A lively debate at the recent Collision Industry Conference in Las Vegas had a former Keystone executive facing off with a Ford Motor Company attorney on crash part design patents and the new Access to Repair Parts Act (H.R. 3059/S. 1368) introduced to Congress in 2009 that would favor the aftermarket and create an exception from infringement of design patents for certain component parts used to repair another article of manufacture.
Dan Morrissey, former vice president of Keystone Automotive Services and current owner of New Horizon Advisors, LLC, accused Ford of trying to gain a monopoly over the sale of commonly used replacement crash parts by eliminating competition through seeking design patent protection. He cited a case that resulted in a win for Ford and a ban on the importation of seven different types of crash parts. A settlement was reached where LKQ, as the only distributor of non-OEM aftermarket copies of Ford collision parts protected by design patents, would pay Ford a royalty for each such part sold during the agreement’s term, which extends through Sept. 30, 2011.
“The impact was fewer choices and higher prices,” Morrissey said. “It was a resolution to the litigation but not a solution to the problem.”
Morrissey said Ford, as the sole source for select crash parts for 14 years (the duration of the design patents), now has the power to price gouge. To prove his point, he showed a graphic in his presentation where the prices for the parts Ford won protection over supposedly went up drastically and immediately after the court decision was handed down. Ford later disputed the information, with Paul Massey, Ford’s product marketing manager, saying the parts listed were “unfairly cherry picked.” Massey said without specific part numbers, the information was highly questionable.
Morrissey listed these other consequences of the court decision in favor of Ford:
• Lack of choice
• Higher parts prices = more total losses
• Increased consumer and insurance costs
• Fewer cars to repair
Benefits of competition he cited were:
• Faster delivery to shops
• Broader availability for older models
• Margin improvement
• OE price matching program
• Improved quality/certification programs
• Better warranties
Damian Procuri, an attorney with Ford’s intellectual property group, immediately went on the defensive and opened by saying, “Were there any job losses in the aftermarket or repair industry? The people we sued, LKQ, reported record profits. I hope Ford can someday.”
Procuri said Ford has pursued design patent protection because modern technology is making it much easier to clone parts.
“It takes thousands of hours to design fenders, hoods and lights,” Procuri said. “But now, high-speed laser scanners, rapid tooling and low-wage offshore manufacturing has made it faster, cheaper and more profitable to copy everything. The Taiwanese can clone our parts in under a day. And the copying of parts in every industry will continue to grow.”
Procuri said enforcing design patents is a 100-year-old concept and does not negatively impact the industry. He said inventors from the aftermarket also have the freedom to protect their patents. Other observations he made were:
• It’s always cheaper to make copies.
• The aftermarket copies the outside, not the inside.
• Insurers want copies, not customers.
• Consumers don’t know they’re getting copies.
• Insurance premiums are based on OE prices.
Addressing Morrissey’s point that aftermarket crash parts provide more choice in the market, Procuri said, “You don’t have to copy a Ford part to provide choice.”
The specific language of the Access to Repair Parts Act, which was introduced on June 25, 2009 and currently sits in committee, makes it not an act of infringement of any design patent to make, use, offer to sell, sell, or import into the United States any article that is a component part of another article, if the sole purpose of the component part is for the repair of the article of which it is a part so as to restore its original appearance.
“Three hundred thousand U.S. parts jobs have been lost since 2000, and Taiwanese parts have skyrocketed from 1989 to 2002,” Procuri said. “This bill would turbocharge that process. It is a clumsy attack on Detroit that will take down dozens of industries and jobs.”
More information:
• ITC Sees Increase in Section 337 Patent Infringement Cases
• Ford Files Design Patent Infringement Complaint on Mustang
