOWARD L. BERMAN, California
    STEVE CHABOT, Ohio                   JUDY CHU, California
    DARRELL E. ISSA, California          TED DEUTCH, Florida
    MIKE PENCE, Indiana                  LINDA T. SANCHEZ, California
    JIM JORDAN, Ohio                     JERROLD NADLER, New York
    TED POE, Texas                       ZOE LOFGREN, California
    JASON CHAFFETZ, Utah                 SHEILA JACKSON LEE, Texas
    TIM GRIFFIN, Arkansas                MAXINE WATERS, California
    TOM MARINO, Pennsylvania             HENRY C. ``HANK'' JOHNSON, Jr.,
    SANDY ADAMS, Florida                   Georgia
    MARK AMODEI, Nevada

                         Blaine Merritt, Chief Counsel

                       Stephanie Moore, Minority Counsel

                                C O N T E N T S

                                  ----------

                                 AUGUST 1, 2012

                                                                       Page

                                    THE BILL

    H.R. 3889, the ``Promoting Automotive Repair, Trade, and Sales
      (PARTS) Act''..................................................     3

                               OPENING STATEMENTS

    The Honorable Bob Goodlatte, a Representative in Congress from
      the State of Virginia, and Chairman, Subcommittee on
      Intellectual Property, Competition, and the Internet...........     1
    The Honorable Melvin L. Watt, a Representative in Congress from
      the State of North Carolina, and Ranking Member, Subcommittee
      on Intellectual Property, Competition, and the Internet........     7
    The Honorable Darrell E. Issa, a Representative in Congress from
      the State of California, and Member, Subcommittee on
      Intellectual Property, Competition, and the Internet...........     9
    The Honorable Zoe Lofgren, a Representative in Congress from the
      State of California, and Member, Subcommittee on Intellectual
      Property, Competition, and the Internet........................    10

                                   WITNESSES

    W. Neal Menefee, President and Chief Executive Officer,
      Rockingham Group
      Oral Testimony.................................................    12
      Prepared Statement.............................................    15
    Kelly K. Burris, Shareholder and Chair, Green Technology Practice
      Group, Brinks, Hofer, Gilson & Lione
      Oral Testimony.................................................    21
      Prepared Statement.............................................    23
    Jack Gillis, Director of Public Affairs, Consumer Federation of
      America (CFA)
      Oral Testimony.................................................    30
      Prepared Statement.............................................    31

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Material submitted by the Honorable Melvin L. Watt, a
      Representative in Congress from the State of North Carolina,
      and Ranking Member, Subcommittee on Intellectual Property,
      Competition, and the Internet
        Letter from the Alliance of Automobile Manufacturers and
          other organizations........................................    39
        Letter from the International Property Owners Association....    59
    Material submitted by the Honorable Darrell E. Issa, a
      Representative in Congress from the State of California, and
      Member, Subcommittee on Intellectual Property, Competition, and
      the Internet...................................................    49

                                    APPENDIX
                   Material Submitted for the Hearing Record

    Response to Questions for the Record from Kelly K. Burris,
      Shareholder and Chair, Green Technology Practice Group, Brinks,
      Hofer, Gilson & Lione..........................................    64
    Letter from Jack Gillis, Director of Public Affairs, the Consumer
      Federation of America (CFA)....................................    66
    Material submitted by Jack Gillis, Director of Public Affairs,
      the Consumer Federation of America (CFA).......................    68
    Letter from Aaron M. Lowe, Vice President, Government Affairs,
      the Automotive Aftermarket Industry Association (AAIA).........    78
    Letter from Kathy R. Van Kleeck, Sr. Vice President, Government
      Relations, Motorcycle Industry Council.........................    80

           PROMOTING AUTOMOTIVE REPAIR, TRADE, AND SALES (PARTS) ACT

                                  ----------

                           WEDNESDAY, AUGUST 1, 2012

                  House of Representatives,
             Subcommittee on Intellectual Property,
                         Competition, and the Internet,
                                    Committee on the Judiciary,
                                                        Washington, DC.

        The Subcommittee met, pursuant to call, at 2:37 p.m., in
    room 2141, Rayburn Office Building, the Honorable Bob Goodlatte
    (Chairman of the Subcommittee) presiding.
        Present: Representatives Goodlatte, Quayle, Coble, Chabot,
    Issa, Jordan, Poe, Chaffetz, Griffin, Amodei, Watt, Chu,
    Lofgren, Jackson Lee, and Waters.
        Staff present: (Majority) Blaine Merritt, Subcommittee
    Chief Counsel; Olivia Lee, Clerk; and (Minority) Stephanie
    Moore, Subcommittee Chief Counsel.
        Mr. Goodlatte. Good afternoon. This hearing of the
    Subcommittee on Intellectual Property, Competition, and the
    Internet of the Committee on the Judiciary will come to order.
    And I will begin with my opening statemen.
        Today the Subcommittee will consider the issue of patent
    design protection to determine whether amendments should be
    made to the law to limit protection for component parts of
    automobiles.
        Chapter 16 of the Patent Act allows an inventor a design
    patent for any new, original, and ornamental design for an
    article of manufacture. However, the chief limitation on the
    patentability of designs is that they must be primarily
    ornamental in character. If the design is dictated by the
    performance of the article, then it is judged primarily
    functional and ineligible for design patent protection.
        Combined with the cost of patenting, this explains why some
    inventors, including automobile companies, have traditionally
    filed for relatively few design patents. However, auto
    manufacturers assert that automotive suppliers lose upwards of
    $12 billion annually to counterfeit products. And at least one
    prominent car company invests $100 million or more in the
    design of each new car line.
        It is understandable that car manufacturers want to reap a
    return on their investments, and they have attempted this in a
    variety of ways. For one, in the past, manufacturers have
    argued for Congress to amend the Patent Act or the copyright
    design statute to provide greater protection for designs.
        In addition, there has been a recent increase in the number
    of applications for design patents for individual parts of
    vehicles. This latter approach has raised the ire of those who
    work in the automotive aftermarket parts industry. Independent
    garage owners fear they will go out of business if the Patent
    Act is used by the auto manufacturers to obtain design patent
    protection for more and more individual parts rather than for
    the design of the car as a whole. Insurers worry that the cost
    of insuring vehicles will increase for consumers if
    manufacturers aggressively assert these rights because there
    will be less competition for replacement parts.
        The aftermarket parts industry argues that we cannot afford
    to maintain the legislative status quo on patent designs. It
    argues the auto manufacturers are filing more design patents
    under current law, meaning the independent garages could lose a
    war of attrition.
        Representative Issa has introduced H.R. 3889, better known
    as the PARTS Act. While the bill does not prevent auto makers
    from patenting designs on replacement parts, it greatly reduces
    the time period during which they may sue competitors for
    patent infringement from 14 years to 30 months.
        Today the Subcommittee will weigh these competing interests
    and the consequences of establishing the precedent of creating
    an exemption to design patent law. I remain open-minded on this
    issue and look forward to the testimony that we will receive.
        [The bill, H.R. 3889, follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Mr. Goodlatte. And it is now my pleasure to recognize the
    Ranking Member, the gentleman from North Carolina, Mr. Watt.
        Mr. Watt. Thank you, Mr. Chairman. And I managed to mess up
    my microphone here. Either it is an ornament, or a design, or--
    -- [Laughter.]
        Functional issue. But regardless, I have to hold it up
    because I broke it. So, I see how he was such an efficient
    automobile thief. [Laughter.]
        Mr. Issa. You know, from anyone else, I might think you
    were disparaging the Member. [Laughter.]
        Mr. Watt. That is an inside joke, you all.
        Well, I thank the Chairman for holding the hearing. Today
    marks at least the fourth consecutive Congress that we have
    considered the scope of design protection under our patent
    laws. Design patents protect the new, unique, and ornamental
    designs of industrial and consumer products. Design patents
    differ from utility patents. While utility patents provide
    exclusive rights over new and useful inventions, design patents
    provide a fundamentally different protection. In laymen's
    terms, design patents protect the style and look of consumer
    products.
        Like all patents, they reward creativity by conferring upon
    the creator the exclusive right to market or otherwise control
    commercialization of his or her design for a 14-year period.
    This reward allows the creator to achieve a return on his or
    her investment, and incentivizes further design innovation.
        The Department of Justice and the Federal Trade Commission
    have noted that intellectual property and antitrust laws are
    ``complementary bodies of law that work together to bring
    innovation to consumers.''
        The exclusive rights granted to intellectual property
    holders are not presumed by the enforcement agencies to create
    monopolies because consumers may have alternatives or other
    substitutes in the market.
        The PARTS Act, the subject of today's hearing, in effect
    limits the auto makers' exclusive right to their design to, at
    most, 30 months, depending upon when the 30-month clock begins,
    perhaps even less time to enjoy the exclusivity of a design
    patent.
        The proponents and opponents of the proposed modifications
    to the protections afforded to automobile aftermarket parts
    under current law have fundamentally different views of the
    market dynamics in the replacement parts industries.
        Supporters, and I am sure we will hear from Mr. Issa and
    Ms. Lofgren shortly, so they will correct me if I am
    misinterpreting what they are saying. Supporters of the bill
    tend to believe that automobile manufacturers' ability to
    assert their design patent rights in the aftermarket may
    establish a monopoly in that secondary market.
        Under this view, the original equipment manufacturer may
    corner the secondary market for the 14-year life of the patent
    by excluding all others, exacting high licensing fees, and
    providing limited choices to the consumer. It is estimated that
    consumers keep their cars between 9 and 11 years, so the 14-
    year patent term engulfs the entire period during which there
    would be any demand for replacement parts.
        Most supporters would have automobile manufacturers recoup
    their investment in the primary market when they first sell
    their vehicles, leaving the secondary market more competitive.
        The opponents, on the other hand, argue that they invest
    massive sums of money into research and development, and are
    entitled to the rewards that the patent system provides.
    Especially in light of advancements in technology that now
    allow and facilitate immediate copying of patented designs and
    reproduction at lower costs often outside the United States.
    Automobile manufacturers maintain that these free riders, as
    they call them, will retard innovation while providing
    consumers with substandard quality, substandard parts.
        The equities involved on both sides of this issue are
    seemingly compelling, yet necessarily self-interested. I think
    what is missing from this debate is input from the government,
    both from a domestic and international perspective.
        Recently in February of this year, the Department of
    Justice announced that it had uncovered international price
    fixings in the aftermarket industry for auto lights, which
    could be covered by design patents. The indictments and guilty
    pleas give rise to some speculation whether consumers are
    victims of anti-competitive practices within the aftermarket
    industry generally, and whether the alleged cost savings that
    would result from opening the market to none original equipment
    manufacturers' parts will ever reach the consumer.
        I am also mindful of ongoing efforts to enact legislation
    to implement the Patent Law Treaty and the Geneva Act of the
    Hague Agreement regarding design patents. Both were signed
    during the Clinton Administration and ratified during the Bush
    Administration.
        The proposed Hague Agreement Implementation Act makes two
    substantive changes in United States' designed patent law,
    including extending the patent term for designs from 14 to 15
    years after the grant. Director Kappos is on record urging the
    Congress to move quickly to implement these treaties.
        Therefore, it concerns me that this bill may take us in the
    opposite direction, limiting rather than strengthening the
    design protections of a U.S. industry. So while I come to this
    issue with an open mind, I believe that in addition to hearing
    from the affected stakeholders, it would be useful at some
    point to hear the government officials who deal with these
    issues on an ongoing basis.
        And with that, Mr. Chairman, I yield back. I have not taken
    a position one way or another, but that is what hearings are
    for.
        Mr. Goodlatte. I thank the gentleman. In part, to allow the
    gentleman to defend his reputation and, more importantly, to
    allow the gentleman, who is the author of the legislation that
    is the subject of the hearing, I will recognize Mr. Issa for an
    opening statement for 5 minutes. And then after that, I will
    recognize the gentlewoman from California, Ms. Lofgren, for an
    opening statement. And then we will ask that all other opening
    statements be made a part of the record.
        So without further ado, the gentleman from California is
    recognized for 5 minutes.
        Mr. Issa. Thank you, Mr. Chairman. As in the Constitution
    to say ``To promote the progress of science and useful arts by
    securing for a limited times to authors and inventors the
    exclusive right to their respective writings and discoveries.''
        I have read that so many times before I came to Congress
    while I was inventing, while I was patenting both utility
    patents and design patents. And I like most people who have
    design patents knew that, in fact, my design patents were
    ornamental. They were limited. That anyone could take a box
    that contained one of my security products and take off a few
    ornamental lines that were put on that represented both a
    patentable item and perhaps even a trade dress in time. But
    they could produce the same box. It just would not be the same,
    but the screws would line up. Nuts and bolts would match. The
    PC board could fit exactly the way it was. In other words, in
    form, fit, and function, they could totally produce a
    replacement part. And in some cases, people did.
        That is what we are talking about here today. We are
    talking about a recognition that first, as my colleague so
    aptly said as he was stating both sides of the issue, and I
    appreciate that. From our side, this is narrow. This is
    limited. It relates only to the outside of an automobile. It is
    necessitated only by what appears to be, in my opinion,
    expansion beyond the intent of these ornamental patents to try
    to create effectively a 14-year utility patent on the entire
    automobile.
        Now that is not new. The auto companies have formally tried
    to do that in the past, and I am a complete supporter that a
    part which is confusingly similar, a part that bears the trade
    name of the manufacturer, a part that would imply a given level
    of quality predictability or originalness, should, in fact, not
    be what we allow the aftermarket to produce.
        But when you consider the balance the Constitution
    intended, which included the, if you will, a long-established
    for sale concept, when I buy an automobile and then somebody
    bangs it up in the parking lot, I own that fender. I can repair
    that fender to an inferior level and nobody has a gripe. Why is
    it I cannot buy a form, fit, and function identical part and
    buy it on a competitive market? The answer is sometimes you
    can, sometimes you cannot. It depends on who is suing whom. Who
    has gone to the ITC to enforce in a way that was not enforced
    for the first 100 years of the auto company this replacement
    parts right.
        That is the reason that bumpers, fenders, side mirrors, and
    door panels are, in fact, the subject of this legislation. Now
    I will tell you, Mr. Chairman, the aftermarket parts
    manufacturers would like this to be shorter or flat to not at
    all. We tried to balance that, and there is no magic number. We
    found a number that seemed to allow the auto companies a launch
    period. And by the way, this would be a launch period in which
    if every model year they changed their fender, they would enjoy
    yet a new exclusive period.
        But we tried to have it short enough that in a relatively
    short period of time, as accidents happen, collisions, rust
    out, and other damage, that they would be able to buy a
    replacement part on a competitive market. Even if they could
    not buy one in a competitive market in some cases, the auto
    companies would tend to price their product based on a
    hypothetical competitive market. We believe that that limits
    the antitrust characteristic of parts pricing.
        Additionally, a healthy aftermarket means that when you get
    to end of life, when that 10-year period is over and the patent
    is still in effect, but the auto company, in the case of a
    small production or, let us say, a Saturn, no longer wants to
    produce those products or they are no longer available, there
    is a healthy aftermarket to provide that.
        People in Europe already enjoy some of these considerations
    and for good reason. The consumer has a balance, and one of
    those balances is a reasonable expectation that a competitive
    market exists. A high competitive market exists for the
    automobile, but without legislation like this, over time, in
    the ITC particularly, I believe that there will be an erosion
    of the competitive market and the availability of alternatives
    when that car is hit in the parking lot or hit on the highway.
        And so, Mr. Chairman, I appreciate the unusual opportunity
    to be able to introduce the bill and an opening statement. I
    look forward to working with people on both sides of the aisle,
    such as Congressman Lofgren and others, to ensure that we make
    sure that this is limited, narrow, and dealing only with the
    likely parts that get hurt on an automobile in everyday wear
    and tear in which we would much rather have a competitive
    replacement part available than have a consumer unable to fix
    that part properly, and yet unable to afford a replacement
    part.
        I thank the Chairman and yield back.
        Mr. Goodlatte. I thank the gentleman. The gentlewoman from
    California, Ms. Lofgren, is recognized for an opening
    statement.
        Ms. Lofgren. Thank you, Mr. Chairman. And I am happy to be
    a co-sponsor of this bill with my friend, Congressman Issa. In
    a previous Congress, I had a bill that took a slightly
    different approach. Basically, that approach protected the
    design from being copied by competing car companies, but also
    allowed for the independent production of parts when they were
    used solely as replacement repair parts. And, as I think Mr.
    Issa has noted, that bill, although I thought a good approach,
    was not successful, did not become a law.
        It is worth noting that several European countries and
    Australia have actually enacted a repair clause provision in
    their laws. And I think we can take a look at what has happened
    there and see that there is real benefit to consumers, and I do
    not think real damage to automobile manufacturers, which none
    of want to do.
        This bill that Congressman Issa and I are promoting is a
    different approach. It limits the protection period to allow
    for competition when it comes to the aftermarket scene. And why
    would we do this?
        Well, the Consumer Federation of America, the Center for
    Auto Safety, the Consumers Union, and the policy and advocacy
    arm of Consumer Reports, are all in favor of this bill. And I
    think the reason why is that competition will lower costs for
    consumers. Now that is important in a time when the economy is
    tough. But it is also important in some other ways.
        Right now, the elimination of competition from independent
    brand crash repair parts is estimated to cost automobile owners
    about a billion dollars a year. That is a lot of money. Because
    of the high cost, there are individuals who actually do not do
    the kind of repairs that they ought to do. And that increases
    the safety risk to motors.
        I agree with Mr. Issa that the time frame put in the bill
    was our best guess. You could argue for more. You could argue
    for less. But I think that this is calculated to provide for
    some relief for consumers when it comes to repair of
    automobiles while protecting completely the design when we have
    the sale of automobiles. And that is part of the genius of the
    American auto industry.
        I will not go on at great length, Mr. Chairman. I am
    appreciative that we are having this hearing, and I am hopeful
    that we can actually move this bill because I think it will
    help promote safety. It will promote competition. And it will
    also save consumers a great deal of money while preserving the
    patent protection that auto manufacturers deserve for their
    design when they sell automobiles.
        And with that, Mr. Chairman, I would yield back.
        Mr. Goodlatte. I thank the gentlewoman. And without
    objection, other Members' opening statements will be made a
    part of the record.
        We have a distinguished panel of witnesses today. And as is
    the custom of this Subcommittee, before we begin, I would like
    to swear in the witnesses. If you all would please stand.
        [Witnesses sworn.]
        Mr. Goodlatte. Thank you, and please be seated.
        Each of the witnesses' written statements will be made a
    part of the record in its entirety. And I ask each witness to
    summarize their testimony in 5 minutes or less. To help you
    stay within that time, there is a timing light on your table.
    When the light switches from green to yellow, you will have 1
    minute to conclude your testimony. When the light turns red, it
    signals that the witness' 5 minutes have expired.
        Our first witness is a constituent and friend of mine, Mr.
    Neal Menefee, President and CEO of Rockingham Group Insurance
    Company in Harrisonburg, Virginia. He will be testifying on
    behalf of the National Association of Mutual Insurance
    Companies and the Quality Parts Coalition.
        Prior to joining Rockingham, Mr. Menefee spent 15 years
    with Exxon Company USA in their marketing and corporate
    planning departments. He also serves on a number of boards for
    various business, civic, and charitable organizations. He
    received a B.S. in Electrical Engineering with distinction from
    Virginia Tech, and his MBA from the University of Pittsburgh.
        Our next witness is Kelly Burris, shareholder of the Ann
    Arbor law firm Brinks, Hofer, Gilson, and Lione. She chairs the
    Brinks' Green Technology Practice Group and focuses on the
    preparation and prosecution of U.S. and foreign patent
    applications in the mechanical, material science, and
    electrical arts.
        Before practicing law, Ms. Burris spent more than 11 years
    in the aerospace industry with McDonnell Douglas and Boeing. A
    patent holder in the area of fiber optics, she has taught IP
    law and published widely in the field. Ms. Burris received her
    B.S. in Aeronautical Engineering from Western Michigan
    University, her M.S. in Material Science and Engineering from
    Washington University, and her J.D. from St. Louis University.
        Our final witness is Jack Gillis, Director of Public
    Affairs with the Consumer Federation of America, the Nation's
    largest consumer advocacy organization. This is the third time
    he has testified before us on the subject of automotive design
    patents.
        Mr. Gillis is the author, co-author, and editor of more
    than 60 books, including The Car Book, The Car Repair Book, and
    The Armchair Mechanic. In addition, he has served as a
    contributing consumer correspondent for the Today Show.
        Mr. Gillis received his B.A. in English from the University
    of Notre Dame and his MBA in Marketing and Consumer Behavior
    from the George Washington University.
        I want to welcome you all, and we will begin. And a special
    welcome to Mr. Menefee. You may want to turn that microphone on
    and keep it close.

              TESTIMONY OF W. NEAL MENEFEE, PRESIDENT AND
               CHIEF EXECUTIVE OFFICER, ROCKINGHAM GROUP

        Mr. Menefee. The green light, thank you. Good afternoon,
    Chairman Goodlatte, Ranking Member Watt, and other esteemed
    Subcommittee Members. I am Neal Menefee, the President and CEO
    of the Rockingham Group Insurance Companies whose home office
    is in Harrisonburg, Virginia. The group currently underwrites
    and markets property and casualty insurance products, including
    auto in Virginia and Pennsylvania. And we have annual revenues
    in excess of $40 million.
        On behalf of the National Association of Mutual Insurance
    Companies, the Property Casualty Insurers Association of
    America, and the Quality Parts Coalition, I would like to thank
    the Subcommittee for its attention to this very important
    issue.
        To begin, I would start by asking you to consider whether
    you or a family member has ever been in an auto accident or had
    to repair your car. I am sorry to hear that if that is the
    case, but whether you knew it or not, you have benefitted from
    competition in the collision repair parts marketplace,
    competition that has existed for decades between car companies
    and alternative suppliers of such parts.
        To be clear, we are talking about collision repair parts,
    which are the cosmetic exterior parts of an automobile, such as
    fenders, quarter panels, bumper covers, and grills. Generally
    speaking, these are not structural or safety-related parts.
        Although the car companies have already captured two-third
    of the market for collision repair parts, the competition that
    alternative suppliers provide is still very important to
    consumers. Alternatively supplied collision repair parts
    typically are 26 to 50 percent less expensive than the car
    company parts. But even if a more expensive car company part is
    used, the mere existence of competition puts downward pressure
    on car company prices.
        The estimated total benefit to consumers from the
    availability of competitive alternatives is upwards of $2.4
    billion per year. It is a great example of the free market at
    work for the benefit of consumers.
        Unfortunately, some car companies appear to want to disrupt
    this well-functioning market and expand their already-dominant
    share. Beginning around 2003, they began obtaining 14-year
    design patents, not just on the overall design, but also under
    individual collision repair parts, and then enforcing those
    patents against alternative suppliers. This is a significant
    departure from the car companies' past behavior.
        I would point out that the purpose of such collision parts
    is to restore the vehicle's original pre-accident appearance.
    Naturally, that is what consumers demand, and it is what
    insurance policies provide for. State insurance laws require
    that alternatively supplied collision repair parts be of like
    kind and quality in form, fit, and finish to car company parts.
    Today, alternative suppliers are in the untenable position of
    complying with State law and meeting consumer demand, while
    simultaneously facing allegations of design patent infringement
    by the car companies. These patents are simply being used to
    eliminate competition and facilitate a monopoly on cosmetic
    replacement parts to the detriment of consumers.
        Ultimately, the impact of such a monopoly would fall
    directly on consumers, first in the form of higher insurance
    premiums, and secondly, on consumers that pay for their own
    repairs out of pocket. Moreover, they might choose to forego
    repairs all together, leading to more rapid deterioration in
    the appreciation of their vehicles.
        Higher repair costs also meant that there is an increased
    likelihood of a vehicle being declared a total loss, compelling
    consumers to replace it, pay off a loan that may exceed its
    value, and seek financing for the purchase of replacement. In
    tough economic times like today, these kinds of added costs
    hurt consumers that much more, especially as autos age and
    depreciate.
        The PARTS Act carefully balances the car companies'
    intellectual property rights with the need to protect consumers
    by preserving competition. It would change from 14 to two and a
    half years the monopoly period during which car companies could
    block competitors from selling alternative collision repair
    parts.
        We recognize that the overall design of a car plays a
    significant role in a consumer's choice when buying a new car,
    and in the very competitive for new auto sales, car companies
    invest a lot in the overall design of a vehicle, that unique
    owning and driving experience that we all see advertised on
    television.
        The PARTS Act would not deter car companies from obtaining
    and enforcing design patents on their collision parts against
    other car companies. Therefore, the PARTS Act does nothing to
    change the incentive of the car companies to innovate as they
    continue to design their cars to compete against each other.
        We respect the investment made by car companies in
    intellectual property, but when a consumer buys a car for
    $35,000 in the showroom, puts the title in his pocket, and
    drives it off the lot, it is his property. And he has
    compensated the car company for the manufacture and for the
    overall design of the car. American consumers should not be
    surprised and forced to pay a monopoly price on a collision
    part whenever it has been damaged in an unexpected accident and
    needs repair.
        The PARTS Act addresses the problem in a properly balanced
    manner similar to how Europe and Australia have confronted
    identical concerns regarding the preservation and competition
    of things like collision repair parts.
        The cost of car ownership is already significant, and
    Americans are increasingly dollar conscious in these tough
    economic times. The PARTS Act does not mandate the use of
    alternative collision parts, nor does it have government
    facilitating new entry into the marketplace. Rather, the
    legislation would simply preserve the traditional competition
    in the sale repair part. That is what consumers deserve.
        Again, thank you for the opportunity to speak here today,
    and I look forward to answering any questions that you may
    have.
        [The prepared statement of Mr. Menefee follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Mr. Goodlatte. Thank you, Mr. Menefee.
        Ms. Burris, welcome.

      TESTIMONY OF KELLY K. BURRIS, SHAREHOLDER AND CHAIR, GREEN
        TECHNOLOGY PRACTICE GROUP, BRINKS, HOFER, GILSON & LIONE

        Ms. Burris. Chairman Goodlatte, Ranking Member Watt, and
    distinguished Members of the Subcommittee, thank you for the
    opportunity to be here today. It really is my pleasure, and it
    feels like an honor.
        I am here today in opposition to the bill from a very high
    level because I am afraid that this type of legislation could
    set a very dangerous precedent and put us on the slippery
    slope.
        If we carve out an exception for component parts for motor
    vehicles--it is not just automotive, and I will get to that. If
    we carve out this exception, who will be next? What industry
    will come to you next alleging that the parts are too
    expensive, my computer is too expensive, and asking for their
    exception to infringement as well? So that is my very high-
    level legal concern, as is many of the people in the room
    today.
        Secondly, and I think more importantly, as a design
    engineer myself, I think legislation of this nature really does
    stifle the innovation process. The patent system is there, as
    Mr. Issa, you have recognized and, Ranking Member Watt, you
    have recognized, to provide an incentive to us to be creative
    and to be innovative. That is the quid pro quo. As Abraham
    Lincoln put it, it is the fuel of interest that feeds the fire
    of ingenuity. When you remove that incentive, how can we expect
    the creativity and the innovation to continue?
        Along the lines of that innovation and creativity, if we
    look at some of the facts, we have in the United States there
    are 21 design centers, often called studios, where just the
    outside of the car is being designed. Those design studios are
    in the States of California, actually many in California, in
    Ohio, and there are studios in Michigan as well.
        These studios, in my written testimony we had 30,000 jobs,
    but some recent numbers just came in from GM. There are over
    40,000 good paying white-collar jobs for these automotive
    designers, industrial designers, working on just the appearance
    of the car. So I think legislation of this nature has a
    tendency to devalue what it is they are doing, and especially
    on the heels of the America Invents Act that was just put into
    law less than a year ago to help promote innovation in our
    country. To have legislation of this nature come on the heels
    of the AIA I think is going in the opposite direction.
        I would also like to mention that you really cannot look at
    design patents in a vacuum or in a bubble. As Mr. Issa, you
    have recognized, there is also trademark or trade dress
    protection in product configurations. As long as the consumer
    can associate that look and feel with the source of the goods.
    There is also utility patent protection on these parts as well.
    Oftentimes now they are fastened to the inner body. So in order
    for this bill to really work, you are going to have to look at
    possibly making changes to the Lanham Act and also utility
    patent infringement.
        Now turning to the language of the bill itself, it does not
    say automobiles. It says ``motor vehicles.'' Motor vehicles are
    defined under Title 49 as any vehicle that is driven or drawn
    by mechanical power, manufactured for use on our streets,
    roads, and highways. So that means it is not just automobiles.
    It is motorcycles. It is scooters. It is mopeds. It is farming
    equipment. It is tractors. It is trailers.
        Looking at motorcycles alone, Harley-Davidson owns 151
    design patents on the components of their motorcycles. I do not
    know about you guys, but I would not want the biker community
    coming after me on this one. [Laughter.]
        And there is even a--are we good, John? There is a
    gentleman here from Caterpillar that is here for the same
    reason, because they have new vehicles that they are protecting
    with design patents that they feel are threatened by this
    legislation.
        The 30-month period that is in the legislation as well is
    not 30 months from the issue date of the patent. It is 30
    months from the date of the offer for sale. You never have a
    design patent the day you offer it for sale. Pendency of design
    patents at the Patent Office is over 1 year, so at best you are
    talking about maybe a 1-year term for design patent holders.
        Let us see. I am running out of time, but I would also like
    to say that this bill is retroactive. So if you had a design
    patent 5 years ago, 10 years ago, guess what? It is done. It is
    gone. You do not have it anymore. So it reaches back.
        And I also think there are alternatives for consumers.
    There are originally equipment manufactured parts that have
    been refurbished that are available. There are parts that do
    not look exactly the same, but are interchangeable. And these
    parts can be repaired, and I look forward to that discussion
    here today.
        Thank you for the time.
        [The prepared statement of Ms. Burris follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                                       __________

        Mr. Goodlatte. Thank you, Ms. Burris.
        Mr. Gillis, welcome.

    TESTIMONY OF JACK GILLIS, DIRECTOR OF PUBLIC AFFAIRS, CONSUMER
                      FEDERATION OF AMERICA (CFA)

        Mr. Gillis. Chairman Goodlatte, Ranking Member Watt, and
    Members of the Committee----
        Mr. Goodlatte. You have the same affliction. Turn that
    microphone on.
        Mr. Gillis. Thank you very much for the opportunity. I am
    here today in addition to being a representative of the
    Consumer Federation of America, also the Advocates for Highway
    and Auto Safety, the Center for Auto Safety, Consumers Union,
    which is the policy and research arm of Consumer Reports and
    Public Citizen. And we particularly appreciate the invitation
    to be here today.
        What I would like the Committee to consider is any one of
    these experiences. You back into a pole. You sideswipe your
    car. You suddenly have someone stop in front of you, and you
    hit them. Hopefully this will not result in injuries. What it
    will result in is thousands of dollars of costs in terms of
    repairing your car.
        Why do these fender benders cost so much? One reason is
    because the parts are so expensive. Ford charges the same
    amount for a fender as Dell charges for a computer and a flat
    screen TV. You can get a two-door refrigerator from Sears for
    the same price as a grill from Toyota. And guess what? That
    two-door refrigerator, those doors are already painted and
    installed. You would have to pay someone to install the part on
    your car.
        And what is really significant is that these products,
    because of competition, have not only improved in quality, but
    they have also been reduced in price. Remember that in the
    early 1990's, the car companies came to you and asked for
    special design copyright protection on these replacement parts,
    and you emphatically said no.
        They have ignored your admonition, and there has been an
    enormous spike in the number of design patents by companies
    like Honda, Toyota, and Ford. Now unless there is something
    special about a fender on a Ford for 2009 that was not special
    on that same Ford in 2002, I think you would agree that this is
    not some newfound design patent protection issue, but a
    newfound business strategy.
        For Ford, Honda, and Toyota, and GM to come before you
    today and say that suddenly these parts are patentable when for
    years and years they were not is at the very least disingenuous
    and at the most extraordinarily costly for the American
    consumer. This is a business strategy, not a legitimate use of
    our important U.S. patent laws.
        The competition these car companies are trying to kill
    lowers prices, provides choice, and improves quality. If the
    automakers succeed in using design patents to eliminate
    competition, it will not only result in higher repair costs,
    but higher auto insurance premiums.
        On the safety side, not only was Congresswoman Lofgren
    correct in our concern about consumers not repairing parts of
    the car because they are so expensive, but let us talk about
    the safety of the parts themselves. I would like to refer to
    the very organization mentioned in one of the testimonies
    submitted by the car companies. This is from the Insurance
    Institute for Highway Safety. ``IIHS did address the issue of
    safety and determined that both in low speed damage tests and
    high speed safety crash tests that alternative parts are
    certified to be the same, in fact performed nearly
    identically.'' And I would like to submit for the record a copy
    of the IHS status report, which describes these findings.
        The most tragic irony of the lack of competition is what I
    call the auto makers' double whammy. Not only can they charge
    whatever they want for the parts we need to fix our cars, but
    when they charge so much that the car is totaled, our only
    recourse is to go back to them and buy another one of their
    products. The bottom line is that if auto makers succeed in
    eliminating competition, the cost to consumers will be
    enormous.
        We applaud Representative Issa and Lofgren for introducing
    3889. It is important to note that this is not a perfect
    solution. Representative Lofgren, as she mentioned, 2 years ago
    proposed a truly elegant solution: allow the car companies to
    patent their parts and keep their designs from being copied by
    other car companies, but allow the independent production of
    those parts when used solely to repair a car. At that time,
    powerful car company and manufacturing lobbyists crushed her
    efforts to protect consumers.
        In the fact of this intense lobbying to protect the use of
    design patents to prevent competition, H.R. 3889 represents a
    compromise. It is a step forward in helping us prevent us from
    being forced to pay unfair prices for the cars we need.
        Probably the most telling testimony submitted by the car
    companies was their suggestion that when one headlight or
    taillight gets damaged, consumers should be encouraged to buy
    both. Of course the car companies want us to replace perfectly
    good parts with their replacements. They would make millions.
    This is also why they are using the patent laws to thwart
    competition. Everyone is entitled to make a fair profit, but
    the car companies suggesting that we replace perfectly good and
    very expensive parts is way over the top.
        So CFA, the Advocates for Highway and Auto Safety, the
    Center for Auto Safety, Consumers Union, and Public Citizen
    believe that consumers need competitive crash parts. On behalf
    of these groups, I strongly urge Congress to adopt a repair
    clause to the design patent laws in order to ensure a
    competitive market with fairly-priced alternatives to expensive
    car company brand parts.
        Thank you very much, Mr. Chairman.
        [The prepared statement of Mr. Gillis follows:]
        Prepared Statement of Jack Gillis, Director of Public Affairs,
                      Consumer Federation of America (CFA)
        Chairman Goodlatte, Ranking Member Watt, and Members of the
    Subcommittee, my name is Jack Gillis, and I am Director of Public
    Affairs for the Consumer Federation of America. In addition to the
    Consumer Federation of America, I also am testifying today on behalf of
    Advocates for Highway and Auto Safety, the Center for Auto Safety,
    Consumers Union, the policy and advocacy arm of Consumer Reports, and
    Public Citizen. We are grateful for your invitation to appear today on
    an issue of tremendous importance to millions of Americans--the
    maintenance and repair of automobiles.
        Consider any of the following experiences, which happen to
    thousands of Americans each year: you back into a pole at a shopping
    mall; someone in front of you stops suddenly and your bumpers collide;
    or, you inadvertently sideswipe your car in a cramped parking lot.
    Fortunately, few of these ``fender-benders'' result in injuries, but
    they often result in shocking repair bills.
        Why are these repair bills so high? One reason is the cost of the
    parts for the needed repairs. For example, Ford charges the same price
    for a fender as Dell charges for a high speed computer and flat screen
    monitor. A simple grill for your car costs the same as a combination
    flat screen TV/DVD player. An unpainted door from Toyota costs the same
    as a Sears refrigerator. And, the refrigerator comes with two doors,
    already painted and installed! You'll typically have to pay someone
    over $500 to paint and install the Toyota door. General Motors charges
    the same price for a rubber bumper cover as Garmin charges for a full
    color GPS, programmed with directions and maps to anywhere in the
    United States. The fact is, computers, TVs, refrigerators, and GPS
    systems are cheaper and better today than five years ago for one
    reason--``competition''.
        In the early 1990s, the car companies came to Congress and asked
    for special design copyright protection on these replacement parts and
    Congress said no. Our concern today is that the car companies are now
    using design patents, not for the important and legitimate protection
    of the overall design of their vehicles, but to prevent competition
    when it comes to getting the parts we need to repair our vehicles.
        Over the past several years, there has been an enormous spike in
    the number of design patents on crash parts, which companies like
    Honda, Toyota, and Ford have received on their external crash parts.
    (See chart below.) Historically, while car companies have
    understandably received design patents on the overall design of a car,
    only recently have they begun to get patents on the individual
    replacement crash parts.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The number of design patents awarded to the major car companies on
    collision repair parts has increased dramatically since the 1990s,
    after Congress said NO to their strategy to enact legislation providing
    copyright protection for repair parts. Note 1: The term ``collision
    repair parts'' includes bezels, bumper covers, deck lids, door shells,
    fenders, fascias, front/rear grilles, header panels, headlamps, high-
    mounted brake lights, hoods, pickup beds, pickup box sides, quarter
    panels, radiator supports, side markers, side mouldings, tailgates,
    taillamps, and wheel houses as defined by the Certified Automotive
    Parts Association at www.capacertified.org Note 2: Figures shown are
    cumulative. For 2012, those figures have been ``annualized'' and are
    based on the number of design patents granted through July 20, 2012.
                                     ______

        In May of 2008, Ford filed a section 337 complaint at the
    International Trade Commission (ITC) against manufacturers and U.S.
    distributors of auto exterior repair parts on the 2005 Ford Mustang.
    This complaint followed on the heels of the previous section 337
    complaint filed by Ford relating to the Ford F-150, which resulted in
    the effective elimination of a competitive choice for seven exterior
    Ford F-150 repair parts. As a result of a court settlement in April
    2009, which ended legal actions on the Ford F-150 and Mustang, today
    the millions of F-150 and Mustang owners in the U.S. have limited
    alternative options for quality replacement collision parts. The
    settlement awarded one aftermarket competitor with a temporary,
    exclusive license to distribute aftermarket Ford parts. This comes at
    further detriment to the consumer, who will shoulder the added cost of
    the royalty in the increased prices of parts. This settlement is
    limited and temporary in nature between one car company and one
    distributor leaving consumers open to whims and exploits of the car
    companies.
        This type of design patent enforcement action that began with the
    Ford F-150 emerged as a new business strategy for automakers. As
    automakers continue to ramp up their design patents on crash parts, the
    possibility of many additional design patent enforcement actions being
    brought at the ITC (or federal courts) continues to be very real. The
    cost of defending such cases is enormous. Even defending just a small
    number of such cases could easily drive competitors out of business
    altogether, regardless of whether they ultimately were to win on the
    merits.
        What is particularly disturbing about the action taken by the car
    companies is that they are only selectively putting design patents on
    those parts where competition, albeit limited, is available.
              quality and safety must be tantamount for all parts
        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.
                     so what does this mean for consumers?
        For over 25 years, consumers have benefited from competition,
    albeit limited, between car company brand replacement parts and
    independently branded parts. Such competition, where it exists, lowers
    prices, provides choice, and improves quality. In fact, many
    independent brand parts have lifetime warranties, something the car
    company parts lack. Unfortunately, however, car companies still have a
    73% market share, competitive suppliers have 12%, and the remainder
    comes from recycled parts. Without congressional intervention this
    barely competitive marketplace for collision repair parts will allow
    automakers to hijack design patent laws to capture the entire market.
    Who are the victims if Congress does not intervene? The thousands of
    Americans who experience low speed collisions each year.
        It's no surprise the car companies don't want competition. Not only
    does the mere presence of competition reduce the price of car company
    brand replacement crash parts, but competitive replacement crash parts
    are typically 34%--83% \1\ less expensive.
    ---------------------------------------------------------------------------
        \1\ Analysis of the Impact of Banning Aftermarket Parts, Property
    and Casualty Insurers Association of America, January 19, 2010.
    ---------------------------------------------------------------------------
          elimination of competition will increase the cost of repairs
        Right now, the elimination of competition from independent brand
    crash repair parts would cost automobile owners more than $1 billion a
    year.
        The lack of competition for repair parts will seriously harm
    consumers. Already high accident repair costs will skyrocket. Right
    now, in low speed crash tests conducted by the highly respected
    Insurance Institute for Highway Safety, the cost of a simple 5 mph bump
    into a pole can cost thousands of dollars to fix. Why does it cost so
    much to repair these vehicles? Because the car companies are able to
    charge monopolistic prices because of lack of competition.
    eliminating competition will increase insurance premiums for consumers.
        If the automakers succeed in using design patents to eliminate
    competition for crash parts, it will not only result in higher repair
    costs, but also higher auto insurance premiums. When collision repair
    crash parts cost more, insurers will have no choice but to pass those
    cost increases on to their policy holders in the form of higher rates.
    In addition, in the face of already rising insurance premiums, many
    consumers are opting for higher deductibles. That means that more of
    these exorbitant crash repair costs will be coming directly out of
    consumers' pockets. This will have a disproportionate impact on low and
    fixed income consumers.
         eliminating competition in crash parts could diminish safety.
        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.
            eliminating competition will result in more ``totals''.
        Higher repair costs due to less competition among the parts needed
    to repair our cars will force insurers to ``total'' more vehicles
    because the cost of repairing otherwise repairable vehicles no longer
    makes economic sense. Consumers lose when a vehicle is totaled. First
    of all, consumers who owe more on the car than it is worth will be left
    with debt payments for a loan on a non-existent car. In addition, total
    losses not only hurt the body shop industry by providing fewer vehicles
    to repair, but a needlessly `totaled' vehicle can also harm the
    environment.
       eliminating competition protects the automakers ``double whammy''.
        The most tragic irony in the lack of competition is what I call the
    automakers' ``double whammy.'' Not only will the lack of competition
    allow car companies to charge whatever they want for the parts we need
    to fix our cars, but when they charge so much that the car is
    `totaled,' our only recourse is to go back to them and buy another one
    of their products.
        The bottom line: If automakers succeed in eliminating competition,
    the cost to the consumers will be enormous.
        Unless Congress addresses the automakers' use of design patents on
    their crash parts, the American public will be faced with mounting
    repair bills, more `totaled' vehicles, increasing insurance costs, and
    deferring necessary repairs affecting safety.
     congress can preserve consumer access to affordable, competitive and
       quality crash parts by adopting a ``repair clause'' in the design
                                  patent law.
        HR 3889 is not a perfect solution. Allowing the car companies to
    place patents on parts for the purposes of preventing competition is
    just as wrong for 30 months as it is for 14 years. Shortening the time
    period by which you allow monopolistic market behavior does not make
    that market behavior acceptable. Two years ago Congresswoman Lofgren
    proposed a truly elegant solution to the problem: Allow the car
    companies the right to patent parts for the purposes of protecting
    their designs from being copied by competing car companies, but also
    allow the independent production of such parts when they are used
    solely as replacement repair parts. At that time powerful car company
    and manufacturing lobbyists crushed Representative Lofgren's efforts to
    protect consumers from car companies' monopolies on replacement repair
    parts. In the face of this intense lobbying to protect the use of
    design patents to prevent competition, HR3889 represents a compromise.
    We appreciate the efforts of Representatives Issa and Lofgren for
    introducing HR3889 as a step forward in protecting the American
    consumer from being forced to pay unfair prices for the parts we need
    to fix our vehicles. It is now time for congressional leadership to
    embrace HR3889 and open the market to competitively priced, high-
    quality alternatives to the expensive car company brand parts. By
    providing a ``repair clause'' in the design patent law, Congress will
    be providing consumer choice and protecting an open and competitive
    market, while enabling the car companies to retain the design patent
    protection on the overall vehicle.
        HR3889 is an important step in the eliminating the increasingly
    unfair, unacceptable, and unnecessary practice of using design patents
    to prevent competition. By establishing this ``repair clause'' in the
    design patent law Congress will be preserving the consumer's access to
    a competitive marketplace for quality alternative crash parts. Such a
    repair clause would establish a very narrow, practical exception to the
    design patent law so that if a car company does receive a design patent
    on a replacement part, independent companies could still make and
    distribute competing parts for the sole purpose of repairing the
    vehicle. Such a very narrow practical exception to the design patent
    law would not--and rightly should not--interfere with an automaker's
    right to prevent competing car companies from using their patented
    vehicle and part designs.
        Design does play an important role in consumers' original choice of
    a car. However, after the purchase, consumers need the maximum number
    of repair choices possible. When we plunk down our hard-earned dollars
    for a new car, we are doing just that, buying a car, not a lifetime
    indenture to the car company to buy their parts. It is simply not fair
    for consumers to be forced to pay monopolistic prices for needed crash
    repair parts.
        Other markets have successfully addressed and solved this problem.
    Nine European countries and Australia have enacted what is called a
    ``repair clause'' law, whereby the making and use of a matching
    exterior auto parts to repair an automobile is not an act of
    infringement, even though the original part is design protected. The
    adoption of such a law, EU-wide, is now under active consideration.
    American consumers deserve no less.
        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 believe that a
    competitive crash parts marketplace, which has been evolving over the
    past few decades, has served consumers. On behalf of these groups, I
    strongly urge Congress to adopt a repair clause to the design patent
    law and pass HR 3889. American consumers will thank you for ensuring a
    competitive market resulting in high quality, fairly priced
    alternatives to expensive car company brand parts. Again, thank you for
    providing me the opportunity to discuss this important issue with you
    today.
                                   __________

        Mr. Goodlatte. Thank you, Mr. Gillis. I will recognize
    myself to begin the questions. And my first question I will
    direct to all three of you.
        Nine European countries and Australia, as has been noted by
    the gentlewoman from California, exempt crash parts from design
    law infringement. Have these laws worked well or not, Mr.
    Menefee?
        Mr. Menefee. From our understanding, they have worked well
    in terms of allowing the competition for after-market parts to
    function in an appropriate fashion as outlined in what this
    bill would provide.
        Mr. Goodlatte. Thank you. Ms. Burris?
        Ms. Burris. I think you will find in my written statement
    that I did obtain a report from one of my associates in
    Australia. A study was conducted, albeit shortly after the
    enactment of that law, that found that it had no impact on the
    insurance premiums. So I think in that case, it was really too
    early to tell. I do not know if there is a more recent report,
    but I would encourage us to keep our eye on what is happening
    over there.
        I have also found out that in Europe, although the current
    law in the European community design itself is that you cannot
    get a design patent on a repair part, they are currently
    discussing that issue and trying to decide what parts and for
    how long they can have protection. So the European community is
    looking at that.
        Each individual country has its own laws, but when you get
    a European registration, there is one law that applies to all
    of those. And there are many countries that do allow design
    protection just like we do. Thank you.
        Mr. Goodlatte. Mr. Gillis?
        Mr. Gillis. Mr. Chairman, as I said in my comments, this is
    an elegant solution to the problem. It is fair. It is
    reasonable. And not only that, it has done nothing to----
        Mr. Goodlatte. Well, tell us about what you know about what
    is going on in these other countries.
        Mr. Gillis. Okay. What is going on in the other countries
    is basically the manufacturer of an independent part is allowed
    to produce that part, even if there is a design patent on it,
    if that part is only being used to repair the car. In other
    words, you cannot make a whole bunch of these parts and
    replicate the vehicle. But if a consumer wants to buy an
    alternative part, then that gives the----
        Mr. Goodlatte. I gotcha. Let me ask Ms. Burris a question.
    You expressed a concern about the precedent that we might be
    taking here with regard to patent law, and I certainly respect
    that concern. But I also see a trend here. Why is that for
    decades, car manufacturers for the most part did not try to use
    design patents to patent these parts in this very competitive
    marketplace and crash repair has developed? What is the reason
    for that trend? That trend concerns me as well.
        Ms. Burris. Yeah, I have seen the trend myself. I think
    there are a number of things that contribute to that. I think
    one of them is the car companies had realized that their parts
    were being copied.
        When you sit down with your client and you have a new
    product that is being launched, you get in a meeting and you
    sit down and you go, okay, what is patentable, what is not,
    what do we want to protect? And one of the questions that you
    always ask is, okay, which parts are replacement parts that
    someone is going to try to copy on our design? And you decide
    then, okay, these are the parts that----
        Mr. Goodlatte. All right, but this is not new.
        Ms. Burris. I understand that.
        Mr. Goodlatte. People have been backing their cars into
    poles or colliding with somebody else on the highway for 100
    years. And companies have been engaged in manufacturing parts
    that will fit to replace that when the vehicles are damaged
    that are not the manufacturer of the original part for a long
    time. I do not know how far back it goes.
        And yet now we seem to have a trend, and I understand that
    not all car manufacturers are doing it. Some are and some are
    not. Some are doing it more than others. So I would really like
    to have an explanation other than protectionism, if you will--
    --
        Ms. Burris. Okay, sure.
        Mr. Goodlatte [continuing]. Why this trend is occurring.
        Ms. Burris. Okay. There are a couple more things for you to
    consider, okay? First of all, the copying of the designs has
    become more widespread, and it is very easy to copy a design
    now versus about 10 years ago. There are digital scanners you
    are probably familiar with. There are a lot of ways to do it
    with lasers, optical sensors that you can run along, literally
    photocopy a part, feed that digital information into your
    computer design system, into your CAD tube. That information
    then gets directly sent to the manufacturing equipment, and,
    voila, a mold is made within literally a day of scanning that
    part.
        So the technology now makes it very easy to copy these
    parts. I think----
        Mr. Goodlatte. But are you saying that this is a new
    industry that has developed because of the ease with which you
    can copy the parts, or is this aftermarket parts industry that
    has existed for a long time has established a place in the
    market, and they are feeling threatened by this new trend to
    use design patents to exclude them from the market?
        Ms. Burris. Yeah. My understanding from discussions with
    the folks at GM and at Ford, albeit limited, and I am happy to
    go back and talk to the other manufacturers as well, is that
    they are chasing a problem. They are chasing people, pulling
    their parts, digitally scanning them, and then copying them.
        Mr. Goodlatte. Well, obviously they have been copying them
    for years. If you are going to make a part----
        Ms. Burris. Not to this level.
        Mr. Goodlatte. You have got to fit on the car that was
    damaged. And so they had to make something that was a close
    facsimile of what was originally damaged. And I do not believe
    this is new.
        Mr. Menefee, can you tell us from your experience, in
    paying for these repairs, is this a new trend that we are
    seeing a more vibrant aftermarket industry, or has the industry
    been operating for a long time making parts for almost any
    vehicle that is damaged?
        Mr. Menefee. Mr. Chairman, the aftermarket parts industry
    has been active for a number of years, decades, as you have
    mentioned. And we have been utilizing aftermarket parts in
    terms of repairs through the insurance for that period of time.
    And I certainly have no specific knowledge of significant
    change other than development of technology, which applies to
    manufacturers, whether it is the car manufacturers themselves
    or aftermarket suppliers. Certainly the nature of manufacturing
    has changed considerably in recent years, so there may be a
    factor there that, in fact, makes them more efficient.
        I also think the statements suggest that the quality of
    this is quite good because of the development of that
    technology. In terms of I would say today our ability to buy
    aftermarket parts that are high quality and meet the test of
    like, kind, and quality and form, fit, and function is probably
    today than it has ever been.
        Mr. Goodlatte. Is that a relatively new development or is
    it something that has been evolving over a long period of time?
        Mr. Menefee. It is something that has been evolving over a
    good number of years.
        Mr. Goodlatte. Mr. Gillis?
        Mr. Gillis. Mr. Chairman, these parts have been in the
    market for at least 40 years. They have been very successful,
    not as successful as we would like to see them because still
    today the car companies have a monopoly on about 70 percent of
    the parts that we need to get our cars repaired. But they have
    been around for a long, long time. And it is clear that as the
    car companies make less and less money selling cars, they need
    to find other places to get their income from, and they are
    getting it from these parts.
        As I said, imagine paying $400 for a simple piece of
    stamped sheet metal. That is outrageous. There are headlights
    that cost $1,500. There are bumpers that cost $900. Why?
    Because there is no competition, and that is hurting us as
    consumers.
        Mr. Goodlatte. Ms. Burris, I will give you an opportunity
    to respond to both of their critics there, if you would like,
    and then my time has expired.
        Ms. Burris. Yeah. I think the other point I wanted to make
    earlier was that I think that part of that uptick that you see,
    and I think we have all recognized that automotive design,
    especially in recent years, has really taken off. There are
    some outstanding designs coming out of not just the big three
    in Detroit, but out of Honda and Toyota. I mean, the outward
    appearance of a car--I mean, look at the Ford Flex, for
    example, and the Toyota Prius. We are away from--I am going to
    do it. Chrysler is not here. Away from the day of the K car.
    There has been this----
        Mr. Goodlatte. But we are also well away from those big----
        Mr. Issa. Where is the '57 Chevy when you need it?
        Mr. Goodlatte. That is what I was looking for.
        Ms. Burris. Yeah. Hey, there you go.
        Mr. Goodlatte. Those big fins on the backs of cars. But I
    take your point.
        Ms. Burris. Yeah. But regarding the cost of the parts, I
    think that, you know, being an engineer, I know what it takes
    to design these parts, and I know what it takes to do the
    materials testing, and to survive. I think the refrigerator and
    computer examples really are not fair. Those are not designed
    to be outside in 120 degree temperatures in the ice and in the
    snow and not rust. They are not designed to hit a wall at 65
    miles an hour without the condiments flying out either. That is
    an unfair comparison.
        Mr. Goodlatte. But think of those magnets that people
    attach to them.
        The gentleman from North Carolina, Mr. Watt, is recognized
    for 5 minutes.
        Mr. Watt. Thank you, Mr. Chairman. I am not taking sides on
    the question you asked. But the comments I have gotten from a
    number of people is that these suits picked up when foreign
    manufacturers of after parts, mostly in Taiwan, started copying
    the components verbatim.
        And so anyway, I am not on one side or the other of this. I
    am just trying to figure out where I should come down.
        Mr. Chairman, I ask unanimous consent to submit for the
    record a letter that is addressed to me and you dated today's
    date from Alliance of Automobile Manufacturers and various and
    sundry other organizations that they would like to have put in
    the record.
        Mr. Goodlatte. Without objection, it will be made a part of
    the record.
        [The information referred to follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Mr. Watt. Mr. Gillis, Mr. Menefee--well, all of you, let me
    first say I think all of you made exceptionally good witnesses.
    And this is a difficult issue it seems to me. Usually I know
    where I am leaning, and I do not know where I am leaning here.
    I mean, my sympathies are with the consumer.
        But let me put myself in the position of the consumer. I
    buy a new car. I drive it off the lot, and somebody bashes it a
    block from the dealership. Why should I not be able to get my
    insurance company or anybody to replace that automobile with an
    original part from the manufacturer?
        I understand the cost considerations, and I am the owner.
    But I want my car to look and be up to the specifications just
    like I bought it. Why is that not a reasonable request? And why
    is it a legitimate argument counter to that to say, well,
    somebody else can make the same part when somebody has a design
    patent on that part? Those two questions I guess are the
    opposite sides of the same coin. Am I missing something here?
        Mr. Menefee, Mr. Gillis, you can address it from the
    insurance company side. I know the insurance company would like
    for me to go and buy the cheapest part available. It reduces
    their costs, but am I not as a consumer, as a customer entitled
    to have my brand new motorcycle be a brand new motorcycle? What
    do you say about that?
        Mr. Menefee. Yes, sir, Congressman. Several questions
    there. I will try to answer each of them as I go.
        Your first question in terms of what do we owe to you as an
    insurance customer under most of our contracts----
        Mr. Watt. Okay, I gotcha. Okay.
        Mr. Menefee. We owe you a return----
        Mr. Watt. You owe me something that appears to be the same.
        Mr. Menefee. Yes, sir, that is what our contract says, and
    then we charge accordingly.
        Mr. Watt. Okay. All right, but that is under the contract.
    Maybe Mr. Gillis is in a better position to argue this because
    he does have a financial interest in it. The insurance
    companies always have a financial interest in it.
        Mr. Menefee. Well, Congressman, if I could just follow up
    to say our financial interest is our consumer. They are our
    customers and ultimately our----
        Mr. Watt. But if your customer wants an identical car to
    the one he just drove off the lot, is your customer's interest
    not in conflict with your financial interest?
        Mr. Menefee. No, sir. Our interest and our customers'
    interests are very much aligned. We want our customer to be
    safe and happy, and in that case we think the contract provides
    for that. The contract says we can----
        Mr. Watt. Go ahead, Mr. Gillis.
        Mr. Gillis. Well, first of all, Representative Watt, we do
    not really see this exactly as an insurance issue. It is much
    more of a consumer issue from the perspective of giving me----
        Mr. Watt. Okay. That is why I put myself in the consumer's
    position.
        Mr. Gillis. Right, the consumer. For example, you drive
    down the street and you decide you need a new muffler. Well,
    you can go to Chrysler and pay $900 for that muffler or you can
    do to Midas and get one for $189. That is a great choice. Now
    if you really want that Chrysler muffler and you want to pay
    $900, you have got that choice.
        With a fender, it is the same thing. You may not want to
    pay $400 for a fender. You may want an alternative choice that
    is maybe a third the price. And all we are saying is let us let
    that choice exist. Let us give me that choice.
        Now if I want to buy an insurance policy----
        Mr. Watt. Even if somebody has got a patent on it, you are
    saying--I mean, you know. We could extend that analysis to just
    about any product, I would think.
        Mr. Gillis. Well, we have a great deal of respect for
    patent law. Patent law is very, very important. But it is not
    being used in a legitimate fashion. As Chairman Goodlatte said,
    why all of a sudden are----
        Mr. Watt. Okay, but you say legitimate fashion. Is it
    legitimate for somebody to scan my patented part and reproduce
    it the very next day? I mean, we do not allow that under our
    patent laws.
        Mr. Gillis. Right now that would be illegal, and that is
    what we hope this piece of legislation would allow. So solely
    for the purposes of----
        Mr. Watt. Well, if you want to facilitate somebody being
    able to scan that part and produce it the very next day after
    it is driven off the lot?
        Mr. Gillis. Solely for the purposes of making a repairable
    part choice available to me, but not for the purposes of
    allowing General Motors to copy Ford's design or Ford to copy
    Honda's design.
        Mr. Watt. So if you are not an automobile dealer, you can
    copy somebody's design, but if you are Ford or General Motors,
    you cannot copy each other's design.
        Mr. Gillis. That is right. If you were copying these parts
    to reproduce the General Motors car, that should be, and we
    respect the fact that that should not be allowed. But if the
    sole purpose is to give me a choice as a consumer, to have some
    choices in the market, like I do in a drug store when I can
    choose, you know, CVS brand aspirin, or like I do in a repair
    shop, or I can get a DieHard battery.
        Mr. Watt. But you cannot go into a drug store and buy a CVS
    brand aspirin while somebody else has the patent on that
    aspirin?
        Mr. Gillis. Right, and we can have a whole----
        Mr. Watt. You know, there are limits to this.
        Mr. Gillis. Well, we could have a whole hearing on the drug
    companies' use of patents and potential abuse of patents. But
    the bottom line is, Representative Watt, car companies really
    need to acknowledge the fact that, as the Chairman said, why
    are they suddenly doing this? Why is this car patented today?
        The representative from the car company said, you know,
    there are outstanding designs on the market today. Well, those
    parts have been around for 40 years, and they are not
    preventing outstanding designs.
        Mr. Watt. All right. I guess hearings have very important
    purposes. They either clarify the situation or they confuse you
    more. And this one----
        Mr. Gillis. Sorry.
        Mr. Watt. This one has left me extremely confused, you
    know, because it is very difficult to know which side of this
    issue to be on. I understand exactly what you are saying, but
    as the Intellectual Property Subcommittee person, I do not know
    how exactly we put this into our current framework. And the
    fact that somebody made a high quality knockoff does not seem
    to me to be a sufficient justification for allowing them to
    market that knockoff if it is a patented item. You know, that
    is what I am having trouble with.
        Mr. Chairman, I am sure we will debate this and hear a lot
    more about it. So I will yield back my time.
        Mr. Goodlatte. I thank the gentleman.
        The gentleman from Nevada, Mr. Amodei, is recognized for 5
    minutes.
        Mr. Amodei. Thanks, Mr. Chairman. In the testimony here, we
    have heard talk about crash parts. What percent of the market
    is crash parts? I am assuming we are talking about new vehicles
    here, which means there is not a lot of folks restoring them.
    So I am guessing if I have a 3-year-old vehicle and need a
    fender, it is because it is subject to a crash. Anybody want to
    tell me what percent of the market is crash parts, exterior
    only? Nobody wants to?
        Mr. Menefee. Congressman, the industry data that we have
    would suggest 15 to 20 percent of the collision repair parts
    come through the aftermarket at the present time.
        Mr. Amodei. No, I mean crash parts generally. We had heard
    talked about an elegant solution from Mr. Gillis that would say
    crash parts only. I am assuming that is a large chunk of the
    market if it was crash parts only.
        Mr. Gillis. Well, there are two types of parts on the
    market. There are----
        Mr. Amodei. I understand that. The question is what
    percentage if you know. It is okay to say you do not.
        Mr. Gillis. It is about a $16 billion market.
        Mr. Amodei. Okay. So we do not know what percent of the
    market we are talking about. That is something if somebody
    could get that later on, I would appreciate it.
        Mr. Gillis. Sure.
        Mr. Amodei. Second, Ms. Burris, Mr.--sorry. I probably
    should not be driving. Mr. Menefee indicated that when somebody
    buys a car from one of your clients, that they had been
    compensated for all their R&D, all that other sort of stuff
    that you kind of intimated. What is your response to that? Do
    manufacturers have any interest in any R&D after I pay $35,000
    to whatever company for my car?
        Ms. Burris. I do not think that they have been fully
    compensated for their R&D when they sell that car.
        Mr. Amodei. Well, if they have not been, then would this
    bill encourage them to increase the price so they are getting--
    I mean, if you no longer have a back end on the parts, I would
    assume that everybody is going to be affected equally in the
    manufacturing and that they are going to increase the price of
    their cars if they do not get something on the parts. Is that a
    bogus statement? How do you get compensated for R&D generally?
        Ms. Burris. Yeah. If it is okay, I would like to go back to
    GM, Chrysler, and Ford and ask them. I can get the information
    back.
        Mr. Amodei. That would be great.
        Ms. Burris. I am the patent attorney. I do not work at the
    automotive companies.
        Mr. Amodei. Okay.
        Ms. Burris. But I would be happy to get that information
    and put it back in the record.
        Mr. Amodei. That is fine. Mr. Menefee, if this bill passes,
    are auto premiums going down for all of Mr. Gillis' consumers?
        Mr. Menefee. Well, I think the position we have laid out is
    a concern about premiums going up.
        Mr. Amodei. So is the answer to my question no?
        Mr. Menefee. I would not expect premiums to go down as a
    result. We are preserving the competitive environment we have
    historically had, which I think would suggest that premiums
    would, in terms of the result here, would be to keep that part
    of the premium relatively the same as compared to----
        Mr. Amodei. Mr. Gillis, how does that work for consumers?
    Is that a good answer for your consumers, auto insurance
    premiums?
        Mr. Gillis. It is not a great answer, no.
        Mr. Amodei. Okay. Thank you. I appreciate that.
        Mr. Gillis. But let me just say this. There are choices
    that consumers can make both in terms of parts and in terms of
    auto premiums. Some consumers actually choose insurance
    premiums that give them only car company brand parts. Now those
    tend to be more expensive.
        Mr. Amodei. Yep.
        Mr. Gillis. But those consumers are willing to pay that.
    Most consumers are shopping around for the least expensive
    insurance they can get, and this is one of the ways that
    insurance companies can reduce costs.
        Mr. Amodei. And I appreciate that. Finally, there was
    testimony about launch period, best guess, some relief for
    consumers. If I might, I think it was you, Mr. Menefee, that
    talked about launch period and best guess. Can you put a little
    more meat on that framework in terms of why 30 months works as
    opposed to 14 years or no period?
        Mr. Menefee. Well, I think the evolution of the bill as
    proposed has resulted in a 30-month number being a relative
    compromise, that that is reasonable to all parties concerned,
    at least in terms of the discussion and the debate so far.
        I am sure you could argue on either side of whether--and I
    would also indicate it is not inconsistent with what at least
    what our company's practice has been, has generally been to use
    OEM parts during the first 2 years that a new vehicle is owned
    by the consumer. And I think all things considered, 30 months
    is a reasonable compromise.
        Mr. Amodei. And I appreciate that. But to tell you why I
    asked the question, because I get the consumer part, and I get
    the cost of insurance. And I also get the R&D part. So what I
    am looking for, and it is like, well, good luck finding that
    because you are the only one looking for it, maybe is, though,
    is what is the investment in R&D? What is reasonable how to
    treat that in the context of providing consumers choice and
    also keeping their insurance premiums as low as possible?
        So when I hear terms like ``best guess'' or ``launch
    period,'' it is like, ``well, okay, what is the basis of that
    statement?'' And I am sure there is some. So if anybody can
    follow that up later on, that would be great.
        With that, I want to thank the panel for your candor, and
    yield back, Mr. Chairman.
        Mr. Goodlatte. I thank the gentleman. The gentlewoman from
    California is recognized for 5 minutes, Ms. Lofgren.
        Ms. Lofgren. Thank you, Mr. Chairman. I am sorry that Mr.
    Watt had to leave, although I certainly respect that all of us
    have many things to do at once, so I am not critical of that.
    But I think it is important to go back to the Constitution, as
    Congressman Issa has, and to reflect on what the Congress is
    asked to do. We are asked to promote the progress of science in
    the useful arts by securing for limited times the exclusive
    right.
        Now when the Constitution was adopted, the Congress chose
    14 years as a patent terms. It is entirely up to us to decide
    what is the appropriate time of protection to promote the
    useful arts. And that is not in any way adverse to our
    obligations or even our history as a country. And I just think
    it is important to reiterate that point.
        Now in terms of safety, there has been some concern
    expressed by Ms. Burris, the parts that were not provided by
    the original manufacturer would be less safe. Mr. Menefee, you
    are actually, as I understand it, a member of the board of the
    Insurance Institute for Highway Safety. I think is that not the
    group that gave us the crash dummies? Can you address the issue
    of safety directly as to these non-original manufacturing
    parts? How can we know that they would be safe?
        Mr. Menefee. Yes, ma'am. Congresswoman, first of all, I am
    an engineer. I started out my career in heavy manufacturing
    doing product design and product manufacturing. I have a good
    appreciation for what is involved with that. I also have a good
    appreciation for what is related to being able to do that and
    manufacture parts that are of high quality and meet the
    standards that they need to meet.
        And as a board member of the Insurance Institute for
    Highway Safety, I have been around these questions of quality a
    lot. This is not a new issue. The Insurance Institute has
    addressed it over, I believe, the past decade or more in terms
    of the question to do aftermarket parts meet the test when it
    comes to quality and safety.
        IIHS has conducted tests and concluded that the source of a
    car's cosmetic car parts is irrelevant to crash worthiness and
    safety. And I would make the distinction there in terms of
    cosmetic parts as compared to the structural parts.
        And, in fact, there is very substantial information and the
    issue has been well vetted that safety with aftermarket parts
    is not an issue. That is, I think, very well established.
        Ms. Lofgren. Now I am interested, and, you know, we all are
    impacted by our own personal experience. So I will tell a story
    on my daughter, who came a couple of years ago and borrowed my
    car, and unfortunately had a small accident with my car. And it
    did not look that badly damaged, but the insurance company
    said, no, just total it because it will cost more to fix it
    than it is worth. And I am just sort of replicating that
    because it was totally fixable, and I would be happy to have
    had it fixed. I did not want to go out and buy a new car.
        I am interested in the impact that something like this bill
    might have on the number of vehicles that are simply totaled
    that could otherwise be repaired and are totally usable. Do you
    have any idea what that might be, Mr. Menefee?
        Mr. Menefee. I would not hazard a guess as to exactly what
    the percentage would be, but certainly it would have an impact.
    In most cases, auto insurers look at damages approaching 75 to
    80 percent as being something that we could consider a total
    loss and then replace the vehicle or settle up with you to
    replace the vehicle as compared to trying to repair it.
        Certainly the elimination or diminution of aftermarket auto
    parts would raise the repair costs, which then would suggest a
    higher percentage of vehicles being put into that category. And
    just generally, that is a concern not just for insured
    customers, but for non-insured customers as well, of which
    there are many who have to pay for those repairs out of their
    pocket as compared to relying on the insurer to do so.
        Ms. Lofgren. Well, I certainly understand that this is a
    new concept for some. To me, certainly we want to make sure
    that we have a vibrant and successful auto industry sector in
    this country. I voted and I was happy to vote on the so-called
    auto bailout, and I was glad that the auto companies came
    through, and they are on their feet, and they are competing. It
    is great.
        But right now, when a consumer goes out and buys a car,
    they are not just buying a car, they are buying indentured
    servitude to the manufacturer for the life of the car. And most
    people do not realize that. I mean, you are buying the design
    and the performance and everything else, but if the patent term
    is 19 years and the car usually lasts 10, I mean, you really
    are stuck in a way that most consumers do not intend.
        And my belief is that the competition that the auto
    companies have is performance and design among other new
    vehicles. It is not to get their claws into the consumer if
    they have an accident 15 years later. And I think Mr. Issa's
    bill helps create the competition that will save money,
    preserve safety, and I think also help create a more vibrant
    aftermarket industry in the United States.
        And with that, I would yield back, Mr. Chairman.
        Mr. Goodlatte. The time of the gentlewoman has expired, and
    the gentleman from California, Mr. Issa, is recognized for 5
    minutes.
        Mr. Issa. Thank you, Mr. Chairman. Ms. Burris, you said a
    few things that I think I, no surprise, might take a little
    exception to.
        Now you are a patent attorney, so the quality of these
    parts, the NRE, the non-recurring expenses, those are not areas
    of your expertise, are they?
        Ms. Burris. My expertise, no. As a consumer, of my concern,
    yes.
        Mr. Issa. So as a consumer, you would ask how it is that
    the auto companies can make a million Toyota Camrys on a dye,
    and then when they have to make a million and one to sell it as
    an aftermarket part, they cannot compete with somebody who had
    to make a brand new dye just to make aftermarket parts. Is it
    not true that from a standpoint of cost, the tooling cost to
    just make aftermarket parts actually puts the repair parts
    person behind, not in front? Well, let me rephrase that. I
    already said you do not know about the cost of these things, so
    let us go on to something else.
        You know about patent law. Okay. Do I own the patented
    product when I buy it? Do I own that fender, that front right
    fender, on my Lexus?
        Ms. Burris. Absolutely. Subject to any terms and conditions
    of the purchase of a patented product, you own that patented
    product. You can repair it. You can----
        Mr. Issa. Okay. Well, the patent law is the patent law. The
    terms and conditions do not modify the patent law. You cannot
    add to the patent law by having an implied contract. I know
    people have tried to do it.
        So let us go through this a little bit. Mr. Gillis' car,
    his Lexus, gets ruined, but the front right fender is okay, and
    it is in a junkyard. Is it okay for me to take it off that and
    put it on my car? His patented front right fender survived the
    crash, right? So I could buy that. Okay.
        Ms. Burris. Sure.
        Mr. Issa. For sale doctrine, right? It is the patent
    transferor. He can sell it. I can buy it. I put it on my car.
    Okay. And I can take that fender that got crunched, and I can
    bend it back out, and I can make it exactly the same as it was,
    and I have not violated the patent because I own that, right?
        Okay. Now if I simply fabricate a fender myself to do the
    job that the first fender did, did I violate the patent law?
        Ms. Burris. Yes.
        Mr. Issa. Oh, okay. So you are saying that, in fact, even
    though I have this fender that I am going to scrap, I do not
    have the ability to duplicate a replacement part.
        Ms. Burris. You do not, but the practical matter is the car
    company is not concerned with the mom and pop shops. They make
    their own----
        Mr. Issa. Right, they are just concerned about making this
    profit by having this exclusive. So let us go through this. I
    own this right, and you are telling me--and Mr. Watt, if he
    were still here, maybe this would make him less confused. I own
    this right. I own this part. But if the part is dinged, I can
    cut out the dinged part and I can weld in a new part. I can
    unbend it. I can move it back into the shape it was. That is
    all okay.
        I can take 80 percent, 50 percent, 60 percent, 90 percent
    of the metal, cut it away, and weld in new metal. I am okay,
    right? Can I take 99 percent and just take the little spot
    where the screw fit into the part and the rest of it? And can I
    fabricate it back on to that one part?
        Ms. Burris. Sure, you can.
        Mr. Issa. Okay. So what you are really saying is this about
    the money the auto companies want by having it exclusive, and
    that is all well and good. But what they are really saying is
    even though I bought and paid for this part, they do not want
    me to do it.
        Well, let us go through this whole point. I am trying to
    make a form, fit, and function replacement part from scratch.
    The design patent is limited to ornamental, correct?
        Ms. Burris. Correct.
        Mr. Issa. So I am entitled to make a part which has form,
    fit, and function perfectly, and I have not violated the patent
    because the patent is limited to ornamental, right?
        Ms. Burris. Yeah. The design patent covers the ornamental
    features of the part, correct.
        Mr. Issa. Okay. So what you are saying is the ornamental
    feature is the only part that I am taking. So it is a crease.
    It is a line. It is something of no value for form, fit, and
    function, right?
        Ms. Burris. I am not sure I followed you. It is the overall
    design that is protected. It is not----
        Mr. Issa. No, it is not the overall design. A design patent
    on a particular fender is limited to its ornamental value. It
    cannot be form, fit, or function. Otherwise, that would be a
    utility patent, right?
        Ms. Burris. That is correct in terms of its coverage.
        Mr. Issa. Okay. So, Mr. Menefee, you mentioned something I
    think that I was a little confusing before, and I want to make
    sure I get it clear. The reason you said that it would not
    necessarily result in lower costs is because so far this
    practice of patenting, and suing, and stopping the importation
    or manufacture of parts is not widespread. Is that not true?
        Mr. Menefee. Yes, sir.
        Mr. Issa. So it is actually something that did not go on
    for the first 100 plus year of the auto manufacturing business
    that is beginning to go on that is driving up the price of
    these and making aftermarket products not available.
        Mr. Menefee. That is correct. Our concern is that the
    current time and a prospective basis.
        Mr. Issa. Okay. Well, quickly, I would like to ask
    unanimous consent that the Coalition for Auto Repair Equity,
    the CARE statement of July 27, 2012 be placed in the record.
        Mr. Goodlatte. Without objection, so ordered.
        [The information referred to follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Mr. Issa. And I would like to just note for the record for
    those who may not go back quite as far as an old guy like me
    does that Carol Shelby, died May 10, 2012, was born in 1923.
    Roy Wishowski, who was a friend and customer of mine, was born
    in 1915, died in 1997. In the 1970's, early 70's, I was buying
    from a well-established Casey Whitney catalogue. Repair parts
    for Kaiser Willeys and for so many parts, particularly from
    automobile companies who were no longer making these parts,
    including Volkswagen of America that would not make parts.
        This industry has been well-established for my entire life,
    and I think the important part is that, in fact, we are talking
    about a narrow bill to prevent a new expansion that endangers
    the consumer's ability to afford repair parts. And I yield
    back.
        Mr. Goodlatte. The gentleman's time has expired. The
    gentleman from Texas, Mr. Poe, is recognized for 5 minutes.
        Mr. Poe. Thank you, Mr. Chairman. I am one who actually has
    been a customer of a junkyard. I am not sure you have ever been
    to a junkyard, Mr. Issa, but maybe you have been. If you have,
    that is great.
        Mr. Issa. I will show you the picture of my 1963 VW bus,
    and it is all junkyard parts, my friend.
        Mr. Poe. I frequent the place in southeast Texas for
    several reasons, and I do not know that on my '98 Wrangler I
    have an original part on it. And many of them have come from
    replacement parts that have been found at a junkyard.
        But be that as it may, I would like to start with the
    insurance first. Having been dropped by most insurance
    companies in Texas at least once over the years---- [Laughter.]
        Driving that '98 Jeep Wrangler with the six-inch lift. I
    want to ask you some questions. The manufacturer sets a price
    on a bumper. First of all, I would like to ask the lady that
    represents the manufacturers, why do these bumpers or parts
    cost so much? Mr. Gillis says his folks can sell them for a
    third of the price and still make a profit. You sell them for,
    you know, 3 times that. Why are they so much? Are you gouging
    the consumer?
        Ms. Burris. Are they really that much? I mean, I think that
    it is a relative look. I mean, once someone comes along and
    copies a part, they do not have to do any R&D----
        Mr. Poe. No, just answer my question. Wait a minute.
        Ms. Burris. I do not know that they are----
        Mr. Poe. Just a minute. I reclaim my time. First of all,
    the original manufactured part is more generally, is it not,
    than the replacement part that his guys sell?
        Ms. Burris. Yes.
        Mr. Poe. Okay. Why is it so expensive? The lady from
    California, Ms. Lofgren said, just replace the part. The
    insurance guy says, hey, that is too much money. We will just
    get you a new car. Why do the parts seem to be so expensive
    from the manufacturer? That is my question.
        Ms. Burris. Yeah. It is a valid question. I think in a lot
    of cases, the parts that you are buying from the original
    equipment manufacturer are higher quality. They are better
    materials. They are going to last longer.
        I asked my students this question in class last week. I
    showed them the bill. I did not tell them how I felt about it.
    How do guys feel about this? And one of the students said,
    well, he goes, I just put a new bumper on my F-150. He goes,
    and within a year it rusted, and I went back and said, hey, why
    is it rusting? And I found out it is a non-OEM part. Now I know
    to ask for OEM parts.
        Now I am not saying that is the case every single time.
    There may be a part that has the same materials, same
    structural characteristics. But I think there is concern that
    these parts--I mean, if we are going to do this, you want to
    make sure those parts are the same parts, and they have the
    same materials, the same durability out in the environment, the
    same structural integrity.
        Mr. Poe. Excuse me, I just have a little bit of time. Mr.
    Gillis says it is generally the same part. We are not talking
    about a part that is not the same part. We are talking about a
    part that is made an aftermarket part. It is the same general
    part made out of the same material, maybe made in Taiwan
    instead of Pittsburgh.
        Ms. Burris. I am a jeep person myself. I was like, hey, you
    are my kind of guy. I have a jeep, and the front radiator had
    to be repaired. I did not know it was a non-OEM part. Paint
    chipped off of that thing in 2 years, and it looked like crap.
    And I went, hey, what is wrong with this radiator? Well, it was
    cheaper. We got you the cheaper part.
        Mr. Poe. All right. You have your patent law over a set
    number of years. How long do you keep parts? So I have got a
    new jeep. Let us say I bought a new jeep, which would not
    happen. But let us say I bought a new one. How long does Jeep
    keep the parts for that vehicle?
        Ms. Burris. I personally do not know that, and I will have
    to go back and ask.
        Mr. Poe. Or Toyota or GM? Do you know any of them?
        Ms. Burris. I do not, but I am happy to gather that.
        Mr. Poe. I mean, a long time ago they had to keep parts for
    20 years, and that was done away with by Congress, I
    understand. So there is no requirement that you keep a stock of
    parts for a certain vehicle.
        Ms. Burris. I am sure each manufacturer has some kind of
    guidelines they use, and I am happy to go gather that
    information and bring it back. But I do not know that right
    now.
        Mr. Poe. All right. And, Mr. Menefee, on the insurance
    angle, people can buy any kind of insurance they want. They can
    get replacement parts that come from the manufacturer. They can
    get insurance that just says it is a replacement part. It does
    not have to come from the manufacturer. I mean, people can do
    that, though, through their insurance that they buy. Is that
    correct?
        Mr. Menefee. There is some flexibility, Congressman.
    However, we are a highly regulated industry, so the policy
    provisions are pretty much dictated by the State insurance
    departments in terms of what we do or do not offer in that
    regard. And, in fact, in most States, the requirement--the
    repairs are like, kind, and quality of form, fit, and function.
    And that is what we honor.
        Mr. Poe. So if I showed up with the jeep wanting to get it
    repaired, I would be allowed to get a part that is equal to the
    original part on that vehicle.
        Mr. Menefee. Yes, sir. And, in fact, in our experience, we
    are very careful, and I think in industry this is typically the
    case, we are required to disclose to the customer what type of
    parts are being used to repair that vehicle. And we do get
    questions sometimes about OEM versus aftermarket parts. And as
    soon as we explain the manufacturing and quality control
    process that most of us in the business use to control those
    aftermarket parts, the customer is very satisfied and, in fact,
    is usually focused on the cost effectiveness. They want a good
    repair at a fair price.
        Mr. Poe. Last question, if I may, Mr. Chairman.
        Mr. Goodlatte. Without objection, the gentleman is
    recognized for one additional minute.
        Mr. Poe. Safety. I would like to hear what you all three
    think about aftermarket parts--not the junkyard part, but
    aftermarket parts and original parts, whether generally if you
    get the same part, it is going to be just as safe or not. Just
    each one of your answers. It is either is or it is not, in your
    opinion. Mr. Menefee, let us start with the insurance.
        Mr. Menefee. If the aftermarket part has been manufactured
    under the quality control and certification conditions that we
    would say it should be, there is no doubt in my mind in terms
    of my background as an engineer and my experience with the
    Insurance Institute, that aftermarket parts are equally safe
    and equivalent to original equipment parts.
        Mr. Poe. Ms. Burris?
        Ms. Burris. As an engineer as well, I would agree with
    that, that if they are designed to the same specifications, the
    same materials, that they are going to have the same safety,
    same quality.
        It is not just on a part basis alone, though. You know,
    those parts interact with one another. It is a vehicle system.
    So one part triggers a reaction in another part. And so it is
    not just the part itself. It is how it interacts with the parts
    around it.
        But, you know, if it is designed to the same specs, sure,
    it is going to perform the same.
        Mr. Poe. Mr. Gillis?
        Mr. Gillis. There are programs available that actually
    confirm the fact that these parts are virtually identical. And
    many insurance companies take advantage of those programs to
    protect consumers from two things: poor quality parts and
    overpriced parts. The real question is the quality of car
    company brand parts. That is something that the Committee may
    also want to look at because, let us face it, in 2010, there
    were more cars recalled by the car companies for quality and
    safety problems than there were even sold. So they do not have
    a lock on quality, and it is important to remember. Let us not
    use that as an excuse not to use competitive parts.
        Mr. Poe. And then, Ms. Burris, if you would get the
    Committee that information regarding how long generally a
    manufacturer keeps in stock or available parts for a specific
    model, we would appreciate that.
        I yield back.
        Mr. Goodlatte. I thank the gentleman. The gentleman from
    North Carolina, Mr. Coble, is recognized for 5 minutes.
        Mr. Coble. Thank you, Mr. Chairman. I was here earlier and
    had to leave due to another meeting.
        Mr. Menefee, if this bill is enacted, would it result in a
    reduction of insurance premium rates? And if so, when would the
    consumer embrace that or be aware of it?
        Mr. Menefee. No, sir, Congressman, we have taken a position
    and communicated that the intention here is to preserve the
    competition that currently exists in the marketplace so that we
    are working to pass the bill to avoid a significant increase in
    the cost of parts and insurance premiums.
        Mr. Coble. Well, would there conversely be a reduction in
    premium rates?
        Mr. Menefee. Our expectation is if the bill is passed, we
    will maintain the current competitive environment we have, and
    as a result, there would be no appreciable change in insurance
    premiums.
        Mr. Coble. Anybody else want to weigh in on that?
        Mr. Gillis. Well, I think that is a good point,
    Representative. I think the issue here is insurance premiums
    are based on what is in the market now. If the car companies
    are successful in keeping that competition out of the
    marketplace, it is inevitable that if an insurance company has
    to buy five $400 parts to repair a car, they are going to
    charge me more for that insurance.
        Mr. Coble. Thank you, sir. Ms. Burris, in your testimony,
    you alluded to motorcycles and other types of motor vehicles.
    Elaborate on that again for me.
        Ms. Burris. Sure. The language of the bill calls for
    component parts used in motor vehicles. And under our Title 49,
    the definition of motor vehicles says any vehicle that is
    driven or drawn by mechanical power, manufactured for use on
    our public streets, roads, and highways. So that is more than
    automobiles. That is a whole lot. I mean, it is motorcycles. It
    is mopeds, motor scooters, farming equipment, trailers. It is
    not just driven by, it is drawn by.
        Mr. Coble. Lawn mowers maybe?
        Ms. Burris. If it is for use on public streets, and roads,
    and highways. Plows. It is wider and broader than just
    automobiles.
        Mr. Coble. All right, thank you. Thank you all for being
    with us. Thank you, Mr. Chairman.
        Mr. Goodlatte. I thank the gentleman. I want to thank all
    the Members of the panel for a very--I am sorry. We now have
    two new Members who have arrived. So we are going to continue
    on, and we will next recognize the gentlewoman from California,
    Ms. Waters, for 5 minutes.
        Ms. Waters. Thank you very much, Mr. Chairman. I am sorry I
    was delayed and unable to be here. But I wanted very much to be
    here for a number of reasons. I appreciate the hearing today as
    an opportunity to hear from the various stakeholders regarding
    the Promoting Automotive Repair, Trade, and Sales Act. Indeed,
    this issue is of great importance to many of my constituents as
    it concerns the maintenance and repair of automobiles where
    dealers contend that the legislation would unduly deprive them
    of their intellectual property rights, which will lead to
    revenue and job losses given the economic challenges that many
    auto dealers continue to face, under declining sales and
    limited access to credit. The PARTS Act would prove devastating
    to a single fragile industry.
        Indeed, the PARTS Act raises a fundamental public policy
    question as it would reduce auto companies' patent protections
    from 14 years to 30 months. The auto companies are also
    concerned about the quality of replacement crash parts.
        Let me ask this. One of the things I have focused on in
    looking at these challenges that continue to arise about these
    issues is what kind of investment and maintenance resources go
    into protection of the intellectual property rights that is
    being challenged? I do not know. Ms. Burris, let me just ask
    you.
        Ms. Burris. Sure, I would be happy to answer that.
        Ms. Waters. Yes.
        Ms. Burris. There are thousands and thousands of dollars
    spent on patent applications. There is the time that the
    attorney spends preparing the specification, the claims. And in
    this case for design patents, the claim is the drawing, so
    there are professional drawings prepared to show the article
    manufacture from a number of different views. You pay your
    filing fees with the USPTO.
        Design patents are a little unique in that once you pay
    your issue fee when it is ready to be issued, you do not have
    to pay maintenance after that, like utility patents.
        So the investment per design patent for an applicant is on
    the order of, it is thousands of dollars, $3,000 to $4,000 per
    patent. And, again, you were not here earlier when we talked
    about this bill. The language of the bill is retroactive, so if
    you got your patent 5, 6, 7 years ago and you paid all that
    money, you have nothing to show for it.
        And also the language of the bill, it is not 30 months from
    the issue date of the design patent. The current term for a
    design patent is 14 years from the issue date. The language of
    the bill does not say 30 months from the issue date. It says 30
    months from the date of the offer for sale.
        So what happens, the reality is when we work with our
    clients, they are getting ready to go to a big auto show or to
    go see a customer. A design has been refined all the way up
    until that date. I have been there, done that, 11 at night
    changing designs right before launch. And so you file your
    patent application the night before you offer it for sale.
    Well, it takes over a year for you to get your patent through
    the Patent Office because--it just takes a while to get it. The
    delay is over a year.
        So really it is not 30 months of patent term. It is closer
    to a year or a year and a half at best of a patent term.
        Ms. Waters. Well, Mr. Chairman, I thank you for allowing me
    a few minutes here having come in late. I just have to say that
    probably some of my consumer activist friends, and I am known
    as a consumer person, but I am old-fashioned in that I believe
    that if you discover and develop that you have a right to reap
    the benefits from it for a reasonable period of time. And you
    can always develop a better mousetrap, but do not take mine.
        Mr. Gillis is trying to get my attention.
        Mr. Gillis. Congresswoman Waters, our dear friend.
        Ms. Waters. Yes.
        Mr. Gillis. Think about what you just heard. It costs
    $3,000 to $4,000 to file a patent that allows the manufacturer
    to force me to pay $400 for a particular part for 14 years. All
    they have to do is sell 5 parts, and they have covered the cost
    of their patent as you just heard. And then they protected
    themselves from me being able to go out into the marketplace
    and have a choice.
        That is what this is about, and we need your help, and we
    need you to stand up for consumers and support this effort.
        Ms. Waters. Well, I do not want to repeat myself, but I
    stand firm in my belief. And it sounds a little bit unusual for
    me, but the fact of the matter is whether you are a small
    company, or a big company, or an individual, if you are smart
    enough and if you are inventive enough to, you know, come up
    with something that you can patent, I want you to enjoy the
    benefits of it.
        And one good thing about it is, like I said, the next
    person can invent a better mousetrap, or they can go for
    whatever they can produce. But I just do not like the idea of
    investing in a patent, and then all of a sudden it is not yours
    after a short period of time. It just does not seem right to
    me. So you can keep talking to me, Mr. Gillis, but that is
    where I am right now. Thank you.
        Mr. Goodlatte. I thank the gentlewoman. The gentlewoman
    from Texas, Ms. Jackson Lee, is recognized for 5 minutes.
        Ms. Jackson Lee. Thank you very much, Mr. Chairman. I know
    that this bill has changed in the hearing on the underlying
    bill, and it had some changes to it. And I think, however, the
    basic premise is one that we should look at very, very closely.
    And I think all the witnesses will know that what you hear from
    many of your constituents is costing as it relates to fixing
    cars, whether they are of recent vintage or older vintage. And
    I assume it is partly because of that famous word ``parts.''
        So let me just start and go across the board and ask each--
    and if you could have succinct answers. If you do not know, you
    do not know. And thank you all for being witnesses here today.
        Will the auto industry support this bill in any form? Could
    I start with Mr. Menefee and go on to Mr. Burris, and then Mr.
    Gillis. Mr. Menefee?
        Mr. Menefee. I am sorry, Congresswoman. So the question is?
        Ms. Jackson Lee. Will the auto industry support this bill
    in any form if it would be modified. And I know you are
    opposing the premise, I guess, of dealing with parts and
    ignoring the patents and the design issues.
        Mr. Menefee. Well, my response there would be we respect
    intellectual property and patent rights. Clearly we do believe
    that this bill strikes a compromise in terms of the protection
    that should be offered there and still affords consumers what
    they deserve in terms of competition in the aftermarket parts
    area in terms of collision repairs on their vehicles. So we
    support the bill because of that.
        Ms. Jackson Lee. And if we modified it more with respect to
    concerns that will be raised by consumers, your view would be
    you would have to look at it. If we did more for consumers.
        Mr. Menefee. Well, we think the bill does quite a bit for
    consumers as it is currently structured.
        Ms. Jackson Lee. All right. Ms. Burris?
        Ms. Burris. I will give you a real succinct answer, and
    that would be a negative, Ghost Rider. We would not support
    this bill. The design patent laws provide for 14 years, and
    that is what we should have. So we do not support this bill in
    any form.
        Ms. Jackson Lee. I appreciate that. And, of course, Mr.
    Gillis?
        Mr. Gillis. There is clearly way, way too much money at
    stake for the car companies for them to ever support the
    consumer-oriented bill that is before them today.
        Ms. Jackson Lee. And why do we not pursue that a little bit
    more, Mr. Gillis, on this question of money and juxtaposed
    against what benefits come to the consumers because of the
    approach that we are looking at.
        Mr. Gillis. Well, there are two things. First and foremost,
    most of us are in pretty desperate financial condition. And I
    would like to set the record straight that Representative Issa
    called me a Lexus person. I have got 4 kids, so I am more of a
    Hyundai person. And most of us are scrimping and saving as much
    as we possibly can.
        When it comes to backing into a pole and having it cost us
    $2,000 or $3,000 to get our car fixed, our fear is, one,
    consumers are simply not going to be able to afford to have
    that car fixed. It will degrade the value of the car driving
    around with an accident. And worse, maybe they will not replace
    some of the important safety features.
        So there are a lot of problems associated with the lack of
    competition and the fact that that lack of competition
    dramatically increases the cost of repair.
        Ms. Jackson Lee. And I am glad you mentioned the Hyundai or
    other import thereof. And the concept is that the $2,000 to
    $3,000 comes from buying the part that comes from or is
    allegedly necessary for that vehicle. And is that part made in
    the United States or overseas? And I know there are some plants
    here. And there is a question of whether or not we are
    promoting domestic production by this legislation or are we
    just furthering the move of manufacturing overseas.
        Mr. Gillis. I appreciate that question, and I am glad you
    raised it because there is this constant undercurrent by the
    car companies that this is somehow trashing American business
    and hurting American production. I would like to submit for the
    record the fact that two of the most popular built American
    cars--the Ford Focus 2012 and the Chevy Cruze, the 2011 version
    of the Cruze--63 percent of the suppliers that Ford has chosen
    for the Ford Focus are foreign manufacturers. Fifty percent of
    the suppliers that Chevy has chosen for the Chevy Cruze are
    foreign suppliers.
        So this is not a foreign versus domestic issue. This is a
    fairness issue, and consumers have the right to choice in the
    marketplace. And that is what this bill would give them.
        Ms. Jackson Lee. How would you answer Ms. Burris' question
    about the 14 years and her inability to support this
    legislation based on the patent design issue?
        Mr. Gillis. Well, quite frankly, we believe that this bill
    here is a compromise. And we originally supported Congresswoman
    Lofgren's very, very elegant solution because these patents are
    being used not to protect legitimate work or legitimate designs
    of individual small parts. But these patents, as you can see by
    their dramatic increase over the last 3 or 4 years, are being
    used as a competitive tool.
        It is great to have patents. It is great to have design
    protection. But it is really unfair to consumers if that is
    being used solely to protect markets. And that is why the
    Consumer Federation of America, Consumers Union, Public
    Citizen, the Advocates for Highway and Auto Safety, who are
    here today, are against this bill. I mean, excuse me, for this
    bill, against the 14-year practice.
        Ms. Jackson Lee. We have been there before. Mr. Chairman, I
    just want to put on the record one statement--I thank the
    Ranking Member--and that is to express my dismay having helped
    bail out the auto industry about a year or two ago for a 50
    percent utilization of foreign parts versus domestic parts,
    which could enhance the manufacturing sector in the United
    States. And I know that we are not the Trade Committee, but
    maybe we can begin to understand that more and enhance
    legislation accordingly.
        With that, Mr. Chairman, I would be happy to yield back.
        Ms. Waters. Mr. Chairman?
        Mr. Goodlatte. I thank the gentlewoman. The gentlewoman
    from California?
        Ms. Waters. Could I get unanimous consent for 30 seconds to
    just raise a question, and I will talk with my husband about it
    a little bit tonight. But he tells me that the labor costs----
        Mr. Goodlatte. Without objection, the gentlewoman is
    recognized for 1 minute.
        Ms. Waters. Thank you. That the labor costs and the repair
    of these automobiles is much higher than the parts. Is that
    true?
        Mr. Gillis. No, I do not think so. It is about a 50/50
    percent. About 50 percent of the costs of the repair goes into
    labor, and about 50 percent of the costs of the repair goes
    into the parts.
        Ms. Waters. Okay. I am going to go back and check all of my
    repair bills----
        Mr. Gillis. Yes.
        Ms. Waters [continuing]. And compare the costs for the
    parts and the costs for the labor. Yield back the balance of my
    time.
        Mr. Goodlatte. I want to again thank all of the witnesses
    for their excellent testimony and for a very lively discussion.
        And before I adjourn the hearing, I want to recognize the
    gentleman from North Carolina for another unanimous consent
    request.
        Mr. Watt. I ask unanimous consent to put the letter of the
    Intellectual Property Owners Association, dated July 31, 2012,
    addressed to me and you into the record.
        Mr. Goodlatte. Without objection, so ordered.
        [The information referred to follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Mr. Goodlatte. And without objection, all Members will have
    5 legislative days to submit to the Chair additional written
    questions for the witnesses, which we will forward and ask the
    witnesses to respond to as promptly as they can so that their
    answers may be made a part of the record.
        And without objection, all Members will have 5 legislative
    days to submit any additional materials for inclusion in the
    record.
        With that, I thank the witnesses and declare this hearing
    to be adjourned.
        [Whereupon, at 4:19 p.m., the Subcommittee was adjourned.]
                                A P P E N D I X

                                  ----------

                   Material Submitted for the Hearing Record

    Response to Questions for the Record from Kelly K. Burris, Shareholder
      and Chair, Green Technology Practice Group, Brinks, Hofer, Gilson &
                                     Lione

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

             Letter from Jack Gillis, Director of Public Affairs,
                    the Consumer Federation of America (CFA)

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Material submitted by Jack Gillis, Director of Public Affairs,
                    the Consumer Federation of America (CFA)

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Letter from Aaron M. Lowe, Vice President, Government Affairs,
             the Automotive Aftermarket Industry Association (AAIA)

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

             Letter from Kathy R. Van Kleeck, Sr. Vice President,
               Government Relations, Motorcycle Industry Council

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]