Tuesday, October 4, 2016

Apple v. Samsung - Preview of Upcoming Oral Arguments before the Supreme Court of the United States

After a brief hiatus, nothing helps to kickstart the Ordinary Observer blog like another episode in the Apple v. Samsung saga. This installment, of course, takes place at the Supreme Court with next week’s oral arguments on the all-important apportionment issue. For those who are casually following the case or just need a refresher, we summarize the party positions and key amicus briefs after the jump. We’ll also be reporting from the Court next week so stay tuned for a first-hand account of the arguments and predictions from the courthouse steps next Tuesday.

On October 11, the United States Supreme Court will hear oral arguments in the latest chapter of the ongoing Apple v. Samsung global smartphone patent wars. As many of you already know, the key issue on appeal is whether disgorged profits under 35 U.S.C. § 289 must be apportioned between profits attributable to the infringing design and profits attributable to other, functional aspects of the accused product. Under § 289, a design patent infringer is liable to a patent owner for the “total profits” earned from any “article of manufacture” bearing the patented design. Here, the article of manufacture is Apple’s iPhone, including a design directed to the outer shell, the graphical user interface, and the screen, as shown below:

At the Federal Circuit, the court found that Apple is entitled to disgorge and recover all of Samsung’s profits earned in connection with the infringing Galaxy smartphones, rejecting Samsung’s argument that Apple is only entitled to a certain percentage of profits based on the relative significance of the patented designs to the overall product. The Court easily dismissed Samsung’s arguments as being clearly inconsistent with the legislative history, which shows that § 289 was enacted specifically to stop apportionment in design patent cases.

At the Supreme Court, Samsung seems to be rehashing some of the same arguments from the Federal Circuit, with a little help from some like-minded amici. Here is a summary of the written arguments that have been presented by Apple, Samsung, and select groups of amicus curiae thus far:

Brief of Petitioner Samsung. – Samsung argues that Apple’s interpretation of the § 289 statute would create extreme results and threatens to undermine the “bedrock legal principles of causation and proportionality.” For example, Samsung contends that an infringing design on something as minor as a vehicle cup-holder could jeopardize the profits of an entire vehicle model. Samsung further asserts that the statutory language “article of manufacture to which such design or colorable imitation has been applied” is restrictive and qualifies the statute such that the relevant profits are those earned as a result of the infringement. Samsung points out that the term “article” can mean “one of several things forming a whole,” which could include one or more components of a larger product. However, Samsung never really grapples with the legislative history of § 289 and appears to be hoping he Supreme Court won’t delve into it.

Brief of Respondent Apple. – Apple, on the other hand, argues that the plain meaning of the § 289 statute supports a broad interpretation of the phrase “article of manufacture” extending to the entire product at issue. It alleges that Congress would not have used absolute language such as “total profit” if it did not intend to carve out an expansive damages rule for design patents. Further, Apple points to the fact that in 1946 Congress specifically amended the statute governing infringement damages for utility patents to exclude the term “profits” while specifically leaving that language in the § 289 statute. In the author’s opinion, the legislative history argument will be difficult for Samsung to overcome.

Amicus Brief #1: The Internet Association, Dell, eBay, Facebook, Google, HP, et. al. – A first group of amici comprised of a major consortium of high technology companies argue that the broad view of the § 289 statute advanced by Apple “is problematic because it ignores the reality of modern, multicomponent technological products” that are “not purchased primarily for the design of one or more isolated components.” They assert that Congress could not possibly have envisioned such complex technological products as smartphones in the nineteenth century thereby reducing the importance of legislative intent. The amici further distinguish previous case law cited by Apple as directed toward much simpler products that are not analogous to today’s sophisticated consumer devices. Lastly, the amici assert that Apple’s interpretation of the statute could lead to arbitrary results. For example, amici consider a design patent infringement case between a smartphone maker and one of their component suppliers. If the component supplier holds the patent they could sue the infringing smartphone maker for profits on the entire smartphone line whereas if the smartphone maker holds the same patent that can only sue the infringing component supplier for profits on that single component.

Amicus Brief #2: Select Group of 50 Intellectual Property Professors –
A second group of amici comprised of fifty intellectual property law professors further argue against Apple’s interpretation of § 289. The amici state that “by one estimate, there are over 250,000 patents that arguably cover various aspects of a smartphone” and “to conclude that one design patent drives the purchase of the product and that the defendant’s entire profit is attributable to infringing that patent, is to say that none of those functional features contribute anything to the value of the phone—a ludicrous proposition.” The amici also cite the absurdity of treating each design patent as the sole profit driver for an entire product, especially where multiple design patents cover the same product. However, this critique of § 289, again, appears to be based on notions of apportionment from damages law, and fails to address the fact that § 289 is an equitable remedy not based on damages or causation.

Amicus Brief #3: The Software Alliance, Microsoft, Adobe, IBM, Oracle, et. al. – A third group of amici comprised of a consortium of software companies argues that design patents and the associated remedies should not be devalued because of their importance to the software industry. They contend that the way “software looks and feels to the consumer is a key driver in the marketplace.” As an example, the group points to the importance of features such as graphical user interfaces (GUIs) from the consumer perspective. Prior to the advent of modern GUIs, computer users typically had to enter arduous series of commands via an appropriate “string of letters and numbers.” In light of the important role design patents play in the software industry, amici urge the Court to adopt an interpretation of § 289 that is sufficient to provide “effective remedies” and “appropriate protection” for software developers. Thus, this group appears to be aligning themselves with Apple without issuing an explicit endorsement.

Amicus Brief #4: The United States of America – The U.S. Department of Justice arguing as amicus curiae advances a position consistent with Samsung’s, however for slightly different reasons. The U.S. agrees with Apple that the § 289 statute requires disgorgement of “total profits,” but disagrees with Apple’s interpretation of what constitutes an “article of manufacture.” The U.S. argues that prior precedent has previously embraced an expansive definition of “article of manufacture” that includes singular components of a multi-component product. Under such an interpretation, the total profits authorized under § 289 would be the total profits derived from the infringing component(s) and not the product as a whole. The amicus acknowledges that calculating an extent of profits associated with particular components will undoubtedly be a fact-intensive inquiry.

However, § 289 does not frame the disgorgement remedy in terms of profits from an article of manufacture. It defines infringement as “appl[ying] the patented design, or any colorable imitation thereof, to any article of manufacture” and then states that the remedy for such infringement is disgorgement of the infringer’s “total profit.” Again, any implication that total profits are somehow limited by the extent of infringement would be based on principles of damages and causation, not equity. And equitable principles should be the only relevant consideration with respect to § 289. It is therefore quite possible that even if the Supreme Court views Apple’s interpretation of § 289 to be unfair, sound jurisprudence may require the Court to uphold the plain statutory meaning and legislative intent of the stature as written. If so, Congress would have to amend § 289 to permit apportionment of profits in design patent cases.

We will let you know how the Court approaches this thorny issue next week as we post (nearly) live from the Supreme Court!

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