Parts Debate Heats Up in Congress
NHTSA Reform Bill May Move in the 111th Congress
Although the second session of the 111th Congress has much more on its plate than can be completed in this election year, automotive parts legislation is still in play. Recently the U.S. House of Representatives' Judiciary Committee held a hearing on "Design Patents and Auto Replacement Parts." Separately, patent reform is being considered by the Congress.
Testifying at the full Judiciary Committee hearing was:
• Jack Gillis, Consumer Federation of America
• Damian Porcari, Ford Global Technologies Inc.
• Robert C. Passmore, Property Casualty Insurers Association of America
• Perry J. Saidman, Saidman Design Law Group
The hearing focused on Rep. Zoe Lofgren's, D-Calif., bill, H.R. 3059, the "Access to Repair Parts Act." Companion legislation has been introduced in the U.S. Senate, Senate Bill 1368. Lofgren is chairwoman of a subcommittee of the Judiciary Committee.
Saidman, a George Washington University Law School professor, specializes in design law. He expressed concern with the Lofgren legislation. He said, "Why is this such a bad idea? Because it will encourage every industry that loses a design patent lawsuit to petition the Congress to do the very same thing; to carve out an exception to their industry so that their infringement will not be actionable, so that they can continue to make, use, sell and import their infringing products without fear of liability to the design patent owner." Saidman was referencing the 2007 International Trade Commission (ITC) decision in support of protecting Ford Motor Co.'s patent. The George W. Bush administration let the ITC ruling stand.
Saidman summed up the arguments of the Lofgren bill's proponents by saying, "Consumers will greatly benefit from the abolishment of design patent protection for auto repair parts, because the resulting competition will create lower prices for the parts. Of course, the insurance companies are on board because they will make more money if they can buy auto repair parts more cheaply than they do now. Will they pass their savings on to their policyholders, or to their shareholders?" He continued to point out to the Committee, "What this bill proposes is that valid and infringed design patents be rendered unenforceable."
Passmore, representing the Property Casualty Insurers Association of America, noted that "alternatively supplied collision repair parts typically are 26 percent to 50 percent less expensive than the car company parts, and the mere existence of competition for a given part results in car companies lowering their corresponding part's price by 8 percent. The estimated benefit to consumers from the availability of competitive alternatives is approximately $1.5 billion a year." Passmore's association supports the Lofgren legislation.
The Automotive Service Association, along with other trade associations, submitted a letter to the committee in opposition to the Lofgren bill. Central to its opposition was the bill's failure to address the quality of replacement crash parts.
The Judiciary Committee's hearing was not alone in reviewing automotive policy. The House Energy and Commerce Committee's Subcommittee on Commerce, Trade and Consumer Protection followed with its own hearing on "National Highway Traffic Safety Administration (NHTSA) Oversight: The Road Ahead." This tough scrutiny of NHTSA, according to Rep. Bobby Rush, D-Ill., chairman of the subcommittee, examined "NHTSA's configuration, its organization, and its performance in the areas of defects investigation, safety standards and enforcement."
Industry leaders speculate that House and Senate members are at work to create a new bill that will increase NHTSA's responsibilities and effectiveness. In a 2001 General Accounting Office (GAO) report, the GAO concluded that "NHTSA has broad authority to set safety standards for aftermarket crash parts."
As for patent reform, what may have begun as an automotive industry debate about patents for vehicle parts may expand due to the lack of regulation, safety and quality of aftermarket crash parts. The legislative calendar will squeeze attempts to move a NHTSA reform bill or parts legislation in 2010, but Congress has not given up on at least a first pass at addressing concerns about automotive parts.
Although committee members did not indicate any upcoming action on the Lofgren legislation, both Democratic and Republican leaders of the House Judiciary Committee recently released the following statement in response to a draft patent reform proposal from the Senate Judiciary Committee: "We are hopeful that Congress can come together to pass real and meaningful patent reform. With regard to the proposed Senate Judiciary Committee language released today, we believe a number of changes are essential before it could be considered by the House. We are hopeful our Senate Judiciary colleagues will consider these changes as part of their process. We remain open and willing to work on meaningful patent reform, but must be sure that any legislation responds to abuses and improves the overall system." - Submitted by Rep. John Conyers, D-Mich., House Judiciary Committee chairman; Rep. Lamar Smith, R-Texas, ranking member; and Reps. Howard Berman, D-Calif., and Lofgren.
ASA members can review the full testimony from both the House Judiciary Committee hearing on automotive parts and the House Energy and Commerce's NHTSA oversight hearing by going to ASA's legislative Web site, www.TakingTheHill.com.
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