Rockingham Group of insurance companies is a member of the National Association of Mutual Insurance Companies and the Property Casualty Insurers Association of America, both of which are members of the Quality Parts Coalition (QPC), which is another industry group with what appears to be a horribly misleading name. The QPC has stated its goal as being none other than securing a permanent legislative change to U.S. design patent law to (in their words) “protect the consumer’s rights to lower-cost alternative replacement parts.” In other words, they don’t like design patents and would rather see them go away.
Frankly, it seems to me that the QPC doesn’t really care for Original Equipment Manufacturers (OEMs) or original parts. Instead the QPC seems to prefer imitation parts, which is why they don’t particularly like innovators obtaining design patents that protects the designs they spend a lot of time, money and energy to produce. In my experience those replacement parts that are not acquired from OEMs just aren’t of the same quality. How they can get away with a name like “Quality Parts Coalition” is indeed interesting.
Of course, what the QPC position presupposes is that there is a right to lower-cost replacement parts in the first place. Such a right sounds good, but it isn’t exactly enshrined in the Constitution. On the other hand, patents are enshrined in the Constitution. Simply stated, the position of the QPC is so typical. These patents are getting in the way of what they want to see happen, so they want to see them abolished.
In his testimony, Menefee reiterated the purpose of collision repair parts is only to restore the vehicle’s “original, pre-accident appearance,” and that the PARTS Act in no way affects a car company’s ability to innovate. “The PARTS Act would do nothing to deter car companies from obtaining 14-year design patents on their collision parts and enforcing them for up to 14 years against other car companies,” Menefee explained.
Nothing? Really? Even without knowing what is in the bill, just learning the stated purpose of the QPC probably has you wondering at least a little — and it should. The bill actually completely and totally guts the design patent rights of those obtaining such patents as they relate to component parts for motor vehicles. Here is what the bill actually says:
With respect to a design patent that claims a component part of a motor vehicle as originally manufactured —
(A) it shall not be an act of infringement of such design patent to make or offer to sell within the United States, or import into the United States, any article of manufacture that is similar or the same in appearance to the component part that is claimed in such design patent if the purpose of such article of manufacture is for the repair of a motor vehicle so as to restore such vehicle to its appearance as originally manufactured; and
(B) after the expiration of a period of 30 months beginning on the first day on which any such component part is first offered to the public for sale as part of a motor vehicle in any country, it shall not be an act of infringement of such design patent to use or sell within the United States any article of manufacture that is similar or the same in appearance to the component part that is claimed in such design patent if the purpose of such article of manufacture is for the repair of a motor vehicle so as to restore such vehicle to its appearance as originally manufactured.
So I suppose you can get design patents, they just won’t be enforceable if someone needs to infringe in order to restore a motor vehicle 30 months after the first day the component was offered for sale, which may be as little as 1 year (or less) into the life of the design patent. Essentially, if this bill passes design patents on motor vehicle components will be worthless.
Not to be deterred from the reality of the legislation, Gillis expressed his concern over the “enormous” spike in the number of design patents on crash parts obtained by car companies. These concerns were reinforced by Chairman Bob Goodlatte and by Rep. Issa during the hearing. “This industry has been well established for my entire life. We are talking about a narrow bill to prevent a new expansion that endangers the consumer’s ability to afford repair parts,” Rep. Issa explained.
Rep. Sheila Jackson-Lee, however, questioned whether this bill would further the move of manufacturing oversees. Gillis attempted to shoot down the notion that this bill would in any way hurt American production, offering that 63% of the suppliers Ford has chosen for the 2012 Ford Focus and 50% of the suppliers Chevy has chosen for its 2011 Chevy Cruze are from foreign suppliers. “This isn’t a foreign versus domestic issue. This is a fairness issue, and consumers have the right to choice in the marketplace. This is what this bill will give them.” While Gillis seemed proud of his answer, I really couldn’t tell you why he would think that answered the question. How does the fact that suppliers are already overseas prove or disprove the point asserted? If a change in the law makes it more likely for companies to move overseas wouldn’t that just mean that the number of foreign suppliers would go up? So Gillis’ answer doesn’t really address the legitimate concern raised by Rep. Jackson-Lee at all.
The only witness testifying against H.R. 3889 was Kelly Burris of Brinks Hofer Gilson & Lione. She started her testimony by saying: “I believe that innovation in automotive design, and potentially the entire industrial design community, will be stifled by legislation of this nature.”
Burris went on to point out the inconvenient truth. Auto manufacturers employ a lot of people in the United States.
Auto manufacturers consistently lead the world in R&D spending, to the tune of $18-20 billion a year. Design protection encourages innovation and creates jobs in the United States. In fact, fourteen different Original Equipment Manufacturers (OEMs) – most of them headquartered outside the U.S. – maintain design centers in the U.S. to create vehicles that will appeal specifically to American consumers. According to the Alliance of Automobile Manufacturers, there are twenty-one separate design facilities in three states (Michigan, Ohio and California) that account for roughly 30,000 jobs.
One thing is crystal clear. Rep. Jackson-Lee is absolutely correct to be concerned about those 30,000 jobs because history unequivocally shows us that innovative companies go where they can get patent protection. Similarly, history shows us that innovative companies vacate countries where patent protection is unavailable, or less readily available. That is not a matter of opinion, it is a matter of historical fact. It is utter nonsense to dispute this, and to pretend that curtailing design patent rights will have no impact would be nearly hysterically funny if it didn’t come with such large consequences.
Burris went on to say:
The proponents of this bill claim that consumers “need options.” Well, consumers have many options without a wholesale taking of the rights of our industrial designers. First, there are alternative designs currently on the market that can be used instead of the OEM parts… These aftermarket parts can be offered to the consumer as repair alternatives to the OEM parts, therefore providing that “consumer choice” everyone is looking for. So what if their vehicle doesn’t look exactly like the originally manufactured version?
That is an excellent question. Where exactly does the right to have a repaired vehicle look exactly like a new vehicle come from? I don’t find that in the Constitution either, but once again patents are right there in Article I, Section 8, Clause 8.
For crying out loud it isn’t even like these folks don’t have the ability to repair their cars to brand new. They can if they use OEM parts. The trouble is that the insurance industry doesn’t want to pay and would prefer to use cheap, inferior parts rather than OEM parts. So stiffing innovators is a right of consumers and insurance companies and the fact that the casualties will almost certainly be American jobs is just another inconvenient truth.