Monday, March 4, 2013

Samsung Strikes Back

After a month long bar exam-related hiatus, we are back with big news from Apple v. Samsung.  On Friday, Judge Koh issued a decision on Apple and Samsung’s cross JMOL’s.  See Apple, Inc. v. Samsung Elec. Co., Ltd., ---- F.Supp.2d ----, 2013 WL 772525 (N.D.Cal. 2013), roughly halving the jury’s damages award to Apple.  The decision raises two important points on design patent damages, which are discussed below.

In its JMOL, Samsung argued that for Apple to be entitled to Samsung’s profits, Apple was required to prove which portions of Samsung’s profits were actually earned by the patented design features. Samsung reasoned that Apple’s expert presented a damages calculation based on all of Samsung’s profits for the relevant products, but Apple never proved that Samsung’s alleged acts of design patent infringement were responsible for all of Samsung’s profits. Thus, Samsung argued that each damage award should have been set aside as unconnected to the profits made by Samsung.

However, Judge Koh rejected this argument and held that plaintiff’s are not required to show causation in order to disgorge the infringer’s profits in design patent cases.  Judge Koh reasoned that, although causation was a requirement in historical case law, this argument was “clearly foreclosed by Federal Circuit precedent. As explained in Nike Inc. v. Wal–Mart Stores, Inc., 138 F.3d 1437, 1442–43(Fed. Cir. 1998), Congress specifically drafted the design patent remedy provisions to remove an apportionment requirement that the Supreme Court had imposed. Thus, there is simply no apportionment requirement for infringer’s profits in design patent infringement under § 289.” 

Next, Samsung argued that Apple failed to submit sufficient evidence to show that Samsung had notice of the design patents-in-suit prior to the filing of the April 15, 2011 original complaint.  Yet, the jury awarded Apple a portion of Samsung’s profits prior to this date.  Samsung further argued that under 35 U.S.C. § 287(a), there can be no damages award where a defendant did not have actual or constructive notice of the patent at issue.   With this argument, the Court agreed, holding that Samsung was entitled to judgment as a matter of law that the earliest notice dates supported by the evidence are: August 4, 2010 for the ‘381 patent; April 15, 2011 for the ‘915 and D’677 Patents; and June 16, 2011 for the ‘163, D305, D’889, and D’087 Patents.  The court therefore remitted the disgorgement award prior to April 14, 2011 and set a new trial to determine damages prior to that date for the ‘381 patent only.

Although the court’s reasoning appears to be correct under the current pronouncement of the law, it exposes an apparent inconsistency in the Federal Circuit’s treatment of the disgorgement remedy in design patent cases.  The Federal Circuit has previously stated that the disgorgement remedy in design patent cases is not considered “damages,” but rather an equitable remedy.  See Braun, Inc. v. Dynamics Corp. of Am., 975 F.2d 815, 824 (Fed. Cir. 1992) (holding that the treble damages provision of § 284 does not apply to recovery of profits under § 289 because disgorged profits do not represent damages).  For this reason, disgorged profits cannot be trebled under 35 U.S.C. §284, which applies only to “damages.”  At the same time though, the Federal Circuit holds that the limitation on damages in § 287(a) does apply to the disgorgement remedy.  See Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1440 (Fed. Cir. 1998) (holding that § 284’s limitation on damages applies equally to the disgorgement remedy for design patent infringement.).  It is difficult to understand why disgorged profits would be considered damages with respect to § 287(a) but strictly construed as an equitable remedy for purposes of § 284.  Perhaps Apple should add this to the growing list of issues for the Federal Circuit to sort out on appeal.

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