Design patents have long been a unique creature of intellectual property law. Recent developments have thrust them back into light for companies looking for a well-rounded arsenal of intellectual property protections. Like trademarks, they are issued for ornamental designs only, and do not cover any aspects of a design that may have a functional purpose. But, like the utility patents that are issued for inventions of new technological advances, design patents have a shorter term than trademarks. And they are subject to a special statute that governs the damages for infringement. This latter issue has been the subject of significant recent attention.
The Patent Act states that whoever “sells or exposes for sale any article of manufacture to which [a patented design] or colorable imitation has been applied shall be liable to the owner to the extent of his total profit . . .” This is different from utility patents. For a utility patent, the patent owner is entitled to his damages from the infringer’s acts. This means that the patent owner is entitled to either his own lost profits or the value of a reasonable royalty he would have received from the infringer. Lost profits can be difficult to prove, and a reasonable royalty, almost by definition, means only a fraction of the infringer’s profits.
But, for design patent infringement, the statute awards the patent holder the “total profit” from the sale of any “article of manufacture” to which the design was applied. For more than a century, this meant the total profits from the end product as sold to market.
Samsung v. Apple Changed Well-Settled Law
In 2011, Apple sued Samsung for infringing three design patents that cover ornamental features on smart phones. One patent covered a smart phone with a black rectangular front face with rounded corners, a second covered a rectangular front face with rounded corners and a raised rim, and a third covered a grid of 16 colorful icons on a black screen. At trial, each was found infringed, and Samsung was ordered to pay $399 million dollars—equivalent to its total profits earned from its sales of infringing smart phones.
Samsung appealed, ending up before the Supreme Court. In December 2016, the Court reversed the damages award in a decision that upended longstanding design patent damages jurisprudence and benefited infringers. In Samsung Elects. Co., Ltd. v. Apple, Inc., 137 S. Ct. 429 (2016), the Supreme Court held that the “article of manufacture” for multi-component products is not necessarily the final product as sold to market, but could be only a component of that product. The Supreme Court declined to articulate a test that could be used to determine when the “article of manufacture” should be considered the entire product and when it should be considered only a component instead. That question was sent back to the lower courts for further consideration. However, the Supreme Court noted that the Department of Justice had proposed a set of four considerations that could be used to answer the question, but that the parties had not proposed any test.
In short, Samsung v. Apple continues a trend among the courts to avoid large damages awards by requiring that patent damages be apportioned to relate to the specific components that were the basis of the inventor’s contribution to the field of art. As the law had been pushing that direction, many looked to design patents, and its opportunity to capture the infringer’s “total profits,” as an attractive form of intellectual property protection, with a strong hammer to swing at potential infringers. The Samsung v. Apple decision raised concerns about how much strength design patents still have.
Columbia Sportswear: A Bellwether for Design Patent Owners?
In September 2017, the first design patent case to go to trial since Samsung has given design patent owners hope that a “total profit” award is still achievable.
Columbia Sportswear developed a technology called “Omni-Heat® Reflective,” which uses an array of reflective foil on the inside of a garment. The foil reflects heat back to the user, and using it only in array allows the continued breathability of the underlying base fabric.
Columbia obtained a portfolio of patents to cover this invention. In addition to a slew of utility patents around the world, it also obtained design patents that cover individual ornamental patterns that could be used to implement this idea. One of those design patents, U.S. Design Patent D657,093, is entitled “Heat Reflective Material,” and covers a wavy line design.
California-based snowsports accessories company, Seirus Innovative Accessories, Inc., developed a line of heat reflective gloves and other accessories it called “HeatWave.” The HeatWave line of products used a fabric with foil applied in a wavy line design. Columbia sued, and in August 2016, the Court granted summary judgment that Seirus’s HeatWave products infringe Columbia’s D’093 patented design.
That set up a trial on damages, which took place in September 2017. In advance of trial, the Court ordered that it would instruct the jury to determine the relevant “article of manufacture” based on the Department of Justice’s proposed four-factor analysis.
At trial, Seirus argued that the “article of manufacture” to which the design was applied was only the fabric used as a liner in the gloves, and not the gloves as a whole. Seirus presented evidence that the fabric was purchased separately by Seirus, and that its proportion of the total manufacturing cost of the gloves was nominal. Seirus also argued that the fabric, which on many products was only on the inside of the gloves, and not visible to the users at the point of sale, had a de minimis impact on the overall visual appearance of the gloves as a whole. In light of these factors, Seirus argued to the jury that it should award only the profits that could be attributable to that fabric.
Columbia argued that the “article of manufacture” was the entire glove. Columbia noted that the inner lining fabric was not separable from the gloves—that it was sewn in, and not removable by end users. Columbia also argued that the only product that Seirus “sells or exposes for sale,” as the statute requires, was the gloves themselves—Seirus does not sell the fabric separately.
Regarding Seirus’s position that the fabric, on the inside, did not significantly contribute to the overall visual appearance of the gloves, Columbia pointed to Seirus’s heavy advertising of the HeatWave products, and the fact that they were advertised based on the features of the lining fabric, with photographs taken to emphasize the inside of the gloves, showing the lining fabric. Columbia showed that Seirus’s marketing messages were driven by that fabric above the other features of the gloves. Seirus also called its product line “HeatWave” to evoke the wavy line pattern on the fabric, and the fact that the design was on material that reflected heat. Columbia showed the jury the large hang tags that Seirus put on the front of its products that incorporated the wavy line pattern and directed users to “Look Inside” to see the actual fabric.
Additionally, Columbia argued that, even if the jury found that the relevant “article of manufacture” was the fabric, the jury should award Columbia Seirus’s total profits from Seirus’s final products sold to market. In support of this position, Columbia argued that, even if the fabric alone infringed, the profits Seirus earned on the fabric were the profits it earned for the glove as a whole. This, Columbia argued, was because Seirus’s marketing showed that the fabric itself drove the consumer demand for the products as a whole, so that all profits from the sales of the gloves could be attributed to the fact that the gloves contained the infringing fabric.
The jury agreed with Columbia, awarding it the entire $3.018 million in profits that Seirus earned from its HeatWave product line sales.
Intellectual property owners hope this case is a bellwether of post-Samsung v. Apple damages awards to come.
Patent Owners Keep an Eye on Other Cases
Other cases are now preparing to go to trial. On October 22, 2017, Judge Koh in the Northern District of California ordered a new trial in the original Samsung v. Apple case. She has ordered that the same Department of Justice four-factor analysis used in the Columbia case be used in that case, and cited the Columbia case as persuasive authority. Apple seeks a much larger damages award. Design patent owners will be watching carefully as a different jury applies the same standard to a very different set of facts. In the Columbia case, the design frequently adorned only the inside of relatively simple products, and the design, and the fabric on which it was applied, were prominently featured in Seirus’s advertising. In the Apple case, on the other hand, the patents cover aspects of the external appearance of the product, but in much more complicated products, where the internal components of the product provide substantial value.
Patent owners are keeping a close eye on how juries respond to the new legal framework, and will be carefully attuned to appeals from these cases as the Federal Circuit addresses the standards that apply to design patent damages cases going forward. If patent owners continue to get total profits for design patent infringement, even after Samsung v. Apple, companies are likely to increase their efforts in obtaining design patents, particularly given the current climate facing utility patents.