- 17

required an election between copyright and design protection. H.R. 1179 allows copyright and design protection to subsist simultaneously if the design of a useful article meets the criteria of both the copyright law and the design protection act. The term of protection under H.R. 1179 is 10 years, rather than five years renewable for an additional five years. H.R. 1179 deletes the reference to "ornamental" in several provisions of the bill. Infringement disputes can be settled by arbitration. Minor modifications have been made in section 1002 (regarding designs not subject to protection), section 1006 (concerning the design notice), section 1008 (regarding infringement), and section 1012 (concerning examination of the application). H.R. 1179 designates the Register of Copyrights as the Administrator, rather than leaving the selection to the President.

III. ARGUMENTS FOR AND AGAINST DESIGN LEGISLATION

A.

Arguments in Favor of Design Legislation

1. Designers deserve protection for their creativity.

Through patent and copyright laws, the United States has long rewarded creators for their intellectual output as an incentive to create or invent for the benefit of the public. Designers of attractive but noninventive functional articles almost alone have been denied effective legal protection.

Legal protection for designs would produce economic benefits for designers in the form of increased demand for their work and a more adequate reward for a good design.

2. Competitiveness of American products would be enhanced by design protection.

Uncompensated copying causes financial loss to the manufacturer of original product designs. Foreign and domestic competitors can undersell the original manufacturer because copyists save on designing expenses, copy only popular designs and avoid the investment risks of the originator, and frequently use inferior workmanship and materials. Copying floods the market with the same design and drastically reduces the life of the design. American manufacturers suffer from copying at the hands of foreigners in the American market, but we are not able to retaliate by copying foreign designs in foreign markets because most countries have better design protection than that provided by United States patent, copyright, and unfair competition laws.

The overall effect of design piracy is to discourage not only creative designing but also higher standards of workmanship and quality. The low standards of the copyist must be met in order to compete.

3. Design piracy harms consumers.

Without adequate design protection, manufacturers have little

incentive to market original designs. Also, the copyist, instead of originating designs and thus adding to consumer choice, copies existing popular designs. The piracy mentality leads to the creation of fewer designs, which limits consumer choice and deprives consumers of the opportunity to make original selections in furniture, appliances, and the whole range of consumer products.

Design protection would not raise prices for desirable products since design costs are only one element of product pricing, and the design cost can be recouped through larger sales once the threat of piracy is

- 19

eliminated. A manufacturer of original products need not price the popular item higher in hopes of making a quick profit during the short period of lead time before copying cuts profits. The manufacturer can anticipate needs more reliably and thus order supplies and estimate production schedules more efficiently. Competition will force manufacturers to price even original products reasonably.

4. Present design laws are inadequate.

Design patent protection is too difficult to obtain (novelty standard must be met); too late (patenting takes 2-3 years and exceeds the life expectancy of many seasonal designs); and too expensive (high filing fees, maintenance fees, and attorney fees). Even when design patents are granted, a large percentage of those challenged are held invalid by the courts.

Copyright protection is available only for a limited number of applied designs that contain separate artistic features, independent of the overall shape of the useful article.

State unfair competition laws are also inadequate to prevent design piracy, especially since the Supreme Court in Sears, Roebuck & Co. v. Stiffel Company, 28/ held that "because of the federal patent laws a State may not, when the article is unpatented and uncopyrighted, prohibit the copying of the article itself or award damages for such copying."

5. Other countries give their manufacturers effective design protection.

A11 major industrialized countries, except the United States, have effective industrial design protection systems and recognize the importance of design protection for their economies. American companies

28. 376 U.S. 225, 232-233 (1964).

- 20

are subject to design piracy and underselling in our market, while other industrialized countries protect their domestic industries from such piratical practices. This imbalance in protection against design piracy makes it doubly difficult for American companies to meet foreign competition. We have the people, resources, and skills to innovate successfully in competition with foreign manufacturers, but our inadequate design laws place us at a disadvantage.

1. Existing design protection is adequate.

The United States already affords legal protection to those original designs deserving of protection. The Patent and Trademark Office

issues 3000 design patents annually.

7,000-8,000 applied designs annually.

The Copyright Office registers
Other designs are protected by

operation of the trademark laws or unfair competition laws. Non-functional features of bottles and product dress or packaging have received trademark or unfair competition protection when they identify the source of the goods (i.e. acquire "secondary meaning").

2. American innovation and creativity thrive under existing laws.

The United States is a consumer's paradise. No other country offers consumers the range, variety, and selection of consumer goods as that available in the United States. American ingenuity and creativity thrive under our existing intellectual property laws balanced by opportunities to compete through imitation of unprotected designs. For 70 years, a few groups have agitated for design legislation on the ground that added

- 21

incentives to create innovative designs are required. During this time, the American economy has flourished and has out-performed the economies of

other countries.

3.

Additional design protection will injure competition among domestic industries.

The United States is one of the few remaining countries to operate a reasonably free market economy. Our economy thrives on competition among domestic industries. The ability to copy or imitate design ideas and innovations that fall short of patent protection is essential to competition. Imitation is the lifeblood of competition. Additional design legislation will lead to greater concentration of monopoly power. It will give large manufacturers a major weapon to stifle competition and destroy smaller companies. The last time the Department of Justice testified on design legislation, it opposed the bill on the ground design legislation "would create a new monopoly which has not been justified by a showing that its benefits will outweigh the disadvantages of removing such designs from free public use."29/

Unfair and predatory foreign competition should be curtailed through trade negotiations and import restrictions or tariffs rather than through extension of new monopoly power that affects primarily other American manufacturers, distributors, retailers, and consumers.

4. Design legislation will increase the price of virtually all consumer goods.

New legal protection for designs means less competition from other manufacturers and will inevitably lead to higher prices, both to cover increased design costs and to obtain greater profits. Legal protection gives companies, especially large companies, the monopoly power to

29. H. REP. 94-1476, 94th Cong., 2d Sess. 50 (1976).