Communications of the ACM
Legally speaking
Apple v. Samsung and the Upcoming Design Patent Wars?
Credit: Andrij Borys Associates / Shutterstock
Until recently, design patents have been a relatively obscure category of U.S. intellectual property (IP) rights. Design patent law was originally intended to encourage investments in novel and inventive ornamental designs for articles of manufacture, such as carpets and lamps. However, many design patents have been granted in recent years to makers of advanced information technologies, such as smartphones. Often these are for component parts of their technologies, such as product configurations and virtual designs embedded in software.
This column reviews the Apple v. Samsung design patent infringement case. It considers the two key issues Samsung brought to the Supreme Court for review. One set concerns the scope of design patents and the test that should be used to judge infringement. A second concerns whether the infringer of a design patent must disgorge all of its profits from the sale of a product in which the design is embodied, or only those profits that are attributable to the infringement. The Supreme Court has decided to address the second issue, but not the first.
Apple v. Samsung
The most recent of several litigations between Apple and Samsung involves three design patents that cover specific portions of the external configuration of smartphone designs: a black rectangular round-cornered front face for the device; a substantially similar rectangular round-cornered front face with a surrounding rim or bezel; and a colorful grid of 16 icons to be displayed on a screen.
Apple sued Samsung for infringing these patents, as well as for infringing trade dress rights in the external design of the iPhone. A jury found that Samsung had infringed both Apple's design patents and trade dress rights and ordered Samsung to pay $930 million in damages for these infringements.
The Court of Appeals for the Federal Circuit (CAFC) overturned the trade dress claim saying that the external design of the Apple smartphone was too functional to qualify for trade dress protection. The rounded corners and bezel were, it ruled, designed to make smartphones more "pocketable" and to protect against breakage when the phone was dropped. The icon displays promote usability by communicating to the user which functionalities they can invoke by touching the icons.
The Supreme Court has held that trade dress, such as product configurations, is too functional to be protectable "if it is essential to the use or purpose of the article or if it affects the cost or quality of the article, or would put competitors at a significant non-reputational-related disadvantage." Under this standard, the Apple trade dress claims failed.
However, the CAFC affirmed the design patent infringement ruling, rejecting Samsung's argument that the same features the CAFC thought were too functional for trade dress protection made them ineligible for design patenting too. The CAFC disagrees with the proposition that the functionality test for design patents is the same as for trade dress.
Somewhat to Samsung's relief, the CAFC ordered the damage award to be cut to $399 million. But even this amount, Samsung argues, is excessive because it represents all of the profits that Samsung has made in selling the phones embodying the patented designs.
Samsung asked the Supreme Court to review the design patent ruling and the monetary damage award. It raised two questions for the Court's consideration:
- Where a design patent includes unprotected non-ornamental features, should a district court be required to limit that patent to its protected ornamental scope?
- 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?
Ornamentality and Filtration
Samsung challenged the Apple design patent infringement claims because some aspects of the patented designs are too conceptual or functional to be within the valid scope of the patents. Geometric shapes, for instance, are concepts in the public domain.
Samsung's brief emphasized that virtually the same design features that the CAFC held were too functional to be eligible for trade dress protection were also the basis for the design patent claims. The finding of functionality that vitiated Apple's trade dress claim should, Samsung argued, have defeated the design patent claim as well. Functional designs should be protected, if at all, by utility patents, not by design patents.
The CAFC, however, regards a design to be too functional to qualify for a patent only if that design is solely dictated by functionality, such that no other design options exist. Samsung argued that is too stringent a test for functionality on the design patent side. After all, a design is supposed to be ornamental to qualify for design patent protection. Ornamental designs, almost by definition, will not be dictated by function.
Samsung's second challenge to the infringement ruling concerned the overbroad test for infringement the lower court had used and the CAFC endorsed. That test focused on whether an ordinary observer would find similarities between the designs to be so substantial that they would induce customers to buy the alleged infringer's product instead of the patentee's product. As applied in the Apple case, Samsung argued that this test failed to filter out of consideration elements of smartphone design not covered by Apple's design patents.
Samsung complained this test failed to filter out the conceptual and functional elements of the patented designs. The court also directed the jury to make a judgment based on their overall impressions of the appearance of the Apple and Samsung smartphones. Under this approach, the jury could have decided that the overall similarities between the Apple and Samsung smartphones justified the infringement finding, even though the design patents only covered a small number of features.
A coalition of high-technology companies, including Dell, eBay, Facebook, and Google, filed a brief in support of Samsung's petition for Supreme Court review. That amicus curiae (friend of the court) brief criticized the CAFC for failing to grasp the complexities of today's highly componentized technologies.
That brief pointed out that today's information technologies are much more complex and have many more component parts than the manufactured products Congress envisioned as suitable for design patent protection back in 1842 when the design patent law was first enacted.
It is one thing to ask a jury to consider whether their overall impression of a design of an article of manufacture, such as a competing carpet, infringed a design patent. The patented design would presumably cover the feature that created most of the value in the patentee's carpet.
However, high-tech products such as smartphones have a staggering number of functional and design features and component parts. As of 2012, more than 250,000 patents had been issued for smartphone-related inventions. Samsung argued that a test for design patent infringement should focus on the similarities in the overall impression of the feature covered by the design patent, not the product as a whole. Although Samsung's arguments have some merit, the Supreme Court has decided not to review either the functionality issue or the proper test for infringement in the Apple v. Samsung case.
Total Profits As Windfall
An even more urgent concern driving Samsung's plea for Supreme Court review arises from the CAFC's approval of an award of all of its profits from selling the smartphones that infringed those three design patents.
The CAFC acknowledged that a total profits award for infringement of the design patents in this case was difficult to justify as a matter of equity. However, it held that the statute required approval of a total profits award.
It relied on this part of the relevant statute, 35 U.S.C. § 289: "Whoever during the term of a patent for a design, without license of the owner ... applies the patented design ... to any article of manufacture ... shall be liable to the owner to the extent of his total profit, but not less than $250."
The statute plainly speaks about "total profit" as a suitable award for infringement of a design patent. But what is the relevant "article of manufacture?"
The CAFC decided the relevant article of manufacture in Apple v. Samsung was the smartphone itself, not just the subparts covered by the design patents. After all, no one would buy only the design-patented screen with icons or round-shaped rim with a bezel. People buy a whole smartphone. This explains why the CAFC thought the smartphone was the article of manufacture whose total profits courts must award when design patents are infringed.
This interpretation of design patent awards is inconsistent with principles that guide damage awards in other types of IP cases. Had Samsung infringed a utility patent, a copyright, or protectable trade dress, an award of monetary damages would be based on the harm that was attributable to the infringement. A total profits award for utility patent infringement, for instance, would only be available if there was evidence the patented feature was responsible for the market demand for the product embodying it.
This interpretation of design patent awards is inconsistent with principles that guide damage awards in other types of IP cases.
The general rule is that IP owners are entitled to compensation for harm caused by infringement. They are not entitled to windfall awards when some or virtually all of the value of a product is due to aspects not covered by an IP right. The CAFC's ruling is inconsistent with conventional rules of IP law and with sound principles of equity.
Samsung's and amicus briefs filed in support of its petition for Supreme Court review have pointed to earlier appellate court decisions that apportioned damages for infringement of design patents.
One case involved a design patent on a piano case. The court approved an award of the infringer's profits from use of the patented design in a piano case, but disapproved the argument that the infringer should have to disgorge its profits from sale of pianos containing the patented design. "[R]ecovery should be confined to the subject of the patent."
The CAFC's interpretation of § 289 is also arguably inconsistent with another part the CAFC did not seem to heed. It states that the patentee "shall not twice recover the profit made from the infringement". This is a limiting principle that links the award of damages to the infringement.
There is also a question of fairness. How could it be fair, Samsung asked, for a court or jury to award 100% of a firm's profits for infringement of one design patent if the patented feature accounted for only 1% of the value of the product? And what if a second design patent owner came along and a jury found infringement of that patent too? Would a second award of total profits be fair, or would the first patentee's windfall have exhausted the available damages?
More concretely, consider this hypothetical. Apple owns a design patent on the musical note icon for smartphones. Samsung is not charged with infringing that patent. But suppose the only design claim against Samsung pertained to that patent.
An IP professors amicus brief in support of Samsung's petition (written by Stanford's Mark Lemley and joined by yours truly) pointed out that it would not be reasonable to award the same $399 million in total profits for infringement of that one patent.
Demand for iPhones is driven by many factors. But the music icon is a very small part of the value of any smartphone that might embody it. Proportionality should apply in all awards for monetary compensation for infringing IP rights.
Several amicus briefs filed in support of Samsung's petition for Supreme Court review warned that if the Court failed to overturn the "total profits" award ruling in this case, this would set off a new round of patent troll litigations. This would be harmful to innovation and competition in high-tech industries, especially given the low quality of some issued design patents.
Conclusion
The Supreme Court has decided to review the total profits recovery question raised by Samsung. On that point, Samsung seems likely to prevail. Differentiating between "ornamental" and "functional" elements of designs for articles of manufacture is a trickier matter, but surely the test for infringement of a design patent should focus on that design rather than products as a whole. Unfortunately, the Court decided not to review this important question. The Apple v. Samsung case is a very important one. Resolved well, it will mitigate design patent wars in high-tech industries. Resolved badly, it will surely spark such wars.
The Digital Library is published by the Association for Computing Machinery. Copyright © 2016 ACM, Inc.
No entries found