United States: Is Congress Finally Getting Serious About Curtailing Design Patents In The Auto Industry?

In recent years, OEMs have been growing their design patent portfolios at a rapid pace. Specifically, OEMs have been securing patent protection on replacement parts, including bumpers, fascias, light fixtures, mirrors, hoods, and trunks, providing them with additional leverage over suppliers and aftermarket competitors for the entire 15 year life of a design patent.

However, this system may be under threat as members of Congress have once again introduced the Promoting Automotive Repair, Trade, and Sales Act of 2017 or the PARTS Act ( S.812 and H.R.1879).1 While the PARTS Act does nothing to prevent companies from securing design patent protection for replaceable parts, the purpose of the Act is to limit the term that the design patent can be asserted for infringement.

Who Would be Affected by Enactment of the PARTS Act?
The PARTS Act affect the patent rights of owners of design patents that claim a component part of a motor vehicle, which is defined as a part of the exterior of a motor vehicle, such as a hood, fender, tail light, side mirror, or quarter panel and excludes any parts in the interior of the motor vehicle. Accordingly, for design patents that claim a tail light or some other component part located on the exterior of a motor vehicle, the OEM's design patent rights would be limited. However, the PARTS Act leaves alone design patents for interior components of vehicles, such as seats and dashboards, preserving the 15 year enforcement term.

How Does the PARTS Act Limit the Rights of Owners of Design Patents Claiming Exterior Component Parts of Motor Vehicles?
Currently, owners of design patents have the right to exclude others from making, using, offering to sell, or selling any patented invention, within the United States or imports into the United States any patented invention during the term of the design patent (35 U.S.C. § 271(a)). The term for a design patent is 15 years from the date of grant (35 U.S.C. § 173).

If the PARTS Act is enacted, the Act would affect the rights of owners of design patents claiming exterior component parts of motor vehicles in two ways. First, the Act grants the ability of competitors to produce and stockpile replacement parts without selling them. Specifically, the patent owners would lose the right to exclude others from making or offering to sell within the United States, or importing into the United State, any product that is similar or the same in appearance to the exterior component part claimed in the design patent. Thus, if an OEM owns a design patent to a side mirror and the side mirror is part of car as originally manufactured, the OEM would be unable to exclude others from making or offering to sell or importing into the United States a side mirror that is similar or the same in appearance to the side mirror patented by the OEM.

Second, the PARTS Act would also greatly reduce the period of time that a patent owner could exclude others from using or selling within the United States. Under the PARTS Act, patent owners are only able to exclude others from making or selling a product that is similar or the same in appearance for a period of 30 months from the first day that the exterior component part was offered for sale to the public. Furthermore, due to the ability of companies to stockpile infringing parts, competitors would be free to flood the market the day after the 30-month enforcement term expires.

It should also be noted that the Act sets the first offer for sale as any country. In order to maximize value from design patents, OEMs should consider releasing new vehicles for sale in foreign markets close to or after the release of the vehicles in the U.S. Similarly, OEMs should be sure to push for filing design patents earlier, to ensure that they are granted by the first sale date, ensuring that aftermarket competitors are on notice of possible infringement for the full 30-month term. The average pendency of a design patent can often be anywhere from 12-18 months, so maximizing design patent rights under the PARTS Act requires counsel to work with engineers during product development. Similarly, claim strategies may be used to leave flexibility with design changes to ensure that the final product is covered by the design patent.

Would the PARTS Act Apply to All Design Patents and Applications Claiming Exterior Component Parts of Motor Vehicles?
If the PARTS Act is enacted in its current form, then the PARTS Act would apply to any patent, issued or application for patent filed, before, on, or after the effective date of the PARTS Act. Therefore, the PARTS Act applies retroactively to all design patents and applications claiming exterior component parts of motor vehicles.

Should I Keep Building My Current Design Patent Portfolio?
In short, the answer is: Yes. While the PARTS Act is fairly straightforward and would be quick and simple to enact, the previous version introduced in 2015 was referred to committee and no action was taken on it. So far, the present version has fallen victim to the same fate. Until the PARTS Act gains more traction, design patents covering replacement parts still maintain their full 15 year enforcement life.

However, even if the PARTS Act is enacted, it applies to parts for restoring vehicles to their as-manufactured state, leaving design patent protection available for targeting aftermarket modification parts that alter the appearance of the vehicles, which can be targeted for royalty payments with proper design claim scope. Above all, the PARTS Act still preserves the rights of OEMs to protect their designs for 30 months, providing broad protection against aftermarket parts for that period, and any such period of exclusivity can result in strong leverage over the aftermarket industry.

Footnote

1 Earlier versions of the PARTS Act have been introduced in the Senate and/or House of Representatives during each congressional session since June 25, 2009.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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