By Liza Porteus Viana for Intellectual Property Watch
The United States Patent and Trademark Office is meeting with industry groups and intellectual property experts to determine how to strike just the right balance on industrial design protection in the United States.

USPTO officials on Thursday will visit Nike’s Beaverton, Oregon, campus for a discussion involving a number of West Coast-based stakeholders including Starbucks, Adidas and home fitness-equipment maker Nautilus, as part of a listening tour. A 16 June event held in Virginia included automobile and insurance companies, consumer groups, independent parts manufacturers and companies such as toolmaker Black & Decker.

In the US, design patents can protect the ornamental appearance of manufactured items such as cars. These differ from utility patents, which provide protection for the innovative, functional aspects of a product as embodied in the structure or operation of the product. Original equipment manufacturers (OEMs) often spend millions, if not billions, of dollars creating unique and distinctive designs for their products, whether they be strollers, mobile phones, household appliances or clothing.

But recent moves by the European Union in loosening patent protection for car repair parts, specifically, has gotten some attention in the United States, as has a legislative bill sponsored by Rep. Zoe Lofgren (Democrat, California). So the USPTO wants to round up ideas and opinions on market effects of such actions, particularly when this country has seen an “incremental increase in design applications” being filed – about 5,000 more in 2007 than in 2003.

“I think this is a good example of looking at both a trend in Europe, spotting an interest in the beginning of a discussion in the United States, then going out and doing our homework” to determine the market effect of changes in design patent systems, Margaret Peterlin, deputy undersecretary of commerce, told Intellectual Property Watch in an interview this week. “Tell us how you use design protection, tell us the value it has for your business … we are in receiving mode.”

Lofgren’s bill would provide design patent exemption for alternative repair parts used for the purpose of repairing an article to its original appearance. The measure, which can be applied to non-vehicle parts, as well, is not meant to cover upgrades. The bill is in response to a recent International Trade Court decision that said automakers could assert patents on ornamental and cosmetic features of exterior vehicle parts to prevent the manufacture or importation of repair parts like bumpers. Ford more recently filed another complaint with the ITC against manufacturers and US distributors of exterior repair parts, alleging alleges infringement of design patents for the 2005 Ford Mustang.

But car companies, among others, are opposing the bill, saying it condones copying.

“It violates the Constitution and the basic principles we all learn, that you can’t copy your neighbour’s work,” said Damian Porcari, an attorney and director of enforcement and licensing at Ford Global Technologies.

OEMs are facing increasing enforcement issues with new technologies making it easier and cheaper for overseas companies to copy their products. Taiwan, in particular, is posing a huge problem for Ford. A new $10,000 laser scanner makes it “ridiculously easy” to copy three-dimensional images of car parts now. That’s cheap compared to the $500 million to $1 billion it might take to design a new car.

“They’ve created this photocopier for car parts,” Porcari said. “In the old days, you had to have a trained machinist measure each of these parts … and meticulously put it into a program which you then had to mill your tooling, verify it … it would take months and months to create this tool.”

The Intellectual Property Owners Association on 18 July sent the USPTO a letter, saying the Lofgren bill “carries with it significant costs to a variety of industries that rely on intellectual property protection to succeed in the global marketplace.”

The United States is in the middle of the pack when it comes to strongly protecting and enforcing design intellectual property, Porcari said, while Brazil rates first in Ford’s book.

“They seem to have a very expert judiciary trained in design and patent enforcement,” Porcari said, adding that Germany and France are not far behind. China has some good protection on the books but enforcement can vary.

But Australia and Europe’s moves to liberalise the aftermarket of visible repair parts has been detrimental to the car replacement part business, he said. They “just did a 180 [degree turn] and said ‘Hey, copy all our stuff, it’s unimportant and un-useful,” Porcari said. “We think that’s just terrible.”

The American Intellectual Property Lawyers Association, in opposing the bill, told the USPTO “there is no evidence or compelling policy argument that the design patent law is not functioning exactly the way Congress intended or that the law has been abused by any overreaching design patent owners.”

“In addition, the legislation departs from the long and well-established doctrine that patent infringement, as well as other types of IP infringement, does not depend on the intention of infringer.”

But OEM competitors say protecting designs of common exterior items such as bumpers reduces consumers’ choice and hits their wallets harder. Cost of repairs will go up if OEMs have what competitors call a “hidden monopoly” on the repair-parts business.

It is a “business strategy” from OEMs to “wipe out the competitive parts industry,” said Eileen Sottile, executive director of the Quality Parts Coalition, which represents the independent parts industry, insurance companies and consumers. “If someone obtains a design patent, they have a 14-year monopoly – that’s the life of a car.”

But the real question, Stolitte said, is: “Did they deserve a patent on a hood or a fender in the first place? …It’s looked the same for the past 40 years.”

Ford would like to see protections like those afforded boat hull designs here in the United States. A 1998 law granted an owner of an original vessel hull design certain exclusive rights provided that application for registration of the design with the Copyright Office is made within two years of the design being made public.

The US House of Representatives on Tuesday passed HR 6531, which would amend the Copyright Act to clarify the distinction between a vessel hull and a deck in design registrations, and to add a partial exception for designs used by the Defense Department.

The fashion industry is also pushing for more design protection in the US. Whereas Europe, Japan and India provide protection for 15 to 25 years for registered fashion designs, the U.S. offers none. Designers and others note that of the $225 billion a year in revenue lost to piracy, and counterfeiting, at least $12 billion of that is in the fashion and apparel industry.

But discount retail stores like WalMart are concerned that if stronger intellectual property protections are granted to fashion designs without sufficient patent examinations, they will not know which components of an item are protected and they can copy.

Reps. Bill Delahunt (D-Massachusetts) and Bob Goodlatte (Republican, Virginia), have introduced a bill (Sen. Charles Schumer [D-New York] has introduced the Senate companion) that would provide three years of copyright protection for fashion designs that are truly unique.

International Example

During its tour, USPTO is also receiving input on how to better streamline and harmonise the design patent process, both at home and abroad. Officials are in discussions with the other trilateral patent offices in the European Union and Japan, as well as in other countries, on harmonisation issues such as a classification system and design patent application drawings.

The United States recently signed onto the Hague System for the International Registration of Industrial Designs, administered by the World Intellectual Property Organisation. On 17 June, WIPO welcomed the 16-state African Intellectual Property Organisation (OAPI) to the system. That agreement gives the owner of an industrial design the chance to have his or her design protected in several countries by filling out one application in one language, with one set of fees in one currency, Swiss francs. There are some changes that need to be made to US patent law to conform to the agreement, such as extending the design patent term to 15 years.

Overseas repair clauses have also sparked more discussion between American patent officials and their foreign counterparts on the ramifications of such moves. The European Parliament in December, for example, voted in favour of a Commission-proposed clause that will move the EU as a whole in line with Australia, Belgium, Hungary, Ireland, Italy, Latvia, the Netherlands, Poland, Spain and the United Kingdom in agreeing that the making and use of a matching exterior auto part to repair a car is not infringement.

“Europeans are looking to liberalise, or open up … ironically, the opposite is happening here,” Sottile said.

In their recent conversations with the EU, US officials are not just honing in on the car repair clause exemptions, but on the broader implications of such exemption in an innovation economy where, in the US alone, intellectual property is valued at as much as $6.2 trillion.

“It’s really a question of what exceptions of an IP system affect the general health of an IP system,” Peterlin said. “Looking at the breadth of the impact of this kind of policy choice on what is becoming increasingly an innovation economy …a tweak no longer applies to IP.”

Liza Porteus Viana may be reached at info@ip-watch.ch.