April 6th, 2022- This morning, AIM president and CEO Ray McCarty testified in opposition to SB 1086, introduced by Sen. Mike Cierpiot before the Senate Commerce, Consumer Protection, Energy and the Environment Committee. This bill would require disclosure of software code to third parties and amount to both a government taking and price controls regarding the repair of farm machinery and construction equipment.
Here is a brief synopsis of McCarty's testimony.
“RIGHT TO REPAIR” ALREADY EXISTS – THIS IS REALLY “RIGHT TO MODIFY”
The so-called “Right to Repair” legislation is more appropriately named, “Right to Modify” because the right to repair an item already exists. Purchasers of any item may repair the item themselves or take the item to any other repair facility today. There is no law against such a repair, although it may void the manufacturer’s warranty on the product or have other consequences. In fact, some farm equipment dealers make repair packages available that include the software needed to repair and dealerships stock many repair parts. These packages contain software necessary to repair the equipment, but do NOT include software source code or allow overriding of safety and emission control systems.
DISCLOSURE OF INTELLECTUAL PROPERTY – A GOVERNMENT TAKING
Although the legislation says it does not require manufacturers to divulge a “trade secret” which includes intellectual property and software developed by the company, it says it requires this confidential, proprietary information to be divulged to any owner or independent repair provider “as necessary to provide documentation, parts, and tools on fair and reasonable terms.” The government would require manufacturers to disclose their proprietary software code and programs, copyrighted repair manuals, service diagrams, and other protected intellectual property which amounts to a form of government taking.
RISK OF HACKING OR UNAUTHORIZED ACCESS
A dangerous side effect of the government requiring a manufacturer to make software and machine code available to anyone that asks is the fact that the software and control systems in the equipment are much more susceptible to hacking than when distribution is limited to a manufacturer and their authorized repair partners. At a time when cybersecurity Is a concern for all businesses, the government should protect consumers against hacking - not increase opportunities for hackers to launch damaging and dangerous attacks that could affect the owner or the general public.
LITIGATION AGAINST MANUFACTURERS AND DEALERS
Defeating or overriding safety features leaves manufacturers and dealers vulnerable to lawsuits. Because the government would require the disclosure of information that allows a product to be modified, then reset to look as if it never happened, manufacturers and dealers would find it hard to defend themselves against such lawsuits as the evidence would be erased.
GOVERNMENT PRICE FIXING FOR PARTS AND REPAIR TOOLS
Under this legislation, the government would require repair and replacement parts, software, manuals, documentation, etc., to be made available to every consumer and third-party repair person “on fair and reasonable terms” – defined as free, the cost to authorized repair providers less any discounts, rebates, or other incentive programs; the cost to the manufacturer of preparing and distributing parts, excluding research and development costs, or the price charged for similar items from another manufacturer. This socialized approach to pricing is government price fixing. Research and development is part of a manufacturer’s costs in developing the products and that cost is recovered through the prices charged for such goods and services. The government should not use its power to declare those costs to be unrecoverable.
Dealers and authorized repair centers stock many parts so they will have them when their customers need them. There is a cost to maintaining these inventories at the dealership or authorized repair centers. Manufacturers may provide a discount to dealers and authorized repair centers to help offset such costs. Under this bill, the government would declare independent operators are entitled to the same pricing as a dealership or authorized repair center without the accompanying overhead carried by those dealerships and authorized repair centers.
HARM TO SECONDARY CONSUMERS - SAFETY AND VALUE
The legislation would allow consumers and third-party repair shops to override emissions and safety controls and allow equipment to run at higher horsepower, or otherwise decrease the useful life of equipment. While such modifications to equipment may be dangerous, they also endanger the safety and investment of future consumers of that machinery or equipment.
For example, a bulldozer owner receives the software code necessary to repair and modify the equipment because of this bill. The bulldozer owner makes changes to override safety features and resets the software so it appears it has not been modified. The bulldozer operator gets hurt because the safety feature has been overridden but sues the manufacturer because the safety device failed to protect him/her. There is no evidence the safety feature was defeated - it appears it just didn't function correctly.
Another example: The same bulldozer owner eventually sells the bulldozer and forgets to reset the safety feature. The second bulldozer owner gets hurt and sues the manufacturer because the safety device didn't work as designed. There would be no recourse against the original bulldozer operator and no proof any modification had ever happened.
Beyond safety concerns, the impact on the secondary consumer that purchases equipment believing to have been operated for a certain length of time at normal operating levels is purchasing a much less valuable piece of equipment if that equipment has been modified to operate at levels above the manufacturer’s recommendation. Those that are not able to afford brand new equipment would be left with equipment that is much less valuable than they believed when they purchased the equipment and the secondary owner may either be left without recourse, or perhaps may sue the innocent dealer that also is unaware the equipment had been modified by the previous owner.
The committee took no action during the hearing. We will update you on any future action.