Today, Congressman Jerrold Nadler (NY-10), Ranking Member of the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet, delivered the following statement during a hearing on the Promoting Automotive Repair, Trade, and Sales (PARTS) Act of 2015 defending intellectual property rights that work for consumers.
The full text of the statement is below:
“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% 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 tail lights. According to some estimates, since generic auto parts can cost up to 50% 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 applies only 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 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 their 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 will help us determine the answers to these and other important questions as we examine the proper balance between respecting the rights of creators and ensuring that consumers 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.”