[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
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Available via the World Wide Web: http://judiciary.house.gov
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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
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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:]
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__________
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:]
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__________
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.
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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.
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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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Material Submitted for the Hearing Record
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