    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

                      PROMOTING AUTOMOTIVE REPAIR, TRADE,
                         AND SALES (PARTS) ACT OF 2015

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

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                         COURTS, INTELLECTUAL PROPERTY,
                                AND THE INTERNET

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                   H.R. 1057

                                   __________

                                FEBRUARY 2, 2016

                                   __________

                               Serial No. 114-59

                                   __________

             Printed for the use of the Committee on the Judiciary

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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

                                __________

                      U.S. GOVERNMENT PUBLISHING OFFICE
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                           COMMITTEE ON THE JUDICIARY

                       BOB GOODLATTE, Virginia, Chairman
    F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
        Wisconsin                        JERROLD NADLER, New York
    LAMAR S. SMITH, Texas                ZOE LOFGREN, California
    STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
    DARRELL E. ISSA, California          STEVE COHEN, Tennessee
    J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
    STEVE KING, Iowa                       Georgia
    TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
    LOUIE GOHMERT, Texas                 JUDY CHU, California
    JIM JORDAN, Ohio                     TED DEUTCH, Florida
    TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
    JASON CHAFFETZ, Utah                 KAREN BASS, California
    TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
    TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
    RAUL LABRADOR, Idaho                 HAKEEM JEFFRIES, New York
    BLAKE FARENTHOLD, Texas              DAVID N. CICILLINE, Rhode Island
    DOUG COLLINS, Georgia                SCOTT PETERS, California
    RON DeSANTIS, Florida
    MIMI WALTERS, California
    KEN BUCK, Colorado
    JOHN RATCLIFFE, Texas
    DAVE TROTT, Michigan
    MIKE BISHOP, Michigan

               Shelley Husband, Chief of Staff & General Counsel
            Perry Apelbaum, Minority Staff Director & Chief Counsel
                                     ------

        Subcommittee on Courts, Intellectual Property, and the Internet

                     DARRELL E. ISSA, California, Chairman

                      DOUG COLLINS, Georgia, Vice-Chairman

    F. JAMES SENSENBRENNER, Jr.,         JERROLD NADLER, New York
    Wisconsin                            JUDY CHU, California
    LAMAR S. SMITH, Texas                TED DEUTCH, Florida
    STEVE CHABOT, Ohio                   KAREN BASS, California
    J. RANDY FORBES, Virginia            CEDRIC RICHMOND, Louisiana
    TRENT FRANKS, Arizona                SUZAN DelBENE, Washington
    JIM JORDAN, Ohio                     HAKEEM JEFFRIES, New York
    TED POE, Texas                       DAVID N. CICILLINE, Rhode Island
    JASON CHAFFETZ, Utah                 SCOTT PETERS, California
    TOM MARINO, Pennsylvania             ZOE LOFGREN, California
    BLAKE FARENTHOLD, Texas              STEVE COHEN, Tennessee
    RON DeSANTIS, Florida                HENRY C. ``HANK'' JOHNSON, Jr.,
    MIMI WALTERS, California               Georgia

                           Joe Keeley, Chief Counsel

                        Jason Everett, Minority Counsel

                                C O N T E N T S

                                  ----------

                                FEBRUARY 2, 2016

                                                                       Page

                                    THE BILL

    H.R. 1057, the ``Promoting Automotive Repair, Trade, and Sales
      (PARTS) Act of 2015''..........................................     3

                               OPENING STATEMENTS

    The Honorable Darrell E. Issa, a Representative in Congress from
      the State of California, and Chairman, Subcommittee on Courts,
      Intellectual Property, and the Internet........................     1
    The Honorable Jerrold Nadler, a Representative in Congress from
      the State of New York, and Ranking Member, Subcommittee on
      Courts, Intellectual Property, and the Internet................     7
    The Honorable John Conyers, Jr., a Representative in Congress
      from the State of Michigan, and Ranking Member, Committee on
      the Judiciary..................................................     8

                                   WITNESSES

    Jack Gillis, Director of Public Affairs, Consumer Federation of
      America
      Oral Testimony.................................................    10
      Prepared Statement.............................................    13
    Kelly K. Burris, Intellectual Property Attorney, Burris Law, PLLC
      Oral Testimony.................................................    20
      Prepared Statement.............................................    22
    Pat Felder, Owner and Founder, Felder's Collision Parts, Inc.
      Oral Testimony.................................................    30
      Prepared Statement.............................................    32
    Dan Risley, President, Automotive Service Association
      Oral Testimony.................................................    39
      Prepared Statement.............................................    42

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    The Prepared Statement of the Honorable Bob Goodlatte, a
      Representative in Congress from the State of Virginia, and
      Chairman, Committee on the Judiciary...........................     9
    Material submitted by the Honorable Darrell E. Issa, a
      Representative in Congress from the State of California, and
      Chairman, Subcommittee on Courts, Intellectual Property, and
      the Internet...................................................    51
    Material submitted by the Honorable John Conyers, Jr., a
      Representative in Congress from the State of Michigan, and
      Ranking Member, Committee on the Judiciary.....................    74

                                    APPENDIX
                   Material Submitted for the Hearing Record

    Response to Questions for the Record from Jack Gillis, Director
      of Public Affairs, Consumer Federation of America..............    90
    Response to Questions for the Record from Kelly K. Burris,
      Intellectual Property Attorney, Burris Law, PLLC...............    94
    Response to Questions for the Record from Pat Felder, Owner and
      Founder, Felder's Collision Parts, Inc.........................    96
    Response to Questions for the Record from Dan Risley, President,
      Automotive Service Association.................................    98
    Letter from the American Intellectual Property Law Association
      (AIPLA)........................................................   100

       PROMOTING AUTOMOTIVE REPAIR, TRADE, AND SALES (PARTS) ACT OF 2015

                                  ----------

                           TUESDAY, FEBRUARY 2, 2016

                            House of Representatives

                Subcommittee on Courts, Intellectual Property,
                                and the Internet

                           Committee on the Judiciary

                                Washington, DC.

        The Committee met, pursuant to call, at 4 p.m., in room
    2141, Rayburn House Office Building, the Honorable Darrell E.
    Issa, (Chairman of the Subcommittee) presiding.
        Present: Representatives Issa, Collins, DeSantis, Nadler,
    Conyers, Chu, Jeffries, Cicilline, Lofgren, and Cohen.
        Staff Present: (Majority) Vishal Amin, Senior Counsel; Eric
    Bagwell, Clerk; and (Minority) Jason Everett, Minority Counsel.
        Mr. Issa. The Subcommittee on Courts, Intellectual
    Property, and the Internet will come to order. Without
    objection, the Chair is authorized to declare a recess of the
    subcommittee at any time. We welcome everyone here today for a
    hearing on H.R. 1057, the ``Promoting Automotive Repair, Trade,
    and Sales Act of 2015,'' otherwise known as the PARTS Act. I
    will now recognize myself for an opening statement.
        This afternoon's hearing is about an important piece of
    pro-consumer legislation, the PARTS Act. It is narrowly focused
    and designed to once and for all call, appropriately, attention
    to the use of ornamental patents for broader than their
    original purpose. For a great many years, patents, known as
    design patents, were clearly understood to be ornamental,
    meaning if someone were to duplicate the appearance of a
    patented product, they would be violating that look for a
    period of 14 years. Under the PARTS Act, this is a limited
    bill. It relates only to car parts that are typically replaced
    after collision, and it allows a limited exemption to the
    design patents so the aftermarket parts of like use, of form,
    fit, and quality can be available for basic repairs.
        This does not mean that marginal or low quality parts are
    by definition to be considered as acceptable. In no way, shape,
    or form is this about the quality, as we all know, and we know
    too well, automobile companies around the world have made
    magnificent automobiles. They also made the Pinto, the Vega,
    the Yugo, the Lada, and I need not go on to tell you there have
    been cars that have been shoddy in their manufacturer,
    unreliable, and yes, I have visited the Corvair Museum. There
    are cars with other notability. But in this case, we are simply
    creating a balance between the rights of the manufacturer to
    produce an ornamental design and protect it for a period of 14
    years from its competitors, people who would produce a similar
    automobile look. That is the intent of a design patent. It was
    never intended to be, in fact, a substitute for the ability to
    simply repair a portion of something you have purchased.
        Now, let's understand the automobile industry is unique.
    They do create rolling pieces of art. Those rolling pieces of
    art should, in fact, enjoy their distinctive advantage.
    However, it is notable that it is very seldom does General
    Motors sue Toyota, Toyota sue Honda, or any of them sue
    Mercedes when they make cars that are so close together that
    even their commercials find it hard to find the automobile that
    matches. They make fun of how similar cars look and yet, you do
    not see automobile patent suits related to their design
    patents, meaning the auto companies do not consider there to be
    a great value to the design patents when they are looking at
    similar designs between automobile companies. Having said that,
    the very lucrative auto aftermarket business related to
    collision parts is an area in which the auto companies have
    attempted to establish greater and greater exclusivity. And I
    support that exclusivity, but for a limited period of time. The
    PARTS Act is intended, recognizing that an automobile exceeds
    $30,000, and one would spend three or four times that if you
    were to buy it in parts from the manufacturer that in fact,
    instead of pounding out a fender, welding or bondoing it, an
    affordable replacement in a competitive market is in the best
    interest of safety, and of course, the consumer.
        Additionally, a healthy aftermarket means more affordable
    parts for everyone, and particularly in the case of small
    production, or out of date older automobiles, or automobiles
    that are no longer produced, such as the Saturn or the
    DeLorean, or for that matter, the 1965 Mustang. These parts,
    without the PARTS Act, if a healthy aftermarket industry does
    not exist, will not and are not typically made at an affordable
    price by the manufacturer. Manufacturers do not want to have a
    lifetime responsibility to keep a set of tooling to make a
    part. If they did, certainly they would be a desirable place
    for the classic car repair business. People in Europe already
    enjoy some of the considerations that are in the PARTS Act, and
    for a good reason. The consumer has an expectation that it is,
    and a reasonable expectation, that there will be a competitive
    market for repair parts for their automobile. There certainly
    is for brake pads. Why would there not be for a bent fender? I
    look forward to working with people on both sides of the aisle,
    and on both sides of this issue to ensure we make the kind of
    limited, narrow, and appropriate changes to the patent law to
    allow automobiles to be repaired, while in fact protecting the
    intellectual property of the auto manufacturer or any other
    original equipment producer now or in the future.
        [The bill, H.R. 1057, follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                          __________
        Mr. Issa. I look forward to our witnesses today, and I look
    forward to working with the Chairman and Ranking Member on this
    area as we move forward with the PARTS Act and it gets signed
    into law. I now would like to recognize the Ranking Member of
    the Subcommittee.
        Mr. Nadler from New York, for his opening statement.
        Mr. Nadler. Thank you, Mr. Chairman. Today, we consider
    H.R. 1057, the ``Promoting Automotive Repair, Trade, and
    Sales,'' or ``PARTS Act of 2015.'' This legislation introduced
    by Chairman Issa and the gentlewoman from California, Ms.
    Lofgren, would reduce the term of design patent protection for
    exterior automotive repair parts like fenders, side view
    mirrors, and headlights from 14 years to two and a half years.
    Supporters see it as a pro-consumer bill to foster much needed
    competition in the collision repair parts market. But opponents
    see it as an unfair exemption to established patent law at the
    expense of one industry, with potential safety implications.
    Each side makes compelling arguments, and I appreciate the
    opportunity to examine these issues in greater detail today.
        According to supporters of the PARTS Act, thousands of
    consumers each year pay artificially inflated prices for car
    repairs because auto manufacturers control more than 70 percent
    of the market for repair parts. To make matters worse, they
    say, manufacturers have recently begun to enforce their design
    patents against generic parts makers, threatening to eliminate
    whatever competition currently exists for aftermarket parts.
    Without the PARTS Act, they argue, consumers could see already
    high prices soar even higher as the generic market shrinks and
    automakers seize a near monopoly on repair parts. These
    consumers see a market with little competition, and wonder why
    there is a thriving market for generic drugs, but not for
    generic taillights. According to some estimates, since generic
    auto parts can cost up to 50 percent less than brand name
    alternatives, consumers would pay over $1 billion a year more
    for repair parts if the independent market were to be
    eliminated altogether. And if repair parts cost more, insurance
    companies will be forced to raise their rates too, further
    hurting consumers.
        The PARTS Act would provide automakers 30 months of design
    patent protection for aftermarket products, long enough,
    supporters argue, for automakers to receive a healthy return on
    investment, but not so long that it would stifle the
    competitive market for repair products that consumers deserve.
    And car companies would still retain a full 14 years of
    protection against other automakers that might seek to copy
    their designs on new cars, since the bill only applies to
    repair parts. But this begs the question why single out only
    one industry for weaker patent protection? Opponents of the
    PARTS Act believe it would set a dangerous precedent in
    intellectual property law. They fear a slippery slope in which
    more and more industries are carved out for special treatment
    under the patent system, leading to a system that is both
    incoherent and unfair. How should we draw the lines between
    which industries are deserving of full protection, full 14-year
    protection, and which are not? We may not always appreciate the
    aesthetic design of a car's component parts, but automakers
    invest significant resources to design every aspect of their
    products so that they stand out to potential buyers.
        Opponents of the PARTS Act argue that it would be unfair to
    deprive these manufacturers of the full return on their
    investment. They also note that auto manufacturers employ
    nearly 30,000 people in the U.S. in design centers. We risk
    losing some of these jobs if we reduce the incentives for
    automakers to create the innovative designs. Opponents further
    warn that the bill could threaten the safety of unsuspecting
    consumers who purchase a generic repair part, which may be of
    lower quality than its brand name equivalent. If a generic
    bumper looks identical but provides insufficient protection in
    an accident, it is certainly no substitute. As we examine the
    PARTS Act, we should consider whether additional safeguards
    ought to be put into place to protect consumers from shoddy
    parts before encouraging a significantly larger market for such
    generic products. Today's hearing hopefully will help us to
    determine the answers to these and other important questions,
    as we examine the proper balance between respecting the rights
    of creators and ensuring that customers enter a safe,
    competitive marketplace. We have an excellent set of witnesses
    to help us sort through these issues, and I look forward to
    their testimony. I yield back the balance of my time.
        Mr. Issa. I thank the gentleman. We now go to the gentleman
    from Michigan, the home of most, but not automobiles.
        Mr. Conyers. All the big three.
        Mr. Issa. Oh, yes, but Cleveland rocks. Thank you, Mr.
    Chairman. I will now recognize the gentleman from Michigan.
        Mr. Conyers. Thank you so much, Mr. Chairman. Members of
    the Committee, this bill would create an exception for certain
    automotive parts from patent protection, and so we should
    review the bill's impact on patent law, but also on consumers.
    To begin with, we should consider whether the exception in this
    bill to design patent law undermines our intellectual property
    system. Intellectual property protection is a cornerstone of
    our economy. This legislation, however, creates an exception
    for design patents, and could arguably weaken our patent
    system. It could foster the importation and sale of all
    unauthorized copies of patent protected vehicle parts.
    Automotive companies make significant investments in the
    development of new exterior automotive parts. Then they acquire
    a design patent so other companies cannot use these designs
    without their approval. Our patent system protects the patent
    holder, as it should.
        Now, if Congress is going to legislate a carve-out in
    patent law, the reasons for it should be exceptional.
    Supporters of this legislation contend that Congress needs to
    create an exception because the cost of replacement parts
    offered by car companies is too expensive. They argued that
    lower prices would benefit consumers who need to make repairs
    to their vehicles. But automotive manufacturers may raise
    prices on new cars to replace lost revenue parts that would
    otherwise infringe their design patents are allowed on the
    trade market. This will hit consumers' pocketbooks when they go
    to purchase new cars and trucks, and it will hurt car companies
    who are still getting back on their feet. We have heard this
    cost argument in other situations, but if we weaken the patent
    system by creating an exception, we will be weakening the
    incentive for companies in every industry to be innovative and
    to bring new products to market. Finally, we must consider how
    the bill would impact consumer safety. I am concerned that off
    brand parts in general may be less safe than those provided by
    car companies because there are no Federal regulations
    requiring minimum safety standards for off-brand parts. In
    fact, the vast majority of these parts are never subject to
    inspection by third party testing organizations.
        Without Federal minimum safety standards on the quality of
    non-original replacement parts, consumers' safety may be at
    risk. Consumers already have a difficult time telling the
    difference between a quality part and an inferior or even
    dangerous one. An exception to patent protection as proposed by
    the measure under examination this afternoon could make this
    problem worse. While a part protected by a design patent is not
    necessarily a guarantee of quality, the fact is, is that if car
    companies churn out inferior or defective parts, they are
    ultimately held accountable. I am sympathetic to the consumer
    cost concerns that supporters of this bill are raising today.
    But I am not yet convinced that such an exception will bring
    forth the benefits they claim will come. While there is no
    guarantee that the insurance companies will pass savings onto
    consumers, what is guaranteed is that if this bill passes,
    there will be more unregulated, untested car parts on the
    market, and we will see many more groups seeking exceptions to
    our patent laws. And for these reasons, I come to this hearing
    skeptical of creating an exception in our design patent laws as
    envisioned by the measure before us today. And I thank the
    Chairman, and yield back.
        Mr. Issa. I thank the gentleman. I now ask unanimous
    consent that the Chairman of the full Committee, Chairman
    Goodlatte's opening statement be placed in the record. Without
    objection, so ordered. Without objection, other Members'
    opening statements will be made a part of the record.
        [The prepared statement of Mr. Goodlatte follows:]
    Prepared Statement of the Honorable Bob Goodlatte, a Representative in
      Congress from the State of Virginia, and Chairman, Committee on the
                                   Judiciary
        Good afternoon. Today's hearing will look at 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 car 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.
        There has been a recent increase in the number of applications for
    design patents for individual parts of vehicles. This 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 to
    reap more profits, meaning the independent garages could lose a war of
    attrition.
        Representative Issa has introduced H.R. 1057, 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 we 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.
        I think we have a great panel assembled today and I look forward to
    hearing from all of our witnesses.
                                   __________

        Mr. Issa. Today, we have a distinguished panel before us,
    two witnesses for the bill, two witnesses who are skeptical, as
    the Ranking Member said. The witnesses' opening statements or
    written statements have been entered into the record in its
    entirety, and I ask please for you each to summarize in
    approximately 5 minutes. If you can stay within the time, it
    will allow us not only to get through your opening statements,
    but through a robust set of questions from this side of the
    dais, and still adjourn before our votes, which will come some
    time probably shortly after 5.
        Before I introduce the witnesses, and pursuant to the
    Committee's rule, would all four of you please rise to take the
    oath? And please raise your right hands.
        [Witnesses sworn.]
        Please be seated. Let the record reflect that all witnesses
    answered in the affirmative. Our witnesses today include Mr.
    Jack Gillis, director of public affairs for Consumer Federation
    of America; Ms. Kelly Burris, intellectual property attorney
    and owner of Burris Law Firm, PLLC; Ms. Pat Felder, owner and
    founder of Felder's Collision Parts. And which city in
    Louisiana, ma'am?
        Ms. Felder. Baton Rouge.
        Mr. Issa. Baton Rouge. I love to just say that. That is
    such a pretty, pretty city. And Mr. Dan Risley, president of
    the Automotive Service Association. Again, your entire written
    statements will be placed in the record, and Mr. Gillis, you
    are first up.
        Mr. Gillis. Thank you very much.
        Mr. Issa. I am afraid, Mr. Gillis, for the record, if you
    could either turn on your mic, or pull it closer, or both.
        Mr. Gillis. It was off.
        Mr. Issa. Thank you.

    TESTIMONY OF JACK GILLIS, DIRECTOR OF PUBLIC AFFAIRS, CONSUMER
                         FEDERATION OF AMERICA

        Mr. Gillis. In addition to representing the Consumer
    Federation, I am also representing 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. We are extremely grateful for your invitation
    to appear today. I would like you to consider any of the
    following experiences, which happen every day. You back into a
    pole, you sideswipe your car, and fortunately, these fender
    benders generally do not result in injuries, but they do result
    in shocking repair costs. Why does a fender bender have to cost
    $2,000 to $3,000 to get your car fixed? Well, one reason is the
    cost of the parts that we need to get our cars repaired. For
    example, Ford charges the same price for a fender as Dell
    charges for a computer and a flat screen monitor. An unpainted
    door from Toyota costs the same as a Sears refrigerator, and
    that refrigerator comes with two doors already painted and
    already installed.
        In fact, a variety of products are cheaper and better today
    thanks to one thing, competition. In the early 1990's, the car
    companies asked Congress for special design copyright patent
    protection on these replacement parts and Congress said no.
    Blatantly ignoring Congress' admonition, there has been an
    enormous spike in the number of design patents by companies
    like Honda, Toyota, and Ford. For these companies to come
    before you today and say that suddenly, these parts are
    patentable, when for years and years they were not, is both
    disingenuous and extraordinarily costly for the American
    consumer. This is a newfound business strategy, not a
    legitimate use of U.S. patents. The competition that the car
    companies are trying to kill lowers prices, provides choice,
    and improves quality. When we plunk down our hard-earned
    dollars for a new car, we are buying a car, not a lifetime of
    indenture to the car companies to buy their brand of parts.
        Regarding the safety of these parts, the very organization
    cited by the car companies, the Insurance Institute for Highway
    Safety, did address this issue, and determined in both low-
    speed damage tests and high-speed crash safety tests, that
    alternative parts, CAPA certified to be the same, in fact
    performed nearly identically. I have been fighting for safer
    cars for over 35 years, and I find it bizarre that the car
    companies are coming before this Committee to allege that their
    illicit use of design patents is for safety reasons. This very
    Congress has caught these car companies red-handed, foisting
    unsafe air bags, ignition switches, and other defects on their
    very own customers. In fact, in addition to cheating on fuel
    economy standards for the last 2 years, about three times as
    many cars have been recalled as have been actually sold. The
    most tragic irony of the lack of competition is what I call the
    automaker's double whammy. Not only can the car companies
    charge whatever they want for the parts that 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. Imagine that business model.
        And here is the icing on the cake. In spite of all of their
    admonitions against competitive parts, Ford, GM, and Chrysler
    have all entered into special agreements, specifically allowing
    independent manufacturers to make their patented parts with no
    oversight or specifications. Are not these the very parts that
    they are railing against? Nevertheless, because of these
    patents, they are getting royalties for the manufacture of the
    very parts they are telling this Committee should not exist.
    That, to me, is the height of hypocrisy. So we applaud
    Representatives Issa and Lofgren for introducing H.R. 1057. It
    is a step forward in protecting the American consumer from
    being forced to pay unfair prices to fix our own cars, while
    still enabling the car companies to retain the design patent
    protection on the overall vehicle. So on behalf of the Consumer
    Federation of America, the Advocates for Highway and Auto
    Safety, the Center for Auto Safety, Consumers Union, and Public
    Citizen, I strongly urge Congress to adopt the repair clause to
    the design patent law. And we thank you very much for providing
    us with the opportunity to discuss this issue we did today.
        [The prepared statement of Mr. Gillis follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      __________
        Mr. Issa. Thank you. Ms. Burris?

     TESTIMONY OF KELLY K. BURRIS, INTELLECTUAL PROPERTY ATTORNEY,
                            BURRIS LAW, PLLC

        Ms. Burris. Good afternoon, Chairman Issa, Ranking Member
    Nadler, and distinguished Members of the Subcommittee. Thank
    you for the opportunity to be here today, and to share my views
    on another version of the PARTS Act, the PARTS Act of 2015, on
    none other than Groundhogs Day. I cannot be the only one that
    noticed that, right? So I have serious concerns with the
    legislation and the impact it would have in three primary
    areas. First of all is jobs, good, high paying, white-collar
    jobs. Second, as we have all been discussing, the safety, and
    the quality of the vehicles. And third, more important to me,
    is the impact it would have on our legal system, and more
    specifically, the degradation of our patent systems. So jobs,
    briefly, which was set forth in more detail in my written
    statement, in the United States, this is a hub for industrial
    designers in the United States for automotive vehicle design.
    You have 15 OEMs with 21 design centers in the United States,
    in Michigan, in Ohio, and in California. Those design centers
    employ roughly 30,000 industrial designers and there is to the
    tune of billions of dollars being spent in the United States on
    the look of that car, something that is eye pleasing to the
    consumers.
        And so, this is a hub for industrial designers here in the
    United States. And in a time when we are pushing STEM education
    to our youth, I just find it odd that we are pushing students
    to go that direction, but yet devaluating what it is that an
    industrial designer produces as a result of their engineering
    efforts. So number two is the safety and quality, which we will
    I know talk about more. And one of the things I do not think we
    have really flushed out a lot is we are not looking at these
    parts in a vacuum. These parts, these exterior parts of the
    vehicle, are part of an overall system. And as the automotive
    manufacturers are putting collision avoidance technology into
    the vehicles, lane avoidance, lane detection, there are sensors
    all over the car. And are we looking at the interaction between
    those sensors and the exterior parts? And what if you replace a
    part that does not have the same quality standards, will it
    function the same with the rest of the system? And as we move
    toward autonomous vehicles, I think that situation gets a
    little more intense, so that is something I think we should
    have a conversation around. Third and more important to me as a
    patent attorney is, okay, so we carve out this exception for
    repair parts. What is next? I drop my smartphone on the floor.
    I have to get it repaired. It is too expensive. Do we go to
    Apple and Samsung and say, ``Hey, guys, guess what? We are
    going to take away your design patents, too'' because they have
    many more design patents, and I would love to look at a curve
    of what their design patents look like in that industry,
    especially after the Apple-Samsung case.
        Secondly, I think the practical impact of the 30 months is
    really--amounts to much less than 30 months if any term
    whatsoever, because it is from the date of the offer for sale,
    and automotive manufacturers, any design patent applicant does
    not have that design patent in hand as soon as they go launch
    their product at an auto show, at a trade show, off to the
    trimmers. So by the time the consumer gets in the car and hits
    the road, I do not think you are going to see any patent term
    at all, so that 2-1/2 years does not--it is not 2-1/2 years
    from a practical standpoint. The language of the bill also
    talks about motor vehicles. It is not automobiles. We are
    talking about motorcycles, scooters, farm equipment. If you
    look at Caterpillar, Harley-Davidson, they own hundreds of
    design patents themselves, so this is reaching into other
    industries besides automotive. So that is another concern that
    I have. And I know that there has been discussions about this
    type of legislation being enacted in Australia and also in
    Europe, but I have not seen any facts to show what impact that
    is having in those countries. And I will also note that the
    deliberations in the European Union, they are talking about
    making sure that those parts are being marked and that there is
    compensation to the original design patent owner. So I will
    stop my remarks there, and I thank you for your time, and I
    look forward to our discussions today.
        [The prepared statement of Ms. Burris follows:]

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                         __________
        Mr. Issa. Thank you, and I will mention that I had to get
    on three airplanes, one after another, and get off of them
    before I finally got on the plane that brought me here, so I
    feel groundhog is with us. Ms. Felder?

    TESTIMONY OF PAT FELDER, OWNER AND FOUNDER, FELDER'S COLLISION
                              PARTS, INC.

        Ms. Felder. Chairman Issa and Ranking Member Nadler, and
    Members of the Subcommittee, I am Pat Felder. My husband and I
    own Felder's Collision Parts in Baton Rouge, Louisiana. Felders
    is a small business, which has been making quality, lower-cost,
    aftermarket collision repair parts available in the marketplace
    since 1987. At the outset, I would also like to thank Chairman
    Issa and Representative Lofgren for their bipartisan leadership
    in sponsoring the PARTS Act, as well as the other House
    Judiciary Committee co-sponsors of this bill. I am testifying
    on behalf of all of the independent aftermarket distributors
    throughout the country, who have, like Felder's, been on the
    front lines of the car companies' efforts to eliminate
    competition through design patent enforcement. It has been a
    gut-wrenching experience having to lay off good, long-term
    employees who are all like family.
        To help frame this issue, if you have ever been in a fender
    bender, and at that time you had your car repaired, you have
    benefited from competition in the collision repair part
    marketplace, whether you knew it or not. This competition has
    existed for decades between the car companies and the
    aftermarket industry. The collision repair parts to which I am
    referring are cosmetic in nature; the exterior parts of a car,
    such as a fender, a hood, or a grill; generally speaking, these
    parts are not structural or safety-related parts. The purpose
    of these parts is to restore the vehicle's original, pre-
    accident appearance. These are must-match parts that leave no
    room for innovation by alternative suppliers. The car companies
    currently have two-thirds of the collision repair market, while
    alternative suppliers have about 14 percent, with salvage
    making up the difference. Despite our relatively small market
    share, the competition that we provide is important because
    alternatively-supplied collision repair parts typically are 26
    to 50 percent less expensive than the car company parts. But
    even if a consumer uses a more expensive car company part, the
    competitive marketplace has caused companies, car companies, to
    lower their collision part prices. The estimated total benefit
    to consumers from the availability of alternative parts is
    approximately $1.5 billion per year.
        Despite the benefit of competition, some car companies are
    seeking to eliminate competition, and expand their dominant
    share of the market by obtaining 14-year design patents on
    their collision parts, and enforcing them against alternative
    suppliers. In 2005 and 2008, Ford filed design patent
    infringement complaints at the International Trade Commission
    against aftermarket suppliers of collision repair parts for the
    F-150 pickup truck and Mustang, respectively. Ultimately, these
    suits resulted in an exclusive settlement by which one of the
    aftermarket competitors must pay a royalty to Ford for every
    Ford aftermarket part it sells, a cost that will be passed
    along to the consumer. And for all of the aftermarket suppliers
    like Felder's, who are not part of this exclusive settlement
    with Ford, we are at risk of design patent infringement suits
    if we continue to sell these parts as we have done in the past.
    As a result, Ford effectively created a duopoly, diminishing
    competition in the repair parts marketplace for owners of
    Fords. Since that time, Chrysler and General Motors have
    followed Ford's lead.
        The impact of eliminating competition in the collision
    repair market falls directly on consumers in several ways. $1.5
    billion would be added to insured automobile repair costs every
    year, resulting in higher premiums. Consumers paying out of
    pocket might choose to forego repairs, and higher repair costs
    may increase the likelihood of a vehicle being declared a total
    loss. The impact would be much greater on those of low income
    or fixed income consumers who can least afford it. Moreover,
    the average consumer keeps their vehicle for 11 or more years,
    and it depends on the competitive repair marketplace, not only
    for the affordable quality repairs, but also to the extent that
    the car companies no longer can sell these certain or do sell
    these certain collision parts. We are not here today to
    advocate for the use of one part over another. We believe that
    the PARTS Act will preserve competition in the market for
    collision repair parts and benefit consumers by helping to keep
    the cost of car ownership as low as possible. Thank you.
        [The prepared statement of Ms. Felder follows:]

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                   __________
        Mr. Issa. Thank you. Mr. Risley.

                  TESTIMONY OF DAN RISLEY, PRESIDENT,
                     AUTOMOTIVE SERVICE ASSOCIATION

        Mr. Risley. Good afternoon, Mr. Chairman, and Members of
    the Subcommittee. My name is Dan Risley.
        Mr. Issa. We are going to need you just a little closer to
    the microphone.
        Mr. Risley. Closer to the microphone.
        Mr. Issa. Thank you.
        Mr. Risley. My name is Dan Risley, and I am the president
    of the Automotive Service Association, and I am here today
    representing our association. ASA is the largest not-for-profit
    trade association of its kind, dedicated to and governed by
    automotive service and collision repair professionals. ASA
    serves an international membership base and includes numerous
    affiliate state and chapter groups from both the collision and
    mechanical repair segments of the automotive service industry.
    Prior to ASA, I worked at a family-owned collision repair
    facility, served as the executive director of another
    automotive association, as well as spent a number of years at
    Allstate Insurance Company. ASA has a long history of working
    with insurance companies, and ensuring our customers the best
    possible repair experience after an accident. ASA is supportive
    of insured direct repair programs, provided the vehicle owner
    has a choice and is properly informed of it. Many of our
    leaders serve on direct program repair advisory boards of State
    and national insurance companies, including myself.
        Many years ago, I participated on a top three insurance
    carrier's advisory panel. Although we work closely with
    insurers, we are mindful that our customers' vehicles are our
    first priority, and that these vehicles must be safely and
    properly repaired. We do have concerns when some insurers
    insist on repairs that are simply cheaper and quicker without
    regard to quality and safety. This is not to imply that all
    insurance carriers are the same. There is a difference between
    standard and non-standard. That is why my board of directors,
    made up of repair shop owners from across the U.S., wanted to
    meet to testify here today before you.
        The automobile is the second most expensive purchase made
    by Americans. Although the automobile is a major part of most
    Americans' daily lives, few vehicle owners know much about
    collision repair. After an accident, other than contacting law
    enforcement or other emergency personnel, the vehicle owner
    contacts their insurance company for help and direction.
    Unfortunately, very few consumers have any knowledge about the
    types of crash parts used to repair their vehicles, and there
    are numerous parts choices in the marketplace, such as original
    equipment manufacturer parts, certified and non-certified
    aftermarket parts, remanufactured, and recycled. The
    fundamental language used in this bill would systematically
    validate any and all aftermarket parts to be the equivalent of
    an OEM part. In section 2 of the bill it states, ``So as to
    restore such vehicle to its appearance as originally
    manufactured.'' This is impossible unless, of course, there is
    a standard by which all the aftermarket parts companies are
    required to meet. We have several standard settings parts
    certifiers in the marketplace today, CAPA being one, and NSF
    being another, and it is supported and endorsed, recognized by
    the industry, both collision and insurers.
        CAPA was created in the 1980's because there was no
    standard. There were no requirements, no monitoring of
    aftermarket parts. It was the equivalent of the wild, wild
    West. Having worked in a family-owned collision repair
    facility, I can assure you that we ordered, and I have
    personally installed, many parts in the early '80's when CAPA
    did not exist. These parts that were deemed to be OEM
    equivalent were later deemed to be inferior in terms of fit and
    function. Although an aftermarket part looks the same as an
    OEM, it does not mean it is the equivalent of an OEM-quality
    part. It does not mean that the part has the same corrosion
    resistance, metallurgical properties, or that it will perform
    the same in a subsequent accident, similar to how an OEM would
    perform. Certification helps to eliminate or narrow those gaps.
    Although parts certification is not perfect, it does positively
    impact parts quality. I have spent several years chairing a
    Committee, working with the Taiwanese aftermarket parts
    manufacturers as well as their government. One of the biggest
    challenges for the Taiwanese was the U.S. marketplace and
    balancing the cost versus quality. The fact is, certified parts
    do cost more to produce. Certification not only is important
    but critical to this debate.
        Under the current language in H.R. 1057, providing a
    faster, less expensive path for aftermarket crash parts
    manufacturers to put non-certified parts in the marketplace
    will both harm both consumers and small businesses. It has been
    proven through many years of collision repair's trial and error
    that the vast majority of non-certified parts are inferior in
    many aspects, not only to the OEM, but also to the equivalent,
    certified aftermarket part. Aftermarket crash parts
    manufacturers will manufacture parts to achieve the lowest cost
    in an effort to sell the parts inexpensively to distributors in
    the U.S. demanding a low-cost basis. I have personally
    witnessed aftermarket parts, non-certified, that did not have
    holes where there are supposed to be holes to fasten it to the
    vehicle. I have personally witnessed parts that have additional
    holes, where there was not supposed to be any to fasten it to
    the vehicle. I have witnessed parts that were not of the same
    metallurgical thickness, parts that were significantly lighter,
    and prone to dent, missing brackets, missing headlamp parts,
    wrong color, improper reflective properties. When parts do not
    fit or there are other issues, collision shops have to return
    the parts to the distributor. These returns add cost to the
    collision repair process as well as delay the repair.
        Whether it is legislation being discussed today or in
    mandates that insurers place on collision parts facilities such
    as where to buy parts, insurers will argue that these
    initiatives lower premium costs. We do not see where these
    parts savings are passed onto consumers. It is a good
    soundbite, but the consumer will continue to be the loser in
    this equation.
        I want to leave you with a few key points. Number one, a
    free and open marketplace does not entail enacting a law that
    states aftermarket parts are equal to OEM. This should be
    decided by the people actually purchasing the parts.
    Competition is good. There is a need for alternative parts such
    as certified aftermarket parts, recycled, remanufactured, used.
    Legislating competition so that Company X and Y are equal is
    similar to legislating that Walmart shirts are similar to
    something you might see at Macy's just because it looked the
    same online in a picture. You may hear or have heard testimony
    here today about these parts being cosmetic. I can assure you,
    a hood is not a cosmetic part. A hood is designed to crumple.
    In the event that the hood should fail to crumple, the hood is
    going to be pushed into the windshield and into the occupants.
    If it does not fold like an accordion--I am going to close it
    up. We ask the Committee to consider the implication this
    legislation will have on the consumer and small business. We
    ask the subcommittee to oppose the PARTS Act. I appreciate the
    opportunity to testify before the Committee today, and thank
    you very much for your time.
        [The prepared statement of Mr. Risley follows:]

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                       __________
        Mr. Issa. I thank you. We have a number of Members that
    have to go to the floor, so what I am going to do is I am going
    to take the liberty of, without objection, calling on Members
    that must leave for the floor out of order. If anyone objects,
    please let me know. Otherwise, I am going to try to accommodate
    Members that I know have to leave. With that, I will go to my
    Ranking Member, Mr. Nadler, first.
        Mr. Nadler. Thank you, and I appreciate this. I do have to
    go to the floor to debate an amendment shortly. Mr. Gillis,
    what is the rationale for singling out just the auto parts
    industry for special treatment under the patent laws, and do
    you worry about the precedent that this bill would set by
    limiting patent protection for one narrow category of items?
        Mr. Gillis. Yes, that is a possibility. I think that
    overall there are probably a number of industry areas that
    could use this type of repair clause for manufacturers.
        Mr. Nadler. What is the rationale for singling out this
    industry?
        Mr. Gillis. Well, at this point right now, it is one of the
    most expensive items that consumers experience on a day-to-day
    basis. When you back into a pole and it costs you $3,000 or
    $4,000.
        Mr. Nadler. It is very expensive. That is the rationale.
    And the other rationales?
        Mr. Gillis. That is right. Expense is the key rationale.
        Mr. Nadler. Okay, and why now? Why not 20 years ago, or, I
    mean, why are we seeing this now?
        Mr. Gillis. Well, 20 years ago, the car companies came
    before Congress, and Congress said, ``No,'' so thankfully, to
    Representative Issa and Representative Lofgren, we have raised
    this issue again.
        Mr. Nadler. But they have not changed? In other words, I
    thought you said that there was a change recently.
        Mr. Gillis. Yes. As you see from that chart over there,
    there is an exponential increase in the number of parts that
    are being designed patent by the car companies.
        Mr. Nadler. But the change in the behavior of the auto
    companies in exercising these patents.
        Mr. Gillis. Exactly.
        Mr. Nadler. And what sort of protections are in place or
    should be in place to ensure the quality and safety of generic
    repair parts?
        Mr. Gillis. Well, first and foremost, the parts should be
    certified to be functionally equivalent to the car company
    brand parts.
        Mr. Nadler. Certified by whom?
        Mr. Gillis. Well, there is at least one agency that I am
    familiar with called the Certified Automotive Parts
    Association. It has been around since 1987, and in the
    interests of full disclosure, I am the executive director of
    that nonprofit group.
        Mr. Nadler. Okay. Thank you. Ms. Burris, I am sorry. We
    have heard about the potential threat to safety that generic
    repair parts may pose. Can you point to any studies that
    document that there are in fact such risks?
        Ms. Burris. Well, I believe there were some studies pointed
    out in a written statement that I submitted. I have also
    gathered information from the automotive companies that, for
    example, a bumper and the material that it is made out of is
    designed to absorb energy from a crash, and in one specific
    instance there was a design with I believe some continuous
    glass fibers in the bumper.
        Mr. Nadler. That is one specific.
        Ms. Burris. Yeah.
        Mr. Nadler. Is there data to show the generic parts
    involved in accidents have a greater rate than parts made by
    the manufacturers?
        Ms. Burris. Yes.
        Mr. Nadler. There is?
        Ms. Burris. Yes, and as a matter of fact, there are reports
    in my written statement, and I would be glad to follow up with
    additional reports.
        Mr. Nadler. Okay, and according to estimates referred
    today, auto manufacturers control more than 70 percent of the
    market for repair parts. If the industry continues to enforce
    these design patents against generic parts, it could achieve a
    near-monopoly. Without competition, how can consumers be sure
    they are receiving a fair price for these products, if we are
    not to pass this bill?
        Ms. Burris. Well, there are options for the consumers. The
    consumers can use refurbished parts. They can repair the parts.
    There are a lot of technologies you can use to repair. You can
    also make the design look different.
        Mr. Nadler. All right. Let me ask one last question. Under
    current law, design patents and auto repair parts receive 14
    years of protection against infringement. Most consumers do not
    own their cars for that long. Does this not effectively provide
    car companies a lifetime protection against competition for
    repair parts in most instances, and if this bill, if 30 months
    is too short, I think somebody said 30 months is too--I think
    you said.
        Ms. Burris. Yes.
        Mr. Nadler. It does not go into effect right away, is there
    some other period greater than 30 months but less than 14 years
    that might be a fair solution, and how would you determine
    that?
        Ms. Burris. Well, my concern with reducing it to any term
    below 14 years is, what other exceptions are going to be made
    for other industries? That is what I worry about.
        Mr. Nadler. Okay, I understand that generic argument. I
    made it myself, but talking about design patents, one argument
    you made was that--I mean, there are two things here. One,
    people do not own cars for 14 years, and that would seem to
    argue against the 14-year patent, and two, you said that--I
    should not say nobody owns a car for 14 years. My father did,
    but most people do not.
        Ms. Burris. I do.
        Mr. Nadler. But that is number one, and number two, you
    pointed out that under this bill, it does not go into effect
    right away, that is 30 months after.
        Ms. Burris. It is retroactive.
        Mr. Nadler. Okay. Would there be a different period longer
    than 30 months but under 14 years that might be a more fair
    resolution?
        Ms. Burris. Yeah, I think that is a question that the
    automotive companies should try to answer. From a legal policy
    standpoint, I would not, I do not, again I worry about what
    that would do in other areas.
        Mr. Nadler. So your basic argument is uniformity of the
    patent law?
        Ms. Burris. Pardon me?
        Mr. Nadler. Your basic argument is uniformity across
    different areas of the patent law?
        Ms. Burris. Right, because as soon as you make an
    exception, right?
        Mr. Nadler. Got it. Thank you. I thank the Chairman for
    allowing me to question out of order.
        Mr. Issa. I very much thank you for your comments and
    input. At this time, I would like to ask unanimous consent that
    the following documents be placed in the record. The statement
    by Robert L. Lyon, president and CEO of Rockingham Group, and
    others.1 deg. Without objections, so ordered. And a
    second document, ``Aftermarket Shock: The High Cost of Auto
    Parts Protectionism,'' by Brian Garst, 2016.2 deg.
    Without objection, so ordered. Additionally, I will ask that
    design patent number 352685,3 deg. dated 1994, and
    design patent 345317,4 deg. March 22, 1994, be placed
    in the record, and I will note I was the designer of those and
    may just choose to ask questions on that. And with that, I
    would like to go to Mr. Collins, who also has to go to the
    floor.
        [The material referred to follows:]

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                      __________
        Mr. Collins. And I do appreciate it, Chairman. It is always
    good to be with the Chairman. This Committee I think is really
    hitting on one of the biggest parts, but I will also not that
    the patents that just got admitted into by unanimous consent
    also were good for 14 years, so that is an aspect, which is
    good and which it needs to be. I think there are some aspects
    about this bill that are good. There are some aspects that need
    to be discussed, but there are also some very disturbing, you
    know, questions. Ms. Burris, you brought up some. Mr. Gillis,
    we are going to get to some. The heart of this, though, and I
    want to get back to this, and Ms. Burris, I will just start
    with you. If you take the premise of the bill as correct, okay,
    which I have no doubt the authors, you know, in looking at it
    and I think there are some ways that we can work together. I
    have some specific concerns about language in the bill, but I
    think there are some possibilities we can work on. The premise
    of the bill is, do consumers lack affordable options in the
    marketplace due in full to ornamental design patent
    protections? If you take the premise of the bill, that is what
    the premise of the bill basically is because we have heard
    about it already. It is money. Mr. Gillis just said that, so is
    that true?
        Ms. Burris. No, it is not true. The consumers have choices.
    They can go with refurbished parts, remanufactured parts, they
    can repair the parts. And, you know, from my perspective as a
    patent attorney, they just need to make it look a little
    different, and then it will not be infringing the design
    patent.
        Mr. Collins. Right.
        Ms. Burris. It is not that tough.
        Mr. Collins. No, it is not, and I think--well, take that a
    step further, and even if the cost differential of the parts is
    different, there is no evidence that consumers directly would
    save money if this bill is enacted.
        Ms. Burris. That is correct. The last hearing that we had,
    I believe the testimony was that consumers' insurance premiums
    would not go down.
        Mr. Collins. Okay, and I think Mr. Gillis, I would think
    you would disagree, but is there hard and fast evidence that
    consumers will save money post-enactment of this legislation?
        Mr. Gillis. Absolutely. When you look at the comparative
    cost of an OEM part to an aftermarket part, it is phenomenally
    different, and that is what consumers pay for if they are
    crashing the car themselves and paying for it themselves, or it
    is being incorporated into their insurance premiums.
        Mr. Collins. Okay, and I think you take a major leap of
    faith there, which I am a man of faith, so I will go with your
    leap of faith.
        Mr. Gillis. Thank you.
        Mr. Collins. I could understand if I was buying it myself,
    like my Honda has a broke front end right now. Zip ties work
    wonderful, but if I did it myself, then I possibly could save
    money there, but if I depend on the insurance company to pass
    their savings along to me, can you honestly sit here under oath
    and say that I am going to see savings from my insurance
    company?
        Mr. Gillis. Well, I think you are already seeing those
    savings because most insurance companies do already use
    aftermarket parts.
        Mr. Collins. Exactly, but you are extrapolating there, if
    this bill was enacted, that that would happen.
        Mr. Gillis. Well, I think you have extrapolated the
    opposite way, and you would probably see insurance premiums
    raised if these parts were not available to the marketplace.
        Mr. Collins. I think that is the wonderful thing for these
    hearings is discussions and disagreements such as that. But in
    your written testimony, I do have an interesting question, and
    this will--and I am going to sort of finish up here because,
    like I said, I think the Chairman and Ms. Lofgren, who I have
    the greatest respect for, there is some ideas here that we
    might could work for, but in your written testimony, you make a
    comment, and it is on page three of your written testimony. It
    says, ''Not only do customers have the right to competition,
    they both have the right to safe and high quality competitive
    parts.'' I am just curious. Where are you getting a right to
    competition?
        Mr. Gillis. Well, I think that is a fundamental right of
    the American capitalistic marketplace that has caused consumers
    great benefit over the years and taking away competition from
    the consumer is un-American.
        Mr. Collins. Well, I mean we can debate American or un-
    American, but really when you say a ``right,'' you are implying
    almost a legal concept here, and I think that is an interesting
    way to hyperbole to put that.
        Mr. Gillis. I am implying a fundamental right to choice, a
    fundamental right to options in the marketplace, and that
    fundamental right is also one of the biggest benefits that
    corporate America experiences when they offer us different
    products.
        Mr. Collins. So conversely, for someone such as myself, who
    believes that a strong and robust patent system actually
    encourages creation and not discourages creation, would you
    agree with me that patent owners have a right to enforce their
    patents?
        Mr. Gillis. They have a right to enforce those patents when
    those patents are legitimate, but in the case of this
    particular situation, I would like your opinion as to why all
    of a sudden, all of these parts are patentable, when 10 years
    ago they were not.
        Mr. Collins. Were they patentable 10 years ago?
        Mr. Gillis. Look at the list.
        Mr. Collins. They were. They chose not to.
        Mr. Gillis. And they chose not to patent them.
        Mr. Collins. And again----
        Mr. Gillis. Why are they choosing to patent them today?
    They are choosing to patent them today because that is a way to
    limit competition.
        Mr. Collins. So as a conservative who believes in free
    markets, you are going to run to the government to say,
    ``Government, put your thumb on the scale.'' Mr. Gillis, I
    think that is a problem, and you make a business choice either
    way. I believe this bill has merit. I believe there are some
    things we can work on to move forward on this. But frankly,
    there is some concern here when you distinguish patents and you
    do this in such a way that you do it--as you said before, it is
    all about money. There are also rights of the patent holders
    and the protection we afford to them, so I look forward to
    continuing the discussion. I appreciate it, Mr. Chairman.
        Mr. Issa. Would the gentleman yield?
        Mr. Collins. Always.
        Mr. Issa. I know you have to go, but before you go, I will
    just mention for example those two fenders that are down front.
    We brought them in for a reason. One is live, one is Memorex.
    Unless you look at the label, you probably will not notice the
    difference.
        Mr. Collins. Can I get one for my Honda?
        Mr. Issa. Absolutely, absolutely. The gentlelady from
    Louisiana can help you.
        Mr. Collins. Which speaking of which, by the way, thank you
    for being here. I always enjoy these panels, and when you have
    actually someone here who does the business every day, the one
    who gets up and writes the payroll checks and comes to--I love
    the other testifying witnesses, but when you have got someone
    like yourself, we may disagree in parts on this, but thank you
    for actually keeping America's economy running. Thank you.
        Ms. Felder. Thank you.
        Mr. Issa. But one of the things that we are going to dig
    into as we go further into the bill is that were these
    thousands, tens of thousands of design patents evaluated based
    on not the ornamental entirety, but the ornamental pieces, then
    the rules of distinct ornamental nature would have to be
    searched by the PTO, by the examiners, and this is one of the
    tests they currently do not do. In other words, when a certain
    car looks a lot like another car and then a particular part
    looks a whole lot like another part, at what point is it novel
    and new? And this is one of the challenges of--this is design.
    This legislation is designed not to take on the hard part of
    making the patent office evaluate the distinct nature of a
    mirror or other parts, so we will get into more of it, but I
    wanted to make sure that your concerns were allied, that we are
    not--allayed, that we are not planning on----
        Mr. Collins. Well, and I think the Chairman brings up a
    great point. If you really want to get into the overall patent
    issue, which we have, you and I have, talked about many times,
    we have to have good, robust patent systems that are actually
    examined. The problem we have right now is patents that can be
    challenged because they frankly are bogus patents, and that
    goes across the spectrum. You brought up a great point, Mr.
    Chairman. That is the reason we have this, and it is a pleasure
    to be on the Committee with you.
        Mr. Issa. Thank you.
        Mr. Risley. Excuse me, Mr. Chairman?
        Mr. Issa. Well, I apologize, but that colloquy exceeds by
    far the Ranking Members' time, so we will give you time, but
    not at this moment. Mr. Conyers.
        Mr. Conyers. Thank you, Mr. Chairman. First, I would like
    to enter into the record the following two letters.
    Missing deg.One is from original equipment
    manufacturers, labor unions, automotive trade associations, and
    the Intellectual Property Owners Association opposing this
    legislation. The other is a letter from the American Bar
    Association, IP law section.
        [The material referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     __________
        Mr. Issa. Without objection, and I would stop the clock. I
    apologize. The gentleman has to leave. I just wanted to let him
    if he had anything to say, since he has been very patient. If
    you have something, I did not mean to cut you off.
        Mr. Risley. No, not at all, Mr. Chairman. Actually, I have
    a family medical emergency, and I have to fly home, and so if
    it is okay I would like to----
        Mr. Issa. Well, you and your family will be in our prayers,
    and thank you very much for being here today.
        Mr. Risley. Thank you very much.
        Mr. Issa. Thank you.
        Mr. Conyers. Quite all right. Thank you. Could I ask
    Attorney Burris about the ability to receive patent protection
    for an invention encourages innovation? It provides an
    incentive to create new products or improve upon other
    products. How would this legislation, in your view, affect
    creativity and innovation?
        Ms. Burris. Well, I think it would significantly dampen
    that creativity. I mean, there is no incentive to create an
    invention, whether it be a design patent or utility patent or a
    plant patent under our systems. Where is the motivation to
    develop new technology, to advance that technology? I think I
    put a quote from Abraham Lincoln in my written statement. I
    mean, it is a fuel that provides incentive to develop new
    designs, new technology in our country and in countries around
    the world.
        Mr. Conyers. And thank you. And how, Attorney Burris, would
    it impact jobs in the automotive manufacturing industry?
        Ms. Burris. Yeah, thank you. I talked a little bit earlier
    about the design centers in the United States. Industrial
    design is a little different beast than the traditional
    engineering that we are used to, mechanical, electrical,
    chemical, et cetera. There are very creative artist-type
    engineers, and there are, in the automotive industry,
    approximately 30,000 industrial designers that are working on,
    you know, the shape of your door handle on your car, the shape
    and the colors and the texturing of your side view mirrors, and
    there is not just one designer working on a car. There may be
    four designers working on just the handle. I mean, I see--I
    have gone to--I go to the auto show every year, and I see these
    really sharp-looking designs on these cars, and those I know
    are products of industrial designers, so jobs in the United
    States, not just U.S. companies, but foreign: Honda, Toyota,
    just in my home state, Toyota and Hyundai put in research
    centers right between Ann Arbor and Detroit. These are
    industrial designers developing eye-pleasing cars for U.S.
    consumers, so 30,000.
        Mr. Conyers. Thanks so much. What do you think if this
    legislation were to pass, other industries would request
    similar legislation to shorten patent protections?
        Ms. Burris. Well, you name it. Mr. Gillis might have that
    answer for us on what is more expensive. That should not be too
    expensive. Smartphones. Consumer apparel, I mean, look at the
    companies who get design patent protection, you know. You have
    the Hewlett-Packards and, you know, the shape of a printer, the
    Nikes, the Apples, the Samsungs. It could go on and on forever.
        Mr. Conyers. Now supporters of this bill might argue that
    these are just patents on the look and style of the exterior
    car parts, so they do not need usual patent term protections.
    Do you think they are correct?
        Ms. Burris. Well, there are laws--our laws provide--well,
    it is actually now 15 years since we signed up to the Hague,
    but our design patent protection is 15 years to the date of
    issue of that patent versus utility patents, which is 20 years
    from the date of filing the patent application, so there is a
    different patent term depending on whether it is a design or
    utility patent.
        Mr. Conyers. Let's see, Mr. Risley has left. Let's see. Mr.
    Gillis, I am concerned that the consumer safety could be
    threatened if this legislation were to pass. Do we have Federal
    laws in place that would ensure that replacement parts from
    independent vendors or overseas vendors would meet the high
    safety standards that we would place on automobile
    manufacturers here in the United States?
        Mr. Gillis. Well, thank you, Representative Conyers. As you
    well know, I am one of America's leading auto safety advocates,
    and this is of great concern to me. The good news is that all
    of these parts are subject to the same recall requirements that
    car company brand parts would be subject to. In addition, with
    the concept of reverse engineering, it is relatively
    straightforward to make a part that is functionally equivalent
    to the car company parts, and finally, the industry that is
    probably most concerned about auto safety is the insurance
    industry, not only because they may be good guys, but because
    it is in their best interests to keep personal injury claims
    down, and as a result they created the Insurance Institute for
    Highway Safety, which has tested parts that have been certified
    to be the same, and they perform the same in both low-speed and
    high-speed crash tests, so I do not think Representative, you
    have to be concerned about the safety issue, as long as the
    manufacturer has been certified to be the same as the car
    company brand part.
        Mr. Conyers. Thank you very much. Mr. Chairman, I yield
    back.
        Mr. Issa. Thank you, and we will now go to the gentlelady
    from California, Ms. Chu.
        Ms. Chu. Thank you. Ms. Felder, I understand that there has
    been uptick in number of design patents that the auto
    industries have filed over the years. In addition, companies
    like Ford began filing infringement complaints at the
    International Trade Commission. The complaints were filed
    against aftermarket suppliers of collision repair parts for
    popular and iconic cars like the F-150 and the Mustang. What
    are the outcomes of these cases, and how have they affected the
    overall market? Is it more difficult to find aftermarket parts
    for these cars today compared to years past?
        Ms. Felder. Are we talking about the settlement cases?
        Ms. Chu. Yes.
        Ms. Felder. Yes? Okay. The terms of the infringement patent
    suits, settlement has made the parts in question more expensive
    since only one aftermarket distributor in the country has the
    exclusive right to sell these aftermarket parts. They are
    paying royalties in order to be able to do so. That cost is
    passed on to the consumer. It is not absorbed by the
    distributor. That in turn is creating a problem for the repair
    industry. We are not allowed to supply these parts. We would be
    sued for infringement if we were to buy the parts from Ford,
    Chrysler, and now General Motors. Of course, our contention is,
    this is indeed a slippery slope. Pretty soon, we will not be
    able to do it for Toyota or Honda or any of the other parts
    that are made, so consequently, by allowing this patent
    situation to continue, we know that it has significantly
    diminished the competition and has created a duopoly.
        Ms. Chu. And you have stated that your own company cease
    and desist letters from a number of car companies who warned
    you of your infringement liability risk if you continue with
    your business. How did you react when you received these
    warnings, and what are you doing to address them?
        Ms. Felder. The distributor that has the exclusive
    licensing agreement is allowed to resell those parts. We do not
    prefer to buy them because there is no economic incentive to do
    so. By the time we purchase the parts for the price that we
    have to pay, put them in a truck, get them to the customer, we
    often have lost money. We have done it because we have certain
    customers that have asked us to do it. They know it is going to
    cost a little more. We have to at least try to cover the cost
    of doing so, but we would prefer not to sell these parts. We
    have received a letter from Chrysler saying that we had--a
    cease and desist letter. It cost us over $3,000 to hire a
    patent attorney to answer this letter and state we were
    purchasing the parts from the licensed distributor who had the
    right to sell those parts to us. They did not just take our
    word for it, so we had to go to the expense of paying a patent
    attorney to represent us in this case.
        Ms. Chu. Okay. Thank you, and Mr. Gillis, you are urging
    Congress to address the automakers misuse of design patents on
    their crash replacement parts. Can you explain how you believe
    design patents are being misused by the auto industry?
        Mr. Gillis. Well, first and foremost, I think the evidence
    is in this chart over to my left. All of a sudden, in an effort
    to disrupt the competitive marketplace, the car companies are
    starting to put design patents on these individual parts. There
    is nothing more special about these parts today than 15 years
    ago, but they have taken on the design issue or design patent
    issue as a business strategy rather than a legitimate means to
    protect the design of an individual part. The second issue is
    that by putting these patents on individual parts, they are
    preventing me as a consumer from having a variety of choices
    when I go out to get my car repaired. As I said in my
    testimony, I bought the car. I did not necessarily want to
    become an indentured buyer to the car company for the rest of
    that car's life. I want choice.
        Ms. Chu. Okay. Thank you. Well, if I could have Ms. Burris
    respond to the same thing?
        Mr. Issa. Of course.
        Ms. Burris. Sure. About the rise in the number of design
    patents?
        Ms. Chu. Well, of this claim that design patents are being
    misused.
        Ms. Burris. Right. Well, I mean, under our patent laws, our
    design patents cover an ornamental article of manufacture, so
    that is in our laws, and anyone who applies for a design patent
    is entitled to protection, provided it meets the requirements
    of the patent office. I think a couple of things are going on
    with the rise in the number of patents that you see, design
    patents. I think that number one, first of all, the parts are
    not the same as they were 15 years ago. They are much more
    advanced technologically with new materials, with integration
    with other sensor systems in the car, and the styling of the
    cars is much more attractive than it used to be 15 years ago. I
    think that offshore companies are able to make those parts very
    quickly with digital scanning technologies. They do not have to
    cut a tool or a mold. They scan the part. They have got a tool
    automatically, and they can chunk out parts very quickly, so
    there became--I think there came in this influx, which is why
    it went to the IFTC of parts that were basically copied, so
    that was a response to, I think in part, a response to the
    influx of parts that were being copied overseas.
        Secondly, and I am actually going to do this when I get
    back home when I have time. Design patents overall have taken
    off. They really have shot up at a much higher rate than they
    have in the past overall, and there are statistics at the
    patent office that you can see, and I think ever since that
    Apple-Samsung case, design patents are--they are kind of in
    vogue right now. A lot of people are filing more and more
    design patents, and it is not just the automotive companies.
        Ms. Chu. Thank you. I yield back.
        Mr. Issa. Thank you. We will now go to the gentleman from
    New York. I am going to do cleanup so, you know, hang around,
    though.
        Mr. Jeffries. All right. Thank you, Mr. Chair, and let me
    just thank the witnesses for their presence here today. Ms.
    Burris, you are opposed to this legislation, correct?
        Ms. Burris. That is correct.
        Mr. Jeffries. And is your opposition anchored in large part
    to your view that there should be uniformity across the patent
    law system that we have in this country?
        Ms. Burris. Yeah, my primary objection is this carve-out,
    this exception for automotive repairs parts and where might
    that lead us after this? What else might be too expensive for
    the consumers? There has got to be another way to fix this.
        Mr. Jeffries. Now, is there any precedent for this type of
    carve-out as it relates to intellectual property law as you
    understand it?
        Ms. Burris. In the United States?
        Mr. Jeffries. Yes.
        Ms. Burris. Outside of pharmaceuticals and generics, I am
    not aware of any. There is certainly not any in the design
    patent world.
        Mr. Jeffries. Now, is there any concerns that you have as
    it relates to taking this approach in the automobile parts
    space?
        Ms. Burris. Oh, absolutely. As I mentioned earlier the
    shape, the look of the car has been--the car companies have
    spent a lot of money with their industrial designers to come up
    with that eye-pleasing design, and now we are going to say,
    ``Well, no, we are not going to allow you any protection on
    that.'' I mean, it is a lot of effort that goes into these, you
    know, ``repair parts.'' It is more than that.
        Mr. Jeffries. And with respect to the legislation's broad
    applicability, it is my understanding that this would be
    retroactive. Is that correct?
        Ms. Burris. That is my read, yes.
        Mr. Jeffries. And so that means that it would apply to
    patents that have already been issued, right?
        Ms. Burris. Correct. Yes.
        Mr. Jeffries. As well as applications that are pending?
        Ms. Burris. Correct.
        Mr. Jeffries. Could you just speak for a moment to the
    issue of the equity in sort of retroactively changing the
    length of time of a patent from I guess what would be 15 years
    down to 30 months?
        Ms. Burris. Well, sure.
        Mr. Jeffries. Some of them already had a reasonable
    expectation based on existing law at the time of them getting
    the patent, of filing the application.
        Ms. Burris. Sure. I mean, when a patent applicant filed
    their application 5 years ago, the bargain was--I mean, that is
    the quid pro quo. I am going to disclose my design in return
    for a 14-year, which is now a 15-year, term. That is what you
    bargained for when you filed that patent application. That
    application that was filed 5 years ago, if this bill were to go
    through, would be expired if it were--it would just be gone. It
    would evaporate.
        Mr. Jeffries. Do you have a sense of whether there would be
    any sort of Fifth Amendment takings concerns in connection with
    retroactive application?
        Ms. Burris. Actually, I had not really thought about that.
        Mr. Jeffries. Okay. If you have any thoughts subsequent to
    this hearing, I would be interested in you sharing those with
    me and or the Committee. Mr. Gillis, it is my understanding
    that you believe were this legislation to be enacted, that the
    cost savings that it would yield would inure to the benefits of
    the consumer. Is that correct?
        Mr. Gillis. That is correct, yes.
        Mr. Jeffries. And so, you do not believe that the purported
    cost savings that would take place would not result in either
    the aftermarket car manufacturers yielding any additional
    profits or the insurance companies yielding those additional
    profits? It is your contention that the savings would be passed
    to the consumer, is that right?
        Mr. Gillis. Well, first of all, it is important to note
    that the parts are here today, and consumers are benefitting
    from those parts being in the marketplace, and they are
    benefitting in two ways. They have access to less expensive
    parts, plus their very existence keeps the costs of the car
    company part in check. When you pull these parts out of the
    marketplace, there will be no reason for the car companies to
    keep their prices low. They will have a monopoly, and they can
    charge anything they want for those prices, so thankfully the
    parts are here, and thankfully consumers are benefitting from
    those parts. The problem with these patents laws is that they
    are now taking these parts out of the marketplace, and that is
    what is going to hurt consumers.
        Mr. Jeffries. Okay, now if this legislation were to pass,
    would the insurance companies likely see an increase in their
    profit margin, separate and apart from the question of whether
    that thing gets passed along to the consumer, but are they
    likely to see an increase in their profit margin?
        Mr. Gillis. Right now, the--probably, there are few
    industries that are more competitive than the insurance
    industry. We consumers are shopping around like crazy for
    insurance policies, so if the insurance companies can keep
    their policy prices in check, they are going to be very happy
    to be able to do that, and if they can lower their prices, they
    certainly will because that is the way we are buying insurance
    these days if you see any of the ads on TV about which
    insurance company is the least expensive. So conversely,
    however, if these parts are pulled out of the marketplace, you
    are going to see substantial increases in the cost of getting
    cars repaired, and that cost will be simply passed right on to
    us either in higher insurance premiums, or if we do not have
    adequate insurance out of our own pockets.
        Mr. Jeffries. Thank you. I yield back.
        Mr. Issa. Thank you. I am going to try and get through a
    lot of questions quickly. Ms. Burris, I am going to go through
    a couple with you because you made some interesting points, and
    I want to make sure we get them in the record. First of all,
    you made the point about 30 months not necessarily being 30
    months. If it was 30 months from the first sale, would that
    make a difference to you in the legislation, since you said
    they would not get 30 months? If they got 30 months, in other
    words, from first sale, would that matter to you?
        Ms. Burris. No.
        Mr. Issa. Okay, so the fact that it is not--your concern is
    you want 14 years. Is that correct?
        Ms. Burris. Yeah, that is what the law says; 15 now,
    actually.
        Mr. Issa. Well, that is what Congress made.
        Ms. Burris. Yeah.
        Mr. Issa. Okay, how long is the patent on a dress?
        Ms. Burris. Pardon me?
        Mr. Issa. How long is the patent on a dress?
        Ms. Burris. How long?
        Mr. Issa. If a designer does a gown?
        Ms. Burris. Sure.
        Mr. Issa. How long is the patent?
        Ms. Burris. It is 15 years from the date of issue. If it is
    filed on or after May 13th of 2015, it is now 15 years under
    the Hague agreement.
        Mr. Issa. And that is something the United States did not
    have. We tried to have design legislation for dresses for
    years, right?
        Ms. Burris. I am not familiar with the years of legislation
    on dresses, no.
        Mr. Issa. Okay.
        Ms. Burris. All right, I am sorry.
        Mr. Issa. The gentleman who once sat right here, Mr. Berman
    and I coauthored a bill to actually create a patent for
    designers, which they had in Europe and we did not. So let me
    get through a couple of quick questions. First of all, if we
    made it 14 years, you would be happy, is that right?
        Ms. Burris. The law, the design patent law----
        Mr. Issa. No, no. Just answer the question because you are
    here representing companies. You have talked about a lot beyond
    the scope of patents.
        Ms. Burris. Well, I have an engineering background, as
    well.
        Mr. Issa. You have talked about the auto companies, and
    you--but you have included a lot of material that it clearly
    came outside of patent law. Would you be happy with 14 years'
    exclusivity?
        Ms. Burris. I would be happy with a term that the design
    patent laws provide----
        Mr. Issa. Yeah, the current law.
        Ms. Burris. The current law is now actually 15, but 14,
    yeah. It is 15 under the Hague.
        Mr. Issa. Okay. Okay, but you are not happy with 30 months.
        Ms. Burris. No
        Mr. Issa. Okay, so we are arguing over your level of
    happiness based on length. Let's go through a few of these
    points. What about the fact that auto companies change their
    designs, and they change the arbitrarily for design reasons? Do
    you think a patent should go on even though a car is out of
    production? They are no longer making that vehicle. Do you
    think that should trigger any change in it?
        Ms. Burris. No.
        Mr. Issa. Okay, is there anything that would cause you not
    to simply want greater exclusivity for the auto manufacturer?
        Ms. Burris. I am sticking to the language of the design
    patent laws. The 15 years is what we should----
        Mr. Issa. No, ma'am, I appreciate that, but I just want to
    know if your position is that you like the fact that as the
    auto companies are currently pushing the law through
    litigation, and particularly through the International Trade
    Commission, which is not an Article 3 court, they are trying to
    gain exclusivity for 15 years for each and every part of an
    automobile, and as they are increasing that and suing to get
    it, you are fine with that, right?
        Ms. Burris. I do believe a patent owner should be entitled
    to enforce their patent, yes.
        Mr. Issa. Okay, well, let's go through a fairly
    straightforward thing. Ms. Felder, you are an expert in the
    auto parts industry. You know about fenders and bumpers and so
    on. Now, you have got really good people, I am sure, in your
    company that deliver those pars, right?
        Ms. Felder. Yes, sir.
        Mr. Issa. How often do they confuse the wrong part if they
    do not check the number closely because these fenders all look
    alike, and a lot of these parts look alike, right?
        Ms. Felder. No, Mr. Chairman, they do not. The parts when
    you bring them, quite obviously, if they are wrong, it is very
    easy to see. We have two fenders here. If I brought in--these
    fenders are for a Malibu. If I were to bring in a fender for a
    Honda, you would be able to put it up and say, ``This is not
    the same fender.''
        Mr. Issa. Yeah, but that is not the standard for design
    patent. Ms. Burris, you have two patents in front of you.
    Looking at the siren patent that is in front of you, the one on
    the right, does it look like a siren?
        Ms. Burris. Well, the title says, ``Siren,'' so yes.
        Mr. Issa. Okay, let's be----
        Ms. Burris. Now, I look at it. Now it looks like a siren.
        Mr. Issa. Okay.
        Ms. Burris. Honestly, when I looked at this side, I
    thought, I wondered, if it was an ice cream maker, maybe
    because it is getting late in the day.
        Mr. Issa. Now, there is a limitation on what that patent
    means under the law, right? The law, the law that you are so
    pleased with as it currently is, there is a limitation on that
    patent. What is the limitation of that patent? What does
    somebody get if they apply for that patent and receive it in
    1994?
        Ms. Burris. This design patent covers the ornamental
    appearance of this article of manufacture, at this time 14
    years from the date it issued.
        Mr. Issa. Right, from date of issue of the old law. And so
    that is an exclusivity in its entirety, correct?
        Ms. Burris. What do you mean by in its entirety?
        Mr. Issa. If it is substantially different but looks
    similar, it still--it is not patented, right?
        Ms. Burris. I am not sure I follow your question. You are
    talking about someone who might be trying to design around this
    patent?
        Mr. Issa. Yeah, exactly, somebody can make an extremely
    similar product. As a matter of fact, that is similar to the
    sirens manufactured by every single auto security company and
    home security company in the world in that period of time. They
    pretty much all look the same, so what you really had there was
    a very narrow patent. Is that correct?
        Ms. Burris. I cannot say how narrow it is not knowing the
    prior art. I mean, there is some prior art listed here on the
    front, but I would have to take a closer look to see how broad
    or narrow it would be.
        Mr. Issa. Okay, well, this brings up the point. What should
    be the standard, if not this legislation, which gives
    absolutely exclusivity and does not raise the test for these
    parts? What should be the test when a fender is basically very
    similar previous fender? In other words, if you have nothing--
    and I will go to Mr. Gillis because I have left him out--if the
    auto companies are in fact consistently adding a line, taking
    away a line, putting in a line, making a change, making it
    rounder, making it squarer, at what point should the patent
    office look back 50 years, even 100 years because the auto
    industry is now over 100 years old, and hold them to a high
    standard of whether or not the ornateness of that subpart of an
    automobile, not the entire automobile, but that subpart--is in
    fact de minimis over the prior art and thus not worthy of a
    design patent?
        Mr. Gillis. Well, congressman, you know that our position
    actually is from day one, they should not be allowed to put
    design patents on these individual items. If it is wrong after
    30 days, or if it is correct after 30 months plus one, it
    should be correct after plus one, so I think that where you are
    going with this is number one, we fully respect the design of
    the car should not be tampered with, and Ford should not be
    able to copy Chevy's car at all, nor should Ford be able to
    build parts to copy a Chevrolet. The beauty of your legislation
    is that we call it a repair clause. These parts are designed to
    be repaired to allow the consumer to repair the car, not build
    a new car or make it look like the original car, but to repair
    their own car, and we need the freedom to be able to buy these
    parts unencumbered at a reasonable price, so if the
    manufacturer wants to hold these designs for 14 years, and, as
    you suggest, then the next year slightly put another wave in
    it, then they get another 14 years and another 14 years on top
    of that, again, we see that as an illicit use of very important
    design patent laws.
        Mr. Issa. Ms. Burris, you are not as old as I am, so I am
    going to ask, are you familiar with the history of Xerox and
    other photocopy companies who have tried to design their
    products to prohibit people from essentially making the
    consumable parts that go into them?
        Ms. Burris. Oh, yes, I am very familiar with consumable
    part protection, yes.
        Mr. Issa. Okay.
        Ms. Burris. For not just Xerox, for other industries as
    well.
        Mr. Issa. So the ability to have, if you will, quiet
    enjoyment of something you paid for, which includes the ability
    to, if you will, get toner with competition, you are familiar
    with that and you are comfortable with that. Is that right?
        Ms. Burris. Well, they spent a lot of money designing a
    product that, I mean, that they had patent protection on. They
    should be able to enforce the patent.
        Mr. Issa. But they do not get design patent protection.
    They only get utility to the extent that they have to.
        Ms. Burris. Yeah, I am not familiar with their patent
    portfolio.
        Mr. Issa. Well, you are familiar that there are aftermarket
    products available for your copy machine and----
        Ms. Burris. Sure, oh, you can always design around a
    patent. You can always get--it is just, you know, how much more
    expensive is it going to be? Is it going to perform the same
    way? But you can--even design patents, you can design around
    them.
        Mr. Issa. I am sure you can always make a fender that does
    not match the other fender.
        Ms. Burris. You mean, the front and the back?
        Mr. Issa. The left to the right.
        Ms. Burris. Well, the quarter panels.
        Mr. Issa. Right. Not very desirable. First sale concept,
    Mr. Gillis. Your position, I assume, is that even though we are
    trying to find legislation that accommodates middle ground,
    that in fact when you purchase something and you get a ding in
    it, and you have a choice of pound it out, put some Bondo in it
    and hope for the best, or replace it, that you should be able
    to buy a replacement part from anywhere you want since it is
    only a subcomponent of that patented or unpatented product that
    you bought and paid for. Is that right?
        Mr. Gillis. That is exactly right, and the best evidence of
    that, congressman, is who among us after our warranty is
    expired is going to go back to Ford to buy a battery? To buy a
    muffler? Very important and sophisticated parts of the car, or
    to buy a tire. We like that freedom in mechanical parts, which
    are probably far more important to the safety of the vehicle
    than exterior cosmetic parts, so we just want that same freedom
    when it comes to exterior cosmetic parts.
        Mr. Issa. And your point being that if I want to put a new
    manifold on, they are not bothering to patent that under design
    patent, and yet they do want to have the part that gets hit in
    a fender bender.
        Mr. Gillis. That is right, and in fact Ms. Burris alludes
    to the concept of utility patents in her presentation, her
    written presentation, and our theory is, if the hood has
    certain waves in it that are of a utility function, then they
    should get a utility patent, and that is perfectly fine, but
    what we are talking about is design patents for very important
    functional parts.
        Mr. Issa. Ms. Felder, the Chairman has indicated in his
    opening statement, and I know you did not get to hear him
    present it, but that he is open and he wants to continue with
    this legislation and begin, you know, finding, if you will,
    legitimate concerns and seeing if we cannot address them. Let
    me ask a question for you, and this is a question from one
    former business person to a current businesswoman. One of the
    things you mentioned in these exclusive settlements is, in
    fact, that you cannot produce or find a producer of a product,
    even if they are QS9000, ISO qualified, they are making a
    certified part. The fact is, they cannot get a license from the
    auto company, but somebody did, right? So as a businesswoman,
    if the auto companies like the music producers and the--and so
    on had a compulsory license where they had to allow anyone to
    get a license to use, if you will, that, would that be
    something where at least you would see an even playing field
    where you pay the $2.50 for the license on the fender, but
    competition can find 10 different people to produce a product
    and have real competition on how it is distributed and how it
    gets to you and whether it is competitive?
        Ms. Felder. Mr. Chairman.
        Mr. Issa. This is a business question----
        Ms. Felder. Right.
        Mr. Issa [continuing]. Not would we not love to have $2.50
    in licensing fees in a product?
        Ms. Felder. Our concern, of course, is, again, restriction
    of competition. In a free market, which is what our country has
    been based on, we should not have to go and pay a licensing fee
    to provide a customer with a competitive product. There are
    many instances where, I am sure, that might be an appropriate
    situation. In my opinion, that is--this is not one of them.
        Mr. Issa. And I apologize, but there is a vote on the
    floor, so I still have to answer the bell, so if you could wrap
    it up, please.
        Ms. Felder. Very briefly, I want to explain that over the
    course of the time between the patent legislation, the patents
    were enforced, 2007. We have seen this industry literally
    almost erased. In our state alone, there were over--there were
    five independent distributors. Today, we are the only man
    standing, and this is national and this is as----
        Mr. Issa. Thank you. Mr. Gillis, I will let you do the
    close. Right to repair. It is talked about a lot. It is gaining
    speed around the world. Notwithstanding questions as to
    patents, both utility and design, do you believe that it should
    be an open market for quality certified products to be able to
    have access to licensing fees so as to provide a real market
    and not a monopoly?
        Mr. Gillis. Well, right to repair is critically important,
    and it has become more important as automobiles have become
    more sophisticated, and the car companies tend to be closing up
    the ability of independent repairs to be able to get the
    computer diagnostic materials, the parts, even the tools, in
    some cases, to repair those cars. So it is clear that the
    fender, hood, and grill issue is just the beginning of the car
    companies wanting complete vertical integration over the
    control of this particular part, and that is bad for consumers.
        Mr. Issa. Well, there will be more to follow. I would
    encourage all of you to, if you will, revise and extend, if you
    have thoughts on things that were not asked and you would like
    to submit them. My expectation is that the Chairman and I will
    work on future hearings, including with the Patent and
    Trademark Office. I want to thank you for your kindness in
    waiting for a little later time today. That helped a great many
    of us work around our schedule, and with that the hearing
    stands adjourned.
        [Whereupon, at 5:31 p.m., the subcommittee adjourned
    subject to the call of the Chair.]

                                A P P E N D I X

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