Supreme Court Sides with Samsung on Design Patent Damages

On December 6, 2016, the Supreme Court issued a unanimous opinion authored by Justice Sotomayor in the Samsung Electronics Co., Ltd. v. Apple, Inc. case concerning apportionment of design patent damages under 35 U.S.C. § 289. Specifically, § 289 makes it unlawful to produce or sell an “article of manufacture” bearing a patented design and makes infringers liable to the patent holder “to the extent of [their] total profit.” The Supreme Court’s ruling rejects Apple’s argument and holds that the meaning of the phrase “article of manufacture” can refer to a single component within a multicomponent product sold to consumers. In support of its reasoning, the Court cites a similarly broad interpretation of the phrase as previously applied to 35 U.S.C. § 171. The § 171 statute defines subject-matter eligibility for design patents.

Courtroom Sketches from Apple v. Samsung

As a follow-up to last week's post, we wanted to share the courtroom sketches from Apple v. Samsung that were graciously provided by Art Lien of courtartist.com.  Art really captured the look of confusion on the Justices' faces...

Samsung Appeals to the Supreme Court! ... (but probably won't get there)

It's not every day that the New York Times reports on design patent news.  But when it does, it usually has something to do with smartphones.  

The big news in design patent law today is Samsung's inevitable appeal to the Supreme Court from its August loss (mostly) at the Federal Circuit.  Just last week, Apple and Samsung appeared to finally be putting this lawsuit behind them, when it was announced that Samsung had agreed to pay Apple $548,176,477 to satisfy the judgment entered by Judge Koh and affirmed by the Federal Circuit.  However, in the agreement, Samsung had reserved its right to "reimbursement" if the judgment is reversed.  

In its petition for writ of certiorari, Samsung points out two alleged errors by the Federal Circuit - 1) whether the Federal Circuit should have "factored out" the allegedly functional aspects of Apple's design patents, and 2) whether the Federal Circuit erred by not apportioning Samsung's profits between the profits attributable to the infringing design and the profits resulting from other aspects of the infringing products. 

Of course, Samsung worded the questions presented somewhat differently:

The questions presented are:

1. Where a design patent includes unprotected non-ornamental features, should a district court be required to limit that patent to its protected ornamental scope?

2. Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?

Regardless of how Samsung chooses to articulate the issues, however, a Supreme Court hearing seems unlikely, in the opinion of this author.  

With respect to the first issue, the Federal Circuit did an excellent job of clarifying its own, somewhat confusing precedent from cases like Richardson v. Stanley Works.  In Apple v. Samsung, the court explained that that the functional aspect of a claim may be conceptually factored out as part of claim construction without literally "exclud[ing] those components in their entirety."  See our earlier post on this topic here.  This pronouncement of the law will help simplify design patent claim construction, while emphasizing to juries and judges that designs do not protect functional concepts, only the appearance of an article of manufacture. 

With respect to the third issue, it is highly unlikely that the Supreme Court would attempt to blatantly overrule the clear, expressed wishes of Congress.  Samsung seems to argue that § 289 is just "really old."  But it's unclear why the Supreme Court's analysis of this argument would be any different from the Federal Circuit's:

In reciting that an infringer “shall be liable to the owner to the extent of [the infringer’s] total profit,” Section 289 explicitly authorizes the award of total profit from the article of manufacture bearing the patented design. Several other courts also concluded that Section 289 authorizes such award of total profit. ... The clear statutory language prevents us from adopting a “causation” rule as Samsung urges.

So while its exciting to see design patents in the news, don't hold your breath for the first Supreme Court design patent case in 100+ years.  Of course, we could be wrong and, if we are, we will be the first to celebrate. 

Design Patent Apportionment – “The Turducken Problem”

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!