[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


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                       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:]

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                               __________

    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:]

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    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.
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    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:]

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                               __________

    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

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               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

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

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    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)

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

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