Lofgren and Issa take on patent law that inflates repair costs
In this era of hyper-partisanship, it’s notable that a bipartisan pair of California members of Congress, Republican Darrell Issa and Democrat Zoe Lofgren, are together proposing reforms to a problem that affects nearly every American: the high cost of auto repairs
Their Promoting Automotive Repair, Trade and Sales (PARTS) Act also has bipartisan sponsors in the Senate. Its topic is the little-understood subject of design patents, a form of intellectual property once briefly suppressed during the 19th century, enabling scores of lawsuits against farmers who used patented agrarian equipment, not unlike today’s problem of patent trolls.
The PARTS Act promises to lower the cost of repairs by creating a limited carve-out that reduces the length of time in which a design patent could be enforced against manufacturers of aftermarket cosmetic car parts designed to restore vehicles to original appearance. Similar safe harbors already exist in the United Kingdom, Australia and a number of European countries.
Under the bill, carmakers would still be protected from knockoffs by competitors for up to the 14 years allowed under current law. But the period to bring claims against makers of parts would be capped at 30 months.
This could be meaningful reform. The American Insurance Association estimates that competitive replacement crash parts are typically 34 to 83 percent less expensive than parts from original manufacturers. This saves consumers between $1.5 and $2.4 billion each year.
Design patents are intended to protect “ornamental designs.” They typically involve intricate drawings to ensure that the likeness of the patented item is clear beyond question. In theory, they are only supposed to protect the look of an item and not its function. But in a world in which function and form often are inextricably linked, design patents are used to exploit the legal ambiguity.
In the case of ornamental car parts, like hoods or fenders, car manufacturers file design patents to prevent third parties from replicating their designs. Under current U.S. law, such designs are protected for a minimum of 10 years and a maximum of 14. Given the short average life of a car, a decade-plus delay effectively insulates manufacturers from competition. That explains why carmakers control more than 70 percent of the collision repair market.
Design patents have another quirk that makes defending claims costly. Where courts do find that a patent has been infringed, the patent owner is entitled to all of the gross profits from the item’s sale, regardless of whether the design feature played any role in a consumer’s decision. No other area of intellectual property works like this.
The phenomenon of design patents killing a market for replacement parts is not limited to cars. Think of razors and ink cartridges, each notorious for otherwise inexplicably high prices. The patented “designs” prevent other parts makers from producing replacements.
Stifling interoperability is not about encouraging innovative design; it’s about keeping out competition. But even if it were about innovation, it’s worth questioning whether protections are necessary. The fashion industry gets by just fine with only limited intellectual property protections. In fact, the development of knockoffs is what inspires the next round of innovation.
While the PARTS Act seeks only to address one issue with design patents, it represents a commendable first step toward broader liberalization of the patent system. Achieving these reforms would prove this Congress can do something after all.