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[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

                              ----------                              

                            FEBRUARY 2, 2016

                                                                   Page

                                THE BILL

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

                           OPENING STATEMENTS

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

                               WITNESSES

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

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

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

                                APPENDIX
               Material Submitted for the Hearing Record

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

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

                              ----------                              

                       TUESDAY, FEBRUARY 2, 2016

                        House of Representatives

            Subcommittee on Courts, Intellectual Property, 
                            and the Internet

                       Committee on the Judiciary

                            Washington, DC.

    The Committee met, pursuant to call, at 4 p.m., in room 
2141, Rayburn House Office Building, the Honorable Darrell E. 
Issa, (Chairman of the Subcommittee) presiding.
    Present: Representatives Issa, Collins, DeSantis, Nadler, 
Conyers, Chu, Jeffries, Cicilline, Lofgren, and Cohen.
    Staff Present: (Majority) Vishal Amin, Senior Counsel; Eric 
Bagwell, Clerk; and (Minority) Jason Everett, Minority Counsel.
    Mr. Issa. The Subcommittee on Courts, Intellectual 
Property, and the Internet will come to order. Without 
objection, the Chair is authorized to declare a recess of the 
subcommittee at any time. We welcome everyone here today for a 
hearing on H.R. 1057, the ``Promoting Automotive Repair, Trade, 
and Sales Act of 2015,'' otherwise known as the PARTS Act. I 
will now recognize myself for an opening statement.
    This afternoon's hearing is about an important piece of 
pro-consumer legislation, the PARTS Act. It is narrowly focused 
and designed to once and for all call, appropriately, attention 
to the use of ornamental patents for broader than their 
original purpose. For a great many years, patents, known as 
design patents, were clearly understood to be ornamental, 
meaning if someone were to duplicate the appearance of a 
patented product, they would be violating that look for a 
period of 14 years. Under the PARTS Act, this is a limited 
bill. It relates only to car parts that are typically replaced 
after collision, and it allows a limited exemption to the 
design patents so the aftermarket parts of like use, of form, 
fit, and quality can be available for basic repairs.
    This does not mean that marginal or low quality parts are 
by definition to be considered as acceptable. In no way, shape, 
or form is this about the quality, as we all know, and we know 
too well, automobile companies around the world have made 
magnificent automobiles. They also made the Pinto, the Vega, 
the Yugo, the Lada, and I need not go on to tell you there have 
been cars that have been shoddy in their manufacturer, 
unreliable, and yes, I have visited the Corvair Museum. There 
are cars with other notability. But in this case, we are simply 
creating a balance between the rights of the manufacturer to 
produce an ornamental design and protect it for a period of 14 
years from its competitors, people who would produce a similar 
automobile look. That is the intent of a design patent. It was 
never intended to be, in fact, a substitute for the ability to 
simply repair a portion of something you have purchased.
    Now, let's understand the automobile industry is unique. 
They do create rolling pieces of art. Those rolling pieces of 
art should, in fact, enjoy their distinctive advantage. 
However, it is notable that it is very seldom does General 
Motors sue Toyota, Toyota sue Honda, or any of them sue 
Mercedes when they make cars that are so close together that 
even their commercials find it hard to find the automobile that 
matches. They make fun of how similar cars look and yet, you do 
not see automobile patent suits related to their design 
patents, meaning the auto companies do not consider there to be 
a great value to the design patents when they are looking at 
similar designs between automobile companies. Having said that, 
the very lucrative auto aftermarket business related to 
collision parts is an area in which the auto companies have 
attempted to establish greater and greater exclusivity. And I 
support that exclusivity, but for a limited period of time. The 
PARTS Act is intended, recognizing that an automobile exceeds 
$30,000, and one would spend three or four times that if you 
were to buy it in parts from the manufacturer that in fact, 
instead of pounding out a fender, welding or bondoing it, an 
affordable replacement in a competitive market is in the best 
interest of safety, and of course, the consumer.
    Additionally, a healthy aftermarket means more affordable 
parts for everyone, and particularly in the case of small 
production, or out of date older automobiles, or automobiles 
that are no longer produced, such as the Saturn or the 
DeLorean, or for that matter, the 1965 Mustang. These parts, 
without the PARTS Act, if a healthy aftermarket industry does 
not exist, will not and are not typically made at an affordable 
price by the manufacturer. Manufacturers do not want to have a 
lifetime responsibility to keep a set of tooling to make a 
part. If they did, certainly they would be a desirable place 
for the classic car repair business. People in Europe already 
enjoy some of the considerations that are in the PARTS Act, and 
for a good reason. The consumer has an expectation that it is, 
and a reasonable expectation, that there will be a competitive 
market for repair parts for their automobile. There certainly 
is for brake pads. Why would there not be for a bent fender? I 
look forward to working with people on both sides of the aisle, 
and on both sides of this issue to ensure we make the kind of 
limited, narrow, and appropriate changes to the patent law to 
allow automobiles to be repaired, while in fact protecting the 
intellectual property of the auto manufacturer or any other 
original equipment producer now or in the future.
    [The bill, H.R. 1057, follows:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    
                      __________
    Mr. Issa. I look forward to our witnesses today, and I look 
forward to working with the Chairman and Ranking Member on this 
area as we move forward with the PARTS Act and it gets signed 
into law. I now would like to recognize the Ranking Member of 
the Subcommittee.
    Mr. Nadler from New York, for his opening statement.
    Mr. Nadler. Thank you, Mr. Chairman. Today, we consider 
H.R. 1057, the ``Promoting Automotive Repair, Trade, and 
Sales,'' or ``PARTS Act of 2015.'' This legislation introduced 
by Chairman Issa and the gentlewoman from California, Ms. 
Lofgren, would reduce the term of design patent protection for 
exterior automotive repair parts like fenders, side view 
mirrors, and headlights from 14 years to two and a half years. 
Supporters see it as a pro-consumer bill to foster much needed 
competition in the collision repair parts market. But opponents 
see it as an unfair exemption to established patent law at the 
expense of one industry, with potential safety implications. 
Each side makes compelling arguments, and I appreciate the 
opportunity to examine these issues in greater detail today.
    According to supporters of the PARTS Act, thousands of 
consumers each year pay artificially inflated prices for car 
repairs because auto manufacturers control more than 70 percent 
of the market for repair parts. To make matters worse, they 
say, manufacturers have recently begun to enforce their design 
patents against generic parts makers, threatening to eliminate 
whatever competition currently exists for aftermarket parts. 
Without the PARTS Act, they argue, consumers could see already 
high prices soar even higher as the generic market shrinks and 
automakers seize a near monopoly on repair parts. These 
consumers see a market with little competition, and wonder why 
there is a thriving market for generic drugs, but not for 
generic taillights. According to some estimates, since generic 
auto parts can cost up to 50 percent less than brand name 
alternatives, consumers would pay over $1 billion a year more 
for repair parts if the independent market were to be 
eliminated altogether. And if repair parts cost more, insurance 
companies will be forced to raise their rates too, further 
hurting consumers.
    The PARTS Act would provide automakers 30 months of design 
patent protection for aftermarket products, long enough, 
supporters argue, for automakers to receive a healthy return on 
investment, but not so long that it would stifle the 
competitive market for repair products that consumers deserve. 
And car companies would still retain a full 14 years of 
protection against other automakers that might seek to copy 
their designs on new cars, since the bill only applies to 
repair parts. But this begs the question why single out only 
one industry for weaker patent protection? Opponents of the 
PARTS Act believe it would set a dangerous precedent in 
intellectual property law. They fear a slippery slope in which 
more and more industries are carved out for special treatment 
under the patent system, leading to a system that is both 
incoherent and unfair. How should we draw the lines between 
which industries are deserving of full protection, full 14-year 
protection, and which are not? We may not always appreciate the 
aesthetic design of a car's component parts, but automakers 
invest significant resources to design every aspect of their 
products so that they stand out to potential buyers.
    Opponents of the PARTS Act argue that it would be unfair to 
deprive these manufacturers of the full return on their 
investment. They also note that auto manufacturers employ 
nearly 30,000 people in the U.S. in design centers. We risk 
losing some of these jobs if we reduce the incentives for 
automakers to create the innovative designs. Opponents further 
warn that the bill could threaten the safety of unsuspecting 
consumers who purchase a generic repair part, which may be of 
lower quality than its brand name equivalent. If a generic 
bumper looks identical but provides insufficient protection in 
an accident, it is certainly no substitute. As we examine the 
PARTS Act, we should consider whether additional safeguards 
ought to be put into place to protect consumers from shoddy 
parts before encouraging a significantly larger market for such 
generic products. Today's hearing hopefully will help us to 
determine the answers to these and other important questions, 
as we examine the proper balance between respecting the rights 
of creators and ensuring that customers enter a safe, 
competitive marketplace. We have an excellent set of witnesses 
to help us sort through these issues, and I look forward to 
their testimony. I yield back the balance of my time.
    Mr. Issa. I thank the gentleman. We now go to the gentleman 
from Michigan, the home of most, but not automobiles.
    Mr. Conyers. All the big three.
    Mr. Issa. Oh, yes, but Cleveland rocks. Thank you, Mr. 
Chairman. I will now recognize the gentleman from Michigan.
    Mr. Conyers. Thank you so much, Mr. Chairman. Members of 
the Committee, this bill would create an exception for certain 
automotive parts from patent protection, and so we should 
review the bill's impact on patent law, but also on consumers. 
To begin with, we should consider whether the exception in this 
bill to design patent law undermines our intellectual property 
system. Intellectual property protection is a cornerstone of 
our economy. This legislation, however, creates an exception 
for design patents, and could arguably weaken our patent 
system. It could foster the importation and sale of all 
unauthorized copies of patent protected vehicle parts. 
Automotive companies make significant investments in the 
development of new exterior automotive parts. Then they acquire 
a design patent so other companies cannot use these designs 
without their approval. Our patent system protects the patent 
holder, as it should.
    Now, if Congress is going to legislate a carve-out in 
patent law, the reasons for it should be exceptional. 
Supporters of this legislation contend that Congress needs to 
create an exception because the cost of replacement parts 
offered by car companies is too expensive. They argued that 
lower prices would benefit consumers who need to make repairs 
to their vehicles. But automotive manufacturers may raise 
prices on new cars to replace lost revenue parts that would 
otherwise infringe their design patents are allowed on the 
trade market. This will hit consumers' pocketbooks when they go 
to purchase new cars and trucks, and it will hurt car companies 
who are still getting back on their feet. We have heard this 
cost argument in other situations, but if we weaken the patent 
system by creating an exception, we will be weakening the 
incentive for companies in every industry to be innovative and 
to bring new products to market. Finally, we must consider how 
the bill would impact consumer safety. I am concerned that off 
brand parts in general may be less safe than those provided by 
car companies because there are no Federal regulations 
requiring minimum safety standards for off-brand parts. In 
fact, the vast majority of these parts are never subject to 
inspection by third party testing organizations.
    Without Federal minimum safety standards on the quality of 
non-original replacement parts, consumers' safety may be at 
risk. Consumers already have a difficult time telling the 
difference between a quality part and an inferior or even 
dangerous one. An exception to patent protection as proposed by 
the measure under examination this afternoon could make this 
problem worse. While a part protected by a design patent is not 
necessarily a guarantee of quality, the fact is, is that if car 
companies churn out inferior or defective parts, they are 
ultimately held accountable. I am sympathetic to the consumer 
cost concerns that supporters of this bill are raising today. 
But I am not yet convinced that such an exception will bring 
forth the benefits they claim will come. While there is no 
guarantee that the insurance companies will pass savings onto 
consumers, what is guaranteed is that if this bill passes, 
there will be more unregulated, untested car parts on the 
market, and we will see many more groups seeking exceptions to 
our patent laws. And for these reasons, I come to this hearing 
skeptical of creating an exception in our design patent laws as 
envisioned by the measure before us today. And I thank the 
Chairman, and yield back.
    Mr. Issa. I thank the gentleman. I now ask unanimous 
consent that the Chairman of the full Committee, Chairman 
Goodlatte's opening statement be placed in the record. Without 
objection, so ordered. Without objection, other Members' 
opening statements will be made a part of the record.
    [The prepared statement of Mr. Goodlatte follows:]
Prepared Statement of the Honorable Bob Goodlatte, a Representative in 
  Congress from the State of Virginia, and Chairman, Committee on the 
                               Judiciary
    Good afternoon. Today's hearing will look at design protection to 
determine whether amendments should be made to the law to limit 
protection for component parts of automobiles.
    Chapter 16 of the Patent Act allows an inventor a design patent for 
any new, original, and ornamental design for an article of manufacture.
    However, the chief limitation on the patentability of designs is 
that they must be primarily ornamental in character.
    If the design is dictated by the performance of the article, then 
it is judged primarily functional and ineligible for design patent 
protection.
    Combined with the cost of patenting, this explains why some 
inventors, including car companies, have traditionally filed for 
relatively few design patents. However, auto manufacturers assert that 
automotive suppliers lose upwards of $12 billion annually to 
counterfeit products. And at least one prominent car company invests 
$100 million or more in the design of each new car line.
    There has been a recent increase in the number of applications for 
design patents for individual parts of vehicles. This has raised the 
ire of those who work in the automotive aftermarket parts industry. 
Independent garage owners fear they will go out of business if the 
Patent Act is used by the auto manufacturers to obtain design patent 
protection for more and more individual parts rather than for the 
design of the car as a whole. Insurers worry that the cost of insuring 
vehicles will increase for consumers if manufacturers aggressively 
assert these rights because there will be less competition for 
replacement parts.
    The aftermarket parts industry argues that we cannot afford to 
maintain the legislative status quo on patent designs. It argues the 
auto manufacturers are filing more design patents under current law to 
reap more profits, meaning the independent garages could lose a war of 
attrition.
    Representative Issa has introduced H.R. 1057, better known as the 
PARTS Act. While the bill does not prevent auto makers from patenting 
designs on replacement parts, it greatly reduces the time period during 
which they may sue competitors for patent infringement from 14 years to 
30 months.
    Today we will weigh these competing interests and the consequences 
of establishing the precedent of creating an exemption to design patent 
law. I remain open-minded on this issue and look forward to the 
testimony that we will receive.
    I think we have a great panel assembled today and I look forward to 
hearing from all of our witnesses.
                               __________

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

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

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

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

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

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

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

              TESTIMONY OF DAN RISLEY, PRESIDENT, 
                 AUTOMOTIVE SERVICE ASSOCIATION

    Mr. Risley. Good afternoon, Mr. Chairman, and Members of 
the Subcommittee. My name is Dan Risley.
    Mr. Issa. We are going to need you just a little closer to 
the microphone.
    Mr. Risley. Closer to the microphone.
    Mr. Issa. Thank you.
    Mr. Risley. My name is Dan Risley, and I am the president 
of the Automotive Service Association, and I am here today 
representing our association. ASA is the largest not-for-profit 
trade association of its kind, dedicated to and governed by 
automotive service and collision repair professionals. ASA 
serves an international membership base and includes numerous 
affiliate state and chapter groups from both the collision and 
mechanical repair segments of the automotive service industry. 
Prior to ASA, I worked at a family-owned collision repair 
facility, served as the executive director of another 
automotive association, as well as spent a number of years at 
Allstate Insurance Company. ASA has a long history of working 
with insurance companies, and ensuring our customers the best 
possible repair experience after an accident. ASA is supportive 
of insured direct repair programs, provided the vehicle owner 
has a choice and is properly informed of it. Many of our 
leaders serve on direct program repair advisory boards of State 
and national insurance companies, including myself.
    Many years ago, I participated on a top three insurance 
carrier's advisory panel. Although we work closely with 
insurers, we are mindful that our customers' vehicles are our 
first priority, and that these vehicles must be safely and 
properly repaired. We do have concerns when some insurers 
insist on repairs that are simply cheaper and quicker without 
regard to quality and safety. This is not to imply that all 
insurance carriers are the same. There is a difference between 
standard and non-standard. That is why my board of directors, 
made up of repair shop owners from across the U.S., wanted to 
meet to testify here today before you.
    The automobile is the second most expensive purchase made 
by Americans. Although the automobile is a major part of most 
Americans' daily lives, few vehicle owners know much about 
collision repair. After an accident, other than contacting law 
enforcement or other emergency personnel, the vehicle owner 
contacts their insurance company for help and direction. 
Unfortunately, very few consumers have any knowledge about the 
types of crash parts used to repair their vehicles, and there 
are numerous parts choices in the marketplace, such as original 
equipment manufacturer parts, certified and non-certified 
aftermarket parts, remanufactured, and recycled. The 
fundamental language used in this bill would systematically 
validate any and all aftermarket parts to be the equivalent of 
an OEM part. In section 2 of the bill it states, ``So as to 
restore such vehicle to its appearance as originally 
manufactured.'' This is impossible unless, of course, there is 
a standard by which all the aftermarket parts companies are 
required to meet. We have several standard settings parts 
certifiers in the marketplace today, CAPA being one, and NSF 
being another, and it is supported and endorsed, recognized by 
the industry, both collision and insurers.
    CAPA was created in the 1980's because there was no 
standard. There were no requirements, no monitoring of 
aftermarket parts. It was the equivalent of the wild, wild 
West. Having worked in a family-owned collision repair 
facility, I can assure you that we ordered, and I have 
personally installed, many parts in the early '80's when CAPA 
did not exist. These parts that were deemed to be OEM 
equivalent were later deemed to be inferior in terms of fit and 
function. Although an aftermarket part looks the same as an 
OEM, it does not mean it is the equivalent of an OEM-quality 
part. It does not mean that the part has the same corrosion 
resistance, metallurgical properties, or that it will perform 
the same in a subsequent accident, similar to how an OEM would 
perform. Certification helps to eliminate or narrow those gaps. 
Although parts certification is not perfect, it does positively 
impact parts quality. I have spent several years chairing a 
Committee, working with the Taiwanese aftermarket parts 
manufacturers as well as their government. One of the biggest 
challenges for the Taiwanese was the U.S. marketplace and 
balancing the cost versus quality. The fact is, certified parts 
do cost more to produce. Certification not only is important 
but critical to this debate.
    Under the current language in H.R. 1057, providing a 
faster, less expensive path for aftermarket crash parts 
manufacturers to put non-certified parts in the marketplace 
will both harm both consumers and small businesses. It has been 
proven through many years of collision repair's trial and error 
that the vast majority of non-certified parts are inferior in 
many aspects, not only to the OEM, but also to the equivalent, 
certified aftermarket part. Aftermarket crash parts 
manufacturers will manufacture parts to achieve the lowest cost 
in an effort to sell the parts inexpensively to distributors in 
the U.S. demanding a low-cost basis. I have personally 
witnessed aftermarket parts, non-certified, that did not have 
holes where there are supposed to be holes to fasten it to the 
vehicle. I have personally witnessed parts that have additional 
holes, where there was not supposed to be any to fasten it to 
the vehicle. I have witnessed parts that were not of the same 
metallurgical thickness, parts that were significantly lighter, 
and prone to dent, missing brackets, missing headlamp parts, 
wrong color, improper reflective properties. When parts do not 
fit or there are other issues, collision shops have to return 
the parts to the distributor. These returns add cost to the 
collision repair process as well as delay the repair.
    Whether it is legislation being discussed today or in 
mandates that insurers place on collision parts facilities such 
as where to buy parts, insurers will argue that these 
initiatives lower premium costs. We do not see where these 
parts savings are passed onto consumers. It is a good 
soundbite, but the consumer will continue to be the loser in 
this equation.
    I want to leave you with a few key points. Number one, a 
free and open marketplace does not entail enacting a law that 
states aftermarket parts are equal to OEM. This should be 
decided by the people actually purchasing the parts. 
Competition is good. There is a need for alternative parts such 
as certified aftermarket parts, recycled, remanufactured, used. 
Legislating competition so that Company X and Y are equal is 
similar to legislating that Walmart shirts are similar to 
something you might see at Macy's just because it looked the 
same online in a picture. You may hear or have heard testimony 
here today about these parts being cosmetic. I can assure you, 
a hood is not a cosmetic part. A hood is designed to crumple. 
In the event that the hood should fail to crumple, the hood is 
going to be pushed into the windshield and into the occupants. 
If it does not fold like an accordion--I am going to close it 
up. We ask the Committee to consider the implication this 
legislation will have on the consumer and small business. We 
ask the subcommittee to oppose the PARTS Act. I appreciate the 
opportunity to testify before the Committee today, and thank 
you very much for your time.
    [The prepared statement of Mr. Risley follows:]
    
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    Mr. Issa. I thank you. We have a number of Members that 
have to go to the floor, so what I am going to do is I am going 
to take the liberty of, without objection, calling on Members 
that must leave for the floor out of order. If anyone objects, 
please let me know. Otherwise, I am going to try to accommodate 
Members that I know have to leave. With that, I will go to my 
Ranking Member, Mr. Nadler, first.
    Mr. Nadler. Thank you, and I appreciate this. I do have to 
go to the floor to debate an amendment shortly. Mr. Gillis, 
what is the rationale for singling out just the auto parts 
industry for special treatment under the patent laws, and do 
you worry about the precedent that this bill would set by 
limiting patent protection for one narrow category of items?
    Mr. Gillis. Yes, that is a possibility. I think that 
overall there are probably a number of industry areas that 
could use this type of repair clause for manufacturers.
    Mr. Nadler. What is the rationale for singling out this 
industry?
    Mr. Gillis. Well, at this point right now, it is one of the 
most expensive items that consumers experience on a day-to-day 
basis. When you back into a pole and it costs you $3,000 or 
$4,000.
    Mr. Nadler. It is very expensive. That is the rationale. 
And the other rationales?
    Mr. Gillis. That is right. Expense is the key rationale.
    Mr. Nadler. Okay, and why now? Why not 20 years ago, or, I 
mean, why are we seeing this now?
    Mr. Gillis. Well, 20 years ago, the car companies came 
before Congress, and Congress said, ``No,'' so thankfully, to 
Representative Issa and Representative Lofgren, we have raised 
this issue again.
    Mr. Nadler. But they have not changed? In other words, I 
thought you said that there was a change recently.
    Mr. Gillis. Yes. As you see from that chart over there, 
there is an exponential increase in the number of parts that 
are being designed patent by the car companies.
    Mr. Nadler. But the change in the behavior of the auto 
companies in exercising these patents.
    Mr. Gillis. Exactly.
    Mr. Nadler. And what sort of protections are in place or 
should be in place to ensure the quality and safety of generic 
repair parts?
    Mr. Gillis. Well, first and foremost, the parts should be 
certified to be functionally equivalent to the car company 
brand parts.
    Mr. Nadler. Certified by whom?
    Mr. Gillis. Well, there is at least one agency that I am 
familiar with called the Certified Automotive Parts 
Association. It has been around since 1987, and in the 
interests of full disclosure, I am the executive director of 
that nonprofit group.
    Mr. Nadler. Okay. Thank you. Ms. Burris, I am sorry. We 
have heard about the potential threat to safety that generic 
repair parts may pose. Can you point to any studies that 
document that there are in fact such risks?
    Ms. Burris. Well, I believe there were some studies pointed 
out in a written statement that I submitted. I have also 
gathered information from the automotive companies that, for 
example, a bumper and the material that it is made out of is 
designed to absorb energy from a crash, and in one specific 
instance there was a design with I believe some continuous 
glass fibers in the bumper.
    Mr. Nadler. That is one specific.
    Ms. Burris. Yeah.
    Mr. Nadler. Is there data to show the generic parts 
involved in accidents have a greater rate than parts made by 
the manufacturers?
    Ms. Burris. Yes.
    Mr. Nadler. There is?
    Ms. Burris. Yes, and as a matter of fact, there are reports 
in my written statement, and I would be glad to follow up with 
additional reports.
    Mr. Nadler. Okay, and according to estimates referred 
today, auto manufacturers control more than 70 percent of the 
market for repair parts. If the industry continues to enforce 
these design patents against generic parts, it could achieve a 
near-monopoly. Without competition, how can consumers be sure 
they are receiving a fair price for these products, if we are 
not to pass this bill?
    Ms. Burris. Well, there are options for the consumers. The 
consumers can use refurbished parts. They can repair the parts. 
There are a lot of technologies you can use to repair. You can 
also make the design look different.
    Mr. Nadler. All right. Let me ask one last question. Under 
current law, design patents and auto repair parts receive 14 
years of protection against infringement. Most consumers do not 
own their cars for that long. Does this not effectively provide 
car companies a lifetime protection against competition for 
repair parts in most instances, and if this bill, if 30 months 
is too short, I think somebody said 30 months is too--I think 
you said.
    Ms. Burris. Yes.
    Mr. Nadler. It does not go into effect right away, is there 
some other period greater than 30 months but less than 14 years 
that might be a fair solution, and how would you determine 
that?
    Ms. Burris. Well, my concern with reducing it to any term 
below 14 years is, what other exceptions are going to be made 
for other industries? That is what I worry about.
    Mr. Nadler. Okay, I understand that generic argument. I 
made it myself, but talking about design patents, one argument 
you made was that--I mean, there are two things here. One, 
people do not own cars for 14 years, and that would seem to 
argue against the 14-year patent, and two, you said that--I 
should not say nobody owns a car for 14 years. My father did, 
but most people do not.
    Ms. Burris. I do.
    Mr. Nadler. But that is number one, and number two, you 
pointed out that under this bill, it does not go into effect 
right away, that is 30 months after.
    Ms. Burris. It is retroactive.
    Mr. Nadler. Okay. Would there be a different period longer 
than 30 months but under 14 years that might be a more fair 
resolution?
    Ms. Burris. Yeah, I think that is a question that the 
automotive companies should try to answer. From a legal policy 
standpoint, I would not, I do not, again I worry about what 
that would do in other areas.
    Mr. Nadler. So your basic argument is uniformity of the 
patent law?
    Ms. Burris. Pardon me?
    Mr. Nadler. Your basic argument is uniformity across 
different areas of the patent law?
    Ms. Burris. Right, because as soon as you make an 
exception, right?
    Mr. Nadler. Got it. Thank you. I thank the Chairman for 
allowing me to question out of order.
    Mr. Issa. I very much thank you for your comments and 
input. At this time, I would like to ask unanimous consent that 
the following documents be placed in the record. The statement 
by Robert L. Lyon, president and CEO of Rockingham Group, and 
others.1 deg. Without objections, so ordered. And a 
second document, ``Aftermarket Shock: The High Cost of Auto 
Parts Protectionism,'' by Brian Garst, 2016.2 deg. 
Without objection, so ordered. Additionally, I will ask that 
design patent number 352685,3 deg. dated 1994, and 
design patent 345317,4 deg. March 22, 1994, be placed 
in the record, and I will note I was the designer of those and 
may just choose to ask questions on that. And with that, I 
would like to go to Mr. Collins, who also has to go to the 
floor.
    [The material referred to follows:]
    
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    Mr. Collins. And I do appreciate it, Chairman. It is always 
good to be with the Chairman. This Committee I think is really 
hitting on one of the biggest parts, but I will also not that 
the patents that just got admitted into by unanimous consent 
also were good for 14 years, so that is an aspect, which is 
good and which it needs to be. I think there are some aspects 
about this bill that are good. There are some aspects that need 
to be discussed, but there are also some very disturbing, you 
know, questions. Ms. Burris, you brought up some. Mr. Gillis, 
we are going to get to some. The heart of this, though, and I 
want to get back to this, and Ms. Burris, I will just start 
with you. If you take the premise of the bill as correct, okay, 
which I have no doubt the authors, you know, in looking at it 
and I think there are some ways that we can work together. I 
have some specific concerns about language in the bill, but I 
think there are some possibilities we can work on. The premise 
of the bill is, do consumers lack affordable options in the 
marketplace due in full to ornamental design patent 
protections? If you take the premise of the bill, that is what 
the premise of the bill basically is because we have heard 
about it already. It is money. Mr. Gillis just said that, so is 
that true?
    Ms. Burris. No, it is not true. The consumers have choices. 
They can go with refurbished parts, remanufactured parts, they 
can repair the parts. And, you know, from my perspective as a 
patent attorney, they just need to make it look a little 
different, and then it will not be infringing the design 
patent.
    Mr. Collins. Right.
    Ms. Burris. It is not that tough.
    Mr. Collins. No, it is not, and I think--well, take that a 
step further, and even if the cost differential of the parts is 
different, there is no evidence that consumers directly would 
save money if this bill is enacted.
    Ms. Burris. That is correct. The last hearing that we had, 
I believe the testimony was that consumers' insurance premiums 
would not go down.
    Mr. Collins. Okay, and I think Mr. Gillis, I would think 
you would disagree, but is there hard and fast evidence that 
consumers will save money post-enactment of this legislation?
    Mr. Gillis. Absolutely. When you look at the comparative 
cost of an OEM part to an aftermarket part, it is phenomenally 
different, and that is what consumers pay for if they are 
crashing the car themselves and paying for it themselves, or it 
is being incorporated into their insurance premiums.
    Mr. Collins. Okay, and I think you take a major leap of 
faith there, which I am a man of faith, so I will go with your 
leap of faith.
    Mr. Gillis. Thank you.
    Mr. Collins. I could understand if I was buying it myself, 
like my Honda has a broke front end right now. Zip ties work 
wonderful, but if I did it myself, then I possibly could save 
money there, but if I depend on the insurance company to pass 
their savings along to me, can you honestly sit here under oath 
and say that I am going to see savings from my insurance 
company?
    Mr. Gillis. Well, I think you are already seeing those 
savings because most insurance companies do already use 
aftermarket parts.
    Mr. Collins. Exactly, but you are extrapolating there, if 
this bill was enacted, that that would happen.
    Mr. Gillis. Well, I think you have extrapolated the 
opposite way, and you would probably see insurance premiums 
raised if these parts were not available to the marketplace.
    Mr. Collins. I think that is the wonderful thing for these 
hearings is discussions and disagreements such as that. But in 
your written testimony, I do have an interesting question, and 
this will--and I am going to sort of finish up here because, 
like I said, I think the Chairman and Ms. Lofgren, who I have 
the greatest respect for, there is some ideas here that we 
might could work for, but in your written testimony, you make a 
comment, and it is on page three of your written testimony. It 
says, ''Not only do customers have the right to competition, 
they both have the right to safe and high quality competitive 
parts.'' I am just curious. Where are you getting a right to 
competition?
    Mr. Gillis. Well, I think that is a fundamental right of 
the American capitalistic marketplace that has caused consumers 
great benefit over the years and taking away competition from 
the consumer is un-American.
    Mr. Collins. Well, I mean we can debate American or un-
American, but really when you say a ``right,'' you are implying 
almost a legal concept here, and I think that is an interesting 
way to hyperbole to put that.
    Mr. Gillis. I am implying a fundamental right to choice, a 
fundamental right to options in the marketplace, and that 
fundamental right is also one of the biggest benefits that 
corporate America experiences when they offer us different 
products.
    Mr. Collins. So conversely, for someone such as myself, who 
believes that a strong and robust patent system actually 
encourages creation and not discourages creation, would you 
agree with me that patent owners have a right to enforce their 
patents?
    Mr. Gillis. They have a right to enforce those patents when 
those patents are legitimate, but in the case of this 
particular situation, I would like your opinion as to why all 
of a sudden, all of these parts are patentable, when 10 years 
ago they were not.
    Mr. Collins. Were they patentable 10 years ago?
    Mr. Gillis. Look at the list.
    Mr. Collins. They were. They chose not to.
    Mr. Gillis. And they chose not to patent them.
    Mr. Collins. And again----
    Mr. Gillis. Why are they choosing to patent them today? 
They are choosing to patent them today because that is a way to 
limit competition.
    Mr. Collins. So as a conservative who believes in free 
markets, you are going to run to the government to say, 
``Government, put your thumb on the scale.'' Mr. Gillis, I 
think that is a problem, and you make a business choice either 
way. I believe this bill has merit. I believe there are some 
things we can work on to move forward on this. But frankly, 
there is some concern here when you distinguish patents and you 
do this in such a way that you do it--as you said before, it is 
all about money. There are also rights of the patent holders 
and the protection we afford to them, so I look forward to 
continuing the discussion. I appreciate it, Mr. Chairman.
    Mr. Issa. Would the gentleman yield?
    Mr. Collins. Always.
    Mr. Issa. I know you have to go, but before you go, I will 
just mention for example those two fenders that are down front. 
We brought them in for a reason. One is live, one is Memorex. 
Unless you look at the label, you probably will not notice the 
difference.
    Mr. Collins. Can I get one for my Honda?
    Mr. Issa. Absolutely, absolutely. The gentlelady from 
Louisiana can help you.
    Mr. Collins. Which speaking of which, by the way, thank you 
for being here. I always enjoy these panels, and when you have 
actually someone here who does the business every day, the one 
who gets up and writes the payroll checks and comes to--I love 
the other testifying witnesses, but when you have got someone 
like yourself, we may disagree in parts on this, but thank you 
for actually keeping America's economy running. Thank you.
    Ms. Felder. Thank you.
    Mr. Issa. But one of the things that we are going to dig 
into as we go further into the bill is that were these 
thousands, tens of thousands of design patents evaluated based 
on not the ornamental entirety, but the ornamental pieces, then 
the rules of distinct ornamental nature would have to be 
searched by the PTO, by the examiners, and this is one of the 
tests they currently do not do. In other words, when a certain 
car looks a lot like another car and then a particular part 
looks a whole lot like another part, at what point is it novel 
and new? And this is one of the challenges of--this is design. 
This legislation is designed not to take on the hard part of 
making the patent office evaluate the distinct nature of a 
mirror or other parts, so we will get into more of it, but I 
wanted to make sure that your concerns were allied, that we are 
not--allayed, that we are not planning on----
    Mr. Collins. Well, and I think the Chairman brings up a 
great point. If you really want to get into the overall patent 
issue, which we have, you and I have, talked about many times, 
we have to have good, robust patent systems that are actually 
examined. The problem we have right now is patents that can be 
challenged because they frankly are bogus patents, and that 
goes across the spectrum. You brought up a great point, Mr. 
Chairman. That is the reason we have this, and it is a pleasure 
to be on the Committee with you.
    Mr. Issa. Thank you.
    Mr. Risley. Excuse me, Mr. Chairman?
    Mr. Issa. Well, I apologize, but that colloquy exceeds by 
far the Ranking Members' time, so we will give you time, but 
not at this moment. Mr. Conyers.
    Mr. Conyers. Thank you, Mr. Chairman. First, I would like 
to enter into the record the following two letters. 
Missing deg.One is from original equipment 
manufacturers, labor unions, automotive trade associations, and 
the Intellectual Property Owners Association opposing this 
legislation. The other is a letter from the American Bar 
Association, IP law section.
    [The material referred to follows:]
    
    
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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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