“We are concerned that ongoing legal proceedings involving a novel application of design patent rights would harm our members’ policyholders by increasing auto repair costs, which would necessitate higher insurance costs,” wrote the National Association of Mutual Insurance Companies, American Insurance Association and the Property Casualty Insurers Association of America in joint testimony submitted to the PTO.
“We believe these legal proceedings could establish precedent that could virtually eliminate competitive aftermarket repair parts from the marketplace,” the groups wrote.
The PTO held a hearing on the issue of aftermarket parts and the protection of industrial designs as intellectual property as part of a “listening tour” that began in
Aftermarket parts—cheaper generic versions of products produced by a vehicle’s original manufacturer—have been a controversial issue since 1999 when legal attacks on insurers were commenced that contended carriers were requiring use of parts that were unsafe. A $1.05 award against State Farm was overturned on appeal, but last year a jury returned a $17 million verdict against American Family.
Deputy Undersecretary of Commerce for Intellectual Property and Deputy Director of the USPTO Margaret Peterlin in advance of hearing insurer testimony said, “The goal of this listening tour is to hear all perspectives on issues surrounding industrial design protection so the USPTO can evaluate and assess what policies are best for our intellectual property system.”
The PTO undertook its tour noting that legislation has been introduced in the House that would create an exception to copyright infringement laws for certain component parts used to repair other objects that would include auto parts. That legislation, HR 5638, was introduced by Rep. Zoe Lofgren, D-Calif., and is awaiting action by the House Judiciary Committee.
Specifically, NAMIC pointed to the case of Ford vs. Keystone, now pending in the U.S. Court of Appeals for the Federal Circuit. If the challenge is successful, aftermarket parts, such as sheet metal or body parts, would effectively be removed from the market, forcing consumers to use only those from the original manufacturer.
Such an outcome, according to NAMIC, would drive repair costs up and increase the likelihood that a damaged vehicle would be considered as a total loss for insurers.
“It would eliminate a low-cost option and necessitate that all repairs utilize more expensive OEM parts,” NAMIC said. “It has been estimated that competitive aftermarket parts are currently priced 34 percent to 83 percent lower than the comparable OEM parts.”