tributor or dealer has sold such vehicle or item of equipment to a customer (§ 119(a)). PROHIBITED ACTS The bill makes it a prohibited act to manufacture, sell, or introduce in interstate commerce any motor vehicle or component which fails to conform to applicable Federal safety standard (§ 109(a)(1)). Similarly, the failure to furnish the certification of compliance and the furnishing of a false certification are made prohibited acts (§ 109 (a) (3)). It is also a prohibited act to obstruct enforcement of the act by failing to make reports or refusing access to or copying of records, or entry or inspection, or failing or refusing to furnish notification of defects, as required by other sections of the act (§ 109 (a) (2) and (4)). The prohibitions against the manufacture, shipment, or sale of substandard vehicles or equipment or issuance of a false certification of compliance do not apply (1) To any sale or shipment after the first sale for purposes other than resale; or (2) To any person who relies upon the certificate of compliance from the manufacturer or distributor and does not actually know of any failure to conform to standards; or (3) To a manufacturer or other person who establishes that he did not know and did not have reason to know in the exercise of due care that such vehicle or item of motor vehicle equipment was not in conformity with such standards (sec. 109(b)). For example, a manufacturer could be relieved from liability upon a showing that he did not know of the failure to conform and that due care had been exercised in manufacturing, inspecting, and shipping the vehicle or item of equipment, in accordance with the manufacturer's obligation to produce vehicles conforming to the standards. PENALTIES AND INJUNCTION The bill imposes a civil penalty not to exceed $1,000 for each prohibited act (sec. 110(a)). The maximum civil penalty is limited to $400,000 for any related series of violations (sec. 110(a)). For example, if a manufacturer produces several thousand substandard vehicles or items of equipment as the result of the same error in design or construction, or the use of the same defective component, the maximum penalty to be imposed upon any one person for those violations would be limited to $400,000. The Secretary is authorized to compromise any civil penalty and, in determining the amount of the penalty, the Secretary or court is directed to consider the appropriateness of the proposed penalty to the size of the business of the person charged and the gravity of the violation (sec. 110(b)). The Attorney General is also authorized to seek injunctions against the performance of any prohibited act and to enjoin the sale of any vehicle which fails to conform to applicable standards under the act (sec. 111). INSPECTION, RECORDS, AND REPORTS The Secretary is authorized to conduct such testing, inspection, and investigations as he deems necessary to aid in the enforcement of standards prescribed under the act (§ 114(a)). He is given express authority to conduct on-site inspection in factories, warehouses, or sales offices (§ 114(b)). Manufacturers are required to maintain records, make reports, and provide the information reasonably required by the Secretary (§ 114(c)). The committee bill provides that the records, reports, and information the Secretary may reasonably require shall be limited to those relevant to determining whether the manufacturer has acted or is acting in compliance with title I and motor vehicle safety standards. issued thereunder (§ 114(c)). For example, the relevant records, reports, and information would include data relating to design, manufacturing procedures, quality control, and shipping records for currently manufactured vehicles, and would not include such closely held competitive trade secrets as financial, price, or cost data (§ 114(d)). EFFECT ON STATE LAW The centralized, mass production, high volume character of the motor vehicle manufacturing industry in the United States requires that motor vehicle safety standards be not only strong and adequately enforced, but that they be uniform throughout the country. At the same time, the committee believes that the States should be free to adopt standards identical to the Federal standards, which apply only to the first sale of a new vehicle, so that the States may play a significant role in the vehicle safety field by applying and enforcing standards over the life of the car. Accordingly, State standards are preempted only if they differ from Federal standards applicable to the particular aspect of the vehicle or item of vehicle equipment (sec. 104). The States are also permitted to set more stringent requirements for purposes of their own procurement. Moreover, the Federal minimum safety standards need not be interpreted as restricting State common law standards of care. Compliance with such standards would thus not necessarily shield any person from product liability at common law. USED MOTOR VEHICLE INSPECTION In recognition of the fact that the setting of new car standards is a partial solution to the problem of motor vehicle safety, the bill expresses a congressional policy "to encourage and strengthen the enforcement of State inspection of used motor vehicles" (sec. 117(a)). In addition, the Secretary is directed to conduct a thorough study and investigation to determine the adequacy of motor vehicle safety standards and motor vehicle inspection requirements and procedures in each State and the effect of programs authorized by this bill upon such used car standards, requirements, and procedures (sec. 117(b)). The Secretary is directed to report to Congress not later than 1 year after enactment of the bill the results of such study, together with such legislative recommendations as he may deem necessary in the interests of traffic safety (sec. 117(b)). EXISTING FEDERAL LAWS ON VEHICLE STANDARDS The bill repeals the Brake Fluid and Seat Belt Standard Acts (Public Laws 87-637 and 88-201), since these subjects are among those covered by the present bill (sec. 120). The Automobile Pollution Control Act (Public Law 89-272) is not repealed, since air pollu tion devices on automobiles are considered to relate to public health and safety generally. APPLICATION OF ANTITRUST LAWS For the reasons set forth below, the committee included a provision in the act providing that "nothing contained herein shall be deemed to exempt from the antitrust laws of the United States any conduct that would otherwise be unlawful under such laws or to prohibit any conduct that would be lawful under such laws" (§ 113). Although the committee firmly believes that competition among automobile manufacturers in the development of safety improvements is essential for the achievement of rapid progress in automotive safety, the committee is aware that cooperation in research and testing among manufacturers can also play a significant role in safety development. To this end, the bill authorizes the Secretary to advise, assist, and cooperate with manufacturers of motor vehicles and motor vehicle equipment, among others, in the development of motor vehicle safety standards and the testing of motor vehicles and motor vehicle equipment (§ 107). The committee considered including a provision in the bill to the effect that cooperation among manufacturers in developing safety devices or in exchanging information about safety standards is not illegal per se, but may be justified under the "rule of reason" to the extent consistent with the antitrust laws and without creating any exemption from the antitrust laws. However, the committee was advised by the Department of Justice that such a provision was unnecessary, since cooperation in the development of safety devices and in exchanging information about safety standards would not be unlawful per se under the antitrust laws but would be permissible under the "rule of reason" where joint efforts seem necessary and constructive and are not accompained by any unduly restrictive collateral agreements. Since the provision under consideration would have done no more than confirm this interpretation, the committee decided that that amendment was unnecessary. The committee by this indication of its views in no way intends to change the application of existing antitrust laws with respect to cooperative activities among automobile manufacturers in the field of safety development. The advice received from the Department of Justice, as summarized above, is contained in a letter from Assistant Attorney General Donald F. Turner to the chairman of the committee dated April 6, 1966, and a further letter from Deputy Attorney General Ramsey Clark to the chairman dated June 2, 1966. An extract from the letter of April 6 follows: Nor is there anything persuasive in the general argument that the vagueness of the antitrust laws prevents the formation of any cooperative effort to develop safety devices or to exchange information concerning standards. The antitrust laws do not prohibit such arrangements where joint efforts seem necessary and constructive and are not accompanied by unduly restrictive collateral agreements. Moreover, clarification of the applicability of the antitrust laws to any particular proposal has always been readily available by PATENTS In order to protect the public investment in research and development activities under the act, the bill provides (§ 106 (c)) that when the Federal contribution for any research or development activity authorized by the act is substantial, the Secretary must include in the contract or grant providing for such research or development provisions effective to insure that all information, uses, processes, patents, and other developments resulting from that activity will be made fully and freely available to the general public. It was the committee's judgment that when the Government finances safety research, the public is entitled to the fruits, including the right to any inventions discovered in the performance of that research. In dealings with their employees and subcontractors private business firms typically retain the right to any inventions discovered, on the understandable ground that the one who has provided financial support is entitled to the resulting product. Such a policy is especially applicable where taxpayer funds are involved and where the research is intimately associated with the public health and safety. On several occasions, running back more than a decade, Congress has provided for public retention of rights in inventions made in the course of Government-supported research. This policy is incorporated in the Atomic Energy Act of 1954, the Coal Research and Development Act of 1960, the Saline Water Conversion Act of 1961, the Arms Control and Disarmament Act of 1961, the Water Resources Research Act of 1964, and the Appalachian Regional Development Act of 1965. Consistent with this approach the committee sought to secure to the public the benefits, accruing from research sponsored by the Secretary in accordance with section 106, that might help reduce accidents involving motor vehicles and reduce accompanying deaths and injuries. As set forth in section 106 (c), the bill provides that the Secretary shall include, in any contract, grant, or other arrangement, provisions effective to insure that all resulting information, uses, processes, patents, and other developments will be made freely and fully available to the general public, wherever the Federal contribution to that activity is substantial. Of necessity, this condition must be satisfied on a case-by-case basis; but it deserves emphasis that it is the particular activity from which the information, uses, processes, patents, and other developments "result" which is the basis for the determination whether the Federal contribution is "more than minimal." Section 106(c), by denying contractors exclusive rights in the performance of research activities where the Federal contribution is "more than minimal," will help curtail unnecessary industry pleas for Government financial support where the companies can do the research themselves. By doing their own research and securing patents on inventions which they discover, the companies in the auto industry can make substantial progress toward increasing auto safety without having to make substantial use of public funds. The committee considered a problem presented by automotive manufacturers relating to the dilemma that would be created if the Secretary issued a Federal motor vehicle safety standard that could be met only by using a patented device, structure, or method and if the patent holder unreasonably refused to license the use of his patent or was willing to supply the item or permit its use only on unreasonable terms. The automotive manufacturers therefore proposed an amendment that would bar patent holders from enjoining the use of any patent that is necessary to meet a Federal motor vehicle safety standard, and would limit the patent holder to a suit for damages in the form of a reasonable royalty. The committee concluded that any legislative solution presents great complexities, since a balancing of equities as between the manufacturer and the patent holder is bound to vary from one case to another. The committee decided it would therefore be preferable to leave the matter for resolution by the courts on a case-by-case basis. In this connection, it is the committee's understanding that under established patent case law the Federal courts, in performing their traditional role of balancing the equities before issuing an injunction, will decline to enjoin the use of a patent when its use is required in the public interest. (See City of Milwaukee v. Activated Sludge, 69 F. 2d 577 (7th Cir. 1934).) The committee therefore assumes that the courts are unlikely to enjoin the use of any patent when an automotive manufacturer can show that use is necessary to comply with a Federal motor vehicle safety standard and that the patent holder is refusing to supply the item or otherwise permit such use on reasonable terms. The committee also assumes that the Secretary is not likely to adopt a standard which can be met only by using a single patented device, and that the Secretary would, before doing so, take steps to obtain an understanding from the patent holder that he would supply the item or grant licenses on reasonable terms REPORTS AND RECOMMENDATIONS The Secretary is required to make an annual report on the administration of the act on March 2 of each year. The report shall include, but is not restricted to (1) Accident and injury statistics; (2) A list of Federal standards; (3) The degree of observance of the standards; (4) A summary of current research grants and contracts; (5) A review of research activities completed and technological progress achieved during the year; (6) The extent to which technical information was disseminated to the scientific community and consumer-oriented information was made available to the motoring public (sec. 123(a)). |