Common sense by design: Form, function and the way forward as charted by the Supreme Court

By Professor Daryl Lim
October 17, 2016

Supreme Court buildingIn the wake of last Tuesday’s Supreme Court oral argument in the “smartphone wars” design patent dispute, the justices must decide if a 130-year old law provision (35 U.S.C. §289) means that Apple can pocket all Samsung’s earnings on its smartphones that contain its infringing designs. The provision gives the patent owner an infringer’s “total profit” from the sales of its “article of manufacture.”

Judge Koh in the Northern District of California and Chief Judge Prost in Federal Circuit concluded that the “article[s]” mean Samsung’s smartphones, even though the patents did not cover the entire iPhone design. Chief Judge Prost acknowledged the view that “an award of a defendant’s entire profits for design patent infringement makes no sense in the modern world,” since the infringement may have only contributed to a small portion of the profits. However, she concluded that only Congress can change this.

Amici curiae on the side of Apple – Crocs, Cleveland Golf, and Nike, argue that the statute makes sense in the modern world because apportionment of those earnings is impracticable and that disgorgement deters copycat designers. Defendant Samsung and its supporting amici – Dell, Facebook, and Google, warn that this “whole profits” approach undermines innovation in complex technological products and their components.

To get around what might appear to be the clear language in the statute, Samsung and the Solicitor General argued that “article” can mean part of the defendant’s product. In a move that surprised many, Apple generally agreed with this approach, but maintained that it was for Samsung to show that was so.

Most of the discussion at oral argument was about how to achieve apportionment. Justices quizzed the parties on how the rule would operate in practice, particularly with multicomponent devices. They did not seem comfortable with some of the answers given.

“Article of manufacture”

The provision arose in response to instances where owners of carpet designs received nominal damages because courts could not distinguish the value of the patented design from the carpet. The provision provided an equitable remedy to protect designers by setting a floor for recovery of $250, and a ceiling “to the extent of [the infringer’s] total profit.”

The House Report on the Act stated that the provision was directed at cases where “it is the design that sells the article” and thus the profit from that article “is not apportionable.” In such cases, “[i]t is expedient that the infringer’s entire profit on the article should be recoverable.” That Report also compared the design right to a trademark right as a means of recovering investment in goodwill.

Refrigerators with infringing door latches that were not sold separately entitled the design owner to only the $250 statutory minimum. An infringed piano case design does not give its owner rights to the profits of the whole piano, because the subject of the patent was the piano case.

All this means is that full disgorgement of profits should only apply where the designs are inseparable from the articles, where the design, article, and product are coextensive. The Court should not get too bogged down in search of a test. Mathematical precision is not required as along as the amount reasonably approximates profits derived from the infringement. A remedy with a floor and ceiling means the amount can be titrated once owners to prove their designs sold the accused products. Infringers should keep what they can show they deserve.

A Job for the Court, Not Congress

The Supreme Court need not wait for Congress to act. This is a case of first impression in interpreting the provision. Design owners should be made whole, but not unjustly enriched. Awarding the infringer’s total profits regardless of the contribution of the design to the end product’s value subverts patent law’s mandate to promote technological progress.

A broad reading of the provision dampens the incentive to create derivative designs. Those designs would necessarily invoke the original design, forcing the infringer to hand over all the profits from the derivative work. Further, unlike copyright law, patent infringement does not require any intention to copy. If disgorgement is required to deter copying, that assertion must be empirically proven.

Some are concerned was that it will be costlier for small companies to defend against copying by bigger companies. That cost is overstated. While expert testimony and consumer surveys may be needed in some cases, in others, the article may be sufficiently simple so that a determination can be properly made by the court without it. Utility patent owners routinely manage. Their experience should prove instructive.

In an age where functional features routinely pass muster as “ornamental,” partial claims can ensnare multicomponent parts, and infringement is triggered by an overall impression, the nuclear option of disgorgement on increasingly lucrative end-products must be closely guarded by the courts.

To conclude, if the iPhone’s iconic appearance was misappropriated, Apple should be compensated, but it need not necessarily receive all of Samsung’s profits for its smartphones. The rule is one of convenience – to provide restitution where normal legal remedies were inadequate to aid the designer. It would turn equity on its head to enrich a designer no matter how insignificant its design contributed to the value of the end product. The provision is common sense by design.

EDITORIAL NOTE: Updated Monday, October 17, 2016 at 9:58 am. 

The Author

Professor Daryl Lim

Professor Daryl Lim is the Director of the John Marshall Law School’s Center for Intellectual Property, Information and Privacy Law, which ranked among the countries best Intellectual Property law programs according to the 2017 U.S. News & World Report’s “Best Graduate Schools” listing. Professor Lim lectures courses on intellectual property and antitrust at John Marshall Law School. Professor Lim received his law degrees from Stanford Law School and the National University of Singapore, and a degree in economics and management from the University of London (London School of Economics). His work was cited to the Supreme Court by opposing parties in a 2015 patent case.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 4 Comments comments.

  1. Anon October 17, 2016 8:45 am

    With all due respect, what you advocate is balderdash.

    What you want to call “interpretation” is nothing more than re-writing and removing the word “total.”

    That you seek to do so for “equitable” Ends matters not at all.

    As a professor of law, such ill-begotten means should be reprehensible to you.

    You have forgotten basics of our jurisprudential system and our tri-partite checks and balances, as well as the Constitutional directive as to which single branch of the government has been allocated the auhority to write the statutory law that is patent law.

    Congress itself has decided on this effect – and the cry of “ONLY make while” obfuscates what Congress has actually done here.

  2. DaveR October 18, 2016 10:50 am

    I wholly agree with the comments of Anon above. Additionally, if that design feature is the reason that triggers purchase of the device, why is award of entire profit unreasonable? If that design feature was not necessary [and by definition the basis for grant of a design patent is for an ornamental design, not a functional feature], how better to discourage infringement than to award entire profits for copying a feature that is not needed as is argued on behalf of Samsung?

  3. zaldar October 18, 2016 12:05 pm

    Wholly agree with comments here but from a law professor this is what you should expect. Unless you are talking to a law professor with a connection to the federalist society (which you should both join) what law professors believe in is courts rewriting laws. Most believe words do not have real meanings and definitions and so courts can do what ever they want. This is why most law professors are supporting Hillary (Vote libertarian).

    Courts interpret and enforce law – they do not make it and arguments about “how laws effect people” should be made to congress not courts.

  4. Anon October 18, 2016 5:46 pm

    zaldar,

    While understanding your point, I do expect those teaching law to understand the law. This includes the fundamental aspects that I mentioned above.

    That’s not too much to ask of those that we (the Royal we) of society give our next generation of lawyers (and prospective law makers) over to for a proper legal education.

    Further, given this role of shaping young minds, combined with the evident activist mindset of using their “authority” (perceived, certainly not granted) to change the law – in contrast to the constraints on attorneys based on our proximity with the law – I would expect that ethical constraints would be even tighter, including the requirement to be at least cognizant of the US jurisprudential foundations of separation of powers and checks and balances.

    This too – in my humble opinion is simply not too much to ask for.