The US PARTS Bill is threatening protection by design patent for automotive parts, and opening the debate on OEM parts pricing in the US. In the EU, OEMs need to keep a watchful eye and take heed of the implications for product liability obligations.
The Promoting Automotive Repair, Trade, and Sales Act (or PARTS Act, H.R. 3889) was introduced in US Congress in February 2012 and aims to legalise the manufacture and distribution of design-protected motor vehicle parts for repair purposes by creating a unique exception to design protection of motor vehicle parts in the case of repair or restoration. The Bill plans to drastically reduce the period of protection by design patent for certain original parts from 14 years to 30 months, and would open the parts market to intensified competition.
Supporting the Bill are several American consumer organisations, insurance companies, aftermarket dealers and other service providers.
The US PARTS Bill is threatening protection by design patent for automotive parts, and opening the debate on OEM parts pricing in the US.
The PARTS Act would amend Title 35 of the US Code to the effect that making, offering for sale and importing into the US of “any article of manufacture that is similar or the same in appearance to the component part that is claimed in such design patent” … is not an infringement of the design patent, if done for the purpose of repairing the motor vehicle or restoring it to its appearance as originally manufactured.
Design protection of non-functional replacement automotive parts has been a controversial matter in recent years. Insurers claim that the elevated cost of replacement parts often makes it uneconomical to repair a car at all.
Proponents of the proposed legislation also argue that car manufacturers currently control 72% of the repair parts market and have been steadily increasing the use of design patents. They say that competition is reduced and consumers end up paying more than necessary for parts.
The market for spare parts is significant. According to recent assessments, it amounts to about €15bn (US$19bn) in the EU alone, while the US original equipment parts market totalled US$141.5bn in 2010 (source: US Automotive Parts Industry Annual Assessment 2011). According to supporters of the proposed legislation, opening the market to competition would save American consumers about US$1.5bn annually.
The automotive industry has concerns that a liberalised market could damage both brands’ and consumers’ expectations. It will result in additional safety, product liability and warranty issues, while not necessarily causing an overall price reduction for consumers.
Further, proponents fail to demonstrate a clear relationship between design patents, the arguable practice of overcharging for spare parts, consumer welfare and a general positive effect on domestic economies.
Brand owners also ask why, if free competition is the only argument, they should maintain patent protection in the first place.
The PARTS Bill may only be in its early stages, but it can be expected to prompt significant debate about the parts market as it progresses.
In addition to the intellectual property implications, the Bill will have a knock-on impact on OEMs in the areas of product liability and competition law, particularly in Europe. From a product liability perspective, in some European jurisdictions, particularly Germany, laws require manufacturers to extend their obligation to monitor potential product and product combination hazards in the field. This duty extends to accessory parts that are not manufactured by the original equipment manufacturer or its affiliates.
In addition, where there is a duty to actively warn the public on the risk of using accessory parts from a third party (possibly a competitor), the manufacturer will need to heed competition laws when wording the warning and instruction statements.
The PARTS Bill may only be in its early stages, but it can be expected to prompt significant debate about the parts market as it progresses.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Dr. Zohar Efroni is Associate Attorney, CBM Lawyers International, Stuttgart, Germany.
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