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It is the goal of the Quality Parts Coalition to develop and secure a permanent legislative change to U.S. design patent law to preserve competition and protect the consumer’s right to benefit from quality, lower-cost alternative replacement parts. The proposal would specify that the making and use of a matching exterior auto part to repair a vehicle is not an act of infringement.
Legislation to establish a “repair clause” in U.S. design patent law should be supported:
- Repair Prices – Without it, the pro-consumer impact that the existence of the quality alternative auto parts industry has on repair prices would be lost. Armed with monopoly power, the big auto companies would be unconstrained in their ability to increase the price of replacement parts. When there is direct competition between an original equipment manufacturer (OEM) part and an alternative part, the cost of the independent supplier can be as much as 40 percent lower. Even though the alternative parts industry has a small market share, its existence seems to constrain the prices charged by OEMs in the aftermarkets as a whole.
- Totals – As the prices of the big automobile company’s repair parts increase, the number of cars considered "totals" also will increase, forcing a consumer to incur the cost of replacing the damaged car with a new one prematurely. For example, it has been estimated that a 1999 Toyota Camry would cost more than $100,000 to put back together with Toyota parts. Brand new, the car retailed for less than $25,000. The economics of this are clear for the insurance adjuster: total the car and force its replacement. Because the likely pay-out to the consumer is book value versus replacement value, the consumer will incur the additional cost and hassle of replacement.
- Disproportionate Impact on the Elderly and Poor – The increase in totals described above will have an even greater impact upon the elderly and poor who tend to drive older cars and are least able to pay higher prices for repair much less replacement in the event of a total. In many instances, lower income individuals have large car loans and could find themselves in a situation where the balance on their loan exceeds the insurance pay-out on a totaled car. Some such individuals could be left without transportation to their jobs.
- Insurance Premiums – While it is difficult to predict the impact on automobile insurance premiums as there are a multitude of factors that go in to the pricing of an insurance policy, logic would lead one to conclude that the elimination of the alternative parts manufacturing industry would eliminate competition and consumer choice and lead to higher prices for OEM parts, more totaling of collision damaged cars and higher insurance premiums.
- Fairness – Keystone and other quality alternative auto body parts manufacturers have been in the repair business for 60 years. What changed at the patent office that has led to the issuance of design patents that now threaten the very existence of the industry? This is clearly an issue the Congress should examine and address during the 110th Congress.
- Precedent – A "repair doctrine" already exists with respect to U.S. utility patents. Its same rationale could easily extend to design patents. There also is precedent for this debate in the European Union (EU) where an amendment to its design patent law to include a "repair clause" is now pending. A “repair clause” already is the law in Australia.
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