News
Copycats Allowed by Linda D. Kennedy
By Rader, Fishman & Grauer Partner, Linda Kennedy
This article originally appeared in Michigan Lawyers Weekly on 6-28-10
Congress is considering creating a new exemption for infringement of U.S. design patents.
Specifically, H.R. 3059 proposes amending the Patent Act to specify that “it shall not be an act of infringement of any design patent to make, use, offer to sell or sell…any article … that itself constitutes a component part of another article of manufacture, if the sole purpose of the component part is for the repair of the [other] article … so as to restore its original appearance.”
Under the proposed revision, an original equipment manufacturer (OEM) could still, for example, obtain a design patent for a uniquely styled bumper of an automobile. However, a third party could make and sell the identical bumper without concern of infringing that patent if the sole purpose of that bumper was to repair the automobile to its original appearance.
Design patents v. utility patents
To analyze the implications of H.R. 3059 for the auto industry, it is useful to understand where design patents fit in the overall scheme of intellectual property protection.
When most business executives discuss patents, they typically discuss utility patents, which are the most common form of patent protection. Utility patents provide a monopoly to an inventor for methods, machines, compositions of matter, and articles of manufacture if they are new, not obvious, and meet the other statutory criteria for patentability.
Put simply, utility patents protect functional and structural inventions without regard to their aesthetic appearance.
Design patents are different.
Design patents are not concerned with functionality. Rather, they provide a monopoly to an inventor for “ornamental designs.”
To be patentable, the ornamental designs must also be new, not obvious, and must meet other statutory criteria.
Under the current patent laws, both utility and design patents can be (and are) granted for component parts as well as overall assemblies that include multiple components. (For examples of component-type design patents, see U.S. D615,007 assigned to Nissan for a radiator grill, and U.S. D617,479 assigned to Toyota for a front combination lamp.)
Unpatented component parts of a patented combination may be subject to the “Repair Doctrine” and the related “Implied License” concept in patent law.
Assume in the above bumper scenario that the bumper was not patented because it, by itself, did not represent a sufficient leap over prior art bumpers for either design patent protection or utility patent protection.
Assume the automobile was protected by a utility patent claiming an automobile comprising the combination of an automotive frame, a bumper connected to the frame, and a gizmo A connected to the frame.
Generally, in such a situation, a purchaser of the patented automobile (assuming the purchase was unrestricted in relevant aspects) receives an implied license to use and repair the automobile. This license includes the right to purchase the unpatented bumper.
The auto purchaser would not be directly infringing any patent rights by installing the unpatented bumper into the patented automobile because of the implied license.
In the absence of direct infringement, there can be no indirect infringement through contributory infringement or inducement of infringement.
That result opens up an aftermarket for the unpatented bumpers. Domestic and foreign third-party manufacturers can then make, import and sell the unpatented bumpers to the licensed auto purchasers.
Thus, H.R. 3059 does not necessarily affect the rights aftermarket manufacturers and importers with respect to all components — just those that the U.S. Patent and Trademark Office determined were patentable after examination.
Infringement of design patents
Like all patents, design patents do not give an inventor the right to use the invention. Instead, the nature of the rights that patents grant is negative. Design patent grants the right to exclude others from making, using or selling the patented design in the U.S. Basically, the right of a patent holder is to gain relief for infringement.
OEMs and suppliers can seek recourse for infringement of design patents by importers in the International Trade Commission (ITC). Under the current law, in the stylized bumper scenario described above, the OEM could seek injunctive relief preventing importation of an infringing bumper from, for example, China.
The OEM could also, of course, seek injunctive relief and/or damages in U.S. federal courts for infringement of a design patent directed to the bumper.
If enacted, H.R. 3059 would eliminate such recourse in the ITC and federal courts.
H.R. 3059 is sponsored by Zoe Lofgren, D-Calif., along with eight co-cosponsors, none from Michigan. The bill was referred to the House Judiciary Committee, and a hearing took place on March 22, 2010.
There are arguments for and against H.R. 3059 that are pertinent to the auto industry: Pro: Primary supporters of the bill include the Consumer Federation of America (CFA) and the Property Casualty Insurers Association of America (PCI).
These supporters argue that, inter alia, permitting OEMs and suppliers to obtain design patents on component parts diminishes competition and consumer choice by eliminating the aftermarket for cosmetic repair parts.
They argue such patents unduly increase the cost of minor auto repairs, thereby increasing insurance premiums.
This increase may lead to (1) more damaged automobiles being “totaled” rather than repaired, thereby damaging the environment, and (2) consumers foregoing expensive repairs, thereby resulting increasing safety risks.
Con: Ford Motor Co. submitted testimony against the bill, arguing that it always has been cheaper to steal something rather than to pay for it.
Ford estimates the cost of copycat parts to Ford, its suppliers and dealers is $400 million annually. Ford also argues that the bill merely eliminates otherwise protectable intellectual property rights in component parts, reducing a 14-year monopoly to zero.
Ford contrasts this reduction with the recent extension of U.S. copyright monopolies to 120 years.
Ford addresses the insurance issues by noting that Ford provides insurance companies with its replacement part pricing that those companies use to set their rates. Then, some insurance companies refuse to pay for genuine parts and refer repair shops to copycat suppliers. Such referrals may be without disclosure to the consumer unless required by law.
Linda D. Kennedy is a partner at Rader, Fishman & Grauer PLLC. She practices patent law before the U.S. Patent and Trademark Office and in U.S. district courts and the U.S. Court of Appeals for the Federal Circuit. Contact her at (248) 594-0619 or ldk@raderfishman.com