Everyone knows that the turkey makes Turducken look good, but it’s the duck that actually makes Turducken valuable … or is it the chicken? In any event, Turducken demonstrates a classic problem in design patent remedies – how do we disgorge “total profits” of the infringer when the profits are not necessarily attributable to the infringing design? For example, if I held a design patent on a Thanksgiving turkey, why should I be entitled to the total profits for the sale of a turducken if the infringer’s profits are, at least in part, attributable to the hidden duck and chicken? My turducken premise is running as thin as my mother-in-law’s gravy (sorry mom), but you get the point.
This question of design patent law is more than a thanksgiving novelty. At the design patent conference at Suffolk Law School last Friday, Samsung’s attorney, Michael Geller, raised this issue in the context of the Apple v. Samsung case. From Samsung’s perspective, its accused Galaxy devices were profitable, at least in part, because of their functionality and software, not Apple’s patented designs which it was found to have infringed.
There is some support in older design patent cases for the idea that disgorged profits should be apportioned between profits attributable to the infringing design and profits attributable to other, separable, aspects of the accused product. In Bush & Lane Piano Co. v. Becker Bros., 222 F. 902, 903-904 (2d Cir. 1915), the Second Circuit held that the infringer’s profits attributable to the infringing piano case was separable from the profits attributable to the internal mechanisms of the piano. See Bush at 903 (apportioning profits between “the structure which incloses and holds in position the piano proper, viz., the part which produces the music. The former appeals to the eye, the latter to the ear.”). According to the Second Circuit “[w]hen the patent owner is awarded the profits due to his design he receives all he is entitled to. If ... a design [patent] for a case enables the owner to collect damages for ... the contents of the case as well, it will lead to results which shock the conscience. A design for a watch case will include the watch itself. A design for a gun case will include the gun, a design for a hat case will include the hat and so on.” Id. at 905.
The decision in Bush appears to contrast with the modern understanding of the disgorgement remedy, however. In Nike Inc. v. Wal-Mart Stores, 138 F.3d 1437, 1442 (Fed. Cir. 1998), the Federal Circuit stated that one of the key differences between the 1946 Act and the design patent statute, “as enacted in 1887, was the removal of the need to apportion the infringer's profits between the patented design and the article bearing the design.” Id. While this comment was not central to the court’s decision, Nike is viewed as a watershed decision on the nature and history of the disgorgement remedy for design patent infringement.
Yet, Samsung’s position is not without hope. Both the 1887 Act and the 1946 Act simply codified what had always been an equitable remedy for design patent infringement. This remedy was based on a theory of unjust enrichment or accounting which was never intended to be punitive. See SEC v. Blatt, 583 F.2d 1325, 1335 (5th Cir. 1978) (“Disgorgement is remedial and not punitive. The court's power to order disgorgement extends only to the amount with interest by which the defendant profited from his wrongdoing. Any further sum would constitute a penalty assessment.”); Restatement (Third) of Restitution and Unjust Enrichment § 51 cmt. e.4 (Tentative Draft No. 5, 2007) (“Disgorgement does not impose a general forfeiture: defendant's liability in restitution is not the whole of the gain from a tainted transaction, but the amount of the gain that is attributable to the underlying wrong.”).
Perhaps the solution to the turducken problem lies in the equitable roots of the disgorgement remedy. It is said that "equity abhors a forfeiture,” and so perhaps courts should have enough equitable discretion, even under 35 U.S.C. § 289, to apportion an infringer’s profits in a manner that reflects the profits fairly attributable to the infringing design.
Whichever way you slice it, the turducken problem will likely play a major role in any appeal from the damages award in Apple v. Samsung. The parties have already briefed this issue before Judg Koh. I suspect that the Federal Circuit may use this as an opportunity to refine its comments about apportionment in the Nike case.
Happy Thanksgiving everyone!