On May 14th the next chapter in the Apple v. Samsung smartphone design patent dispute will commence in the United States District Court for the Northern District of California with a retrial to determine a new award in the case. The most notable moment in this long winding history was the unanimous Supreme Court decision where the Supreme Court sided with Samsung in its appeal in late 2016. But while the Supreme Court’s ruling should have modernized our antiquated law governing design patents to fit into the modern 21st century world, that important outcome is still in doubt pending the retrial. A key question remains – namely, how to determine the article of manufacture and appropriate remedy for infringement of multifaceted products. And could this open up potential grounds of consideration for utility patent interpretation?
Under U.S. Code Title 35 § 289, infringement of a design patent can result in a plaintiff receiving total profits. That statute was the basis for the original $1 billion awarded to Apple after Samsung was found to infringe on three of its design patents related to mobile devices – which the U.S. Court of Appeals for the Federal Circuit later reduced to $400 million. It’s important to note that these patents covered only minor ornamental features of devices containing more than 200,000 patents. Apple applied for – and was granted – multiple design patents that covered portions of an illustrated smartphone. Despite using vague titles like “electronic device,” these design patents clearly covered singular design features (such as the bezel on the device) and not the entire device.
Samsung appealed the lower court’s decision to the Supreme Court, asking for clarification on the following question: “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?” The Court subsequently ruled that “the relevant ‘article of manufacture’ for arriving at a §289 award need not be the end product sold to the consumer but may be only a component of that product.”
This momentous decision should bring clarity and common sense to modern-day design patent law, particularly as it relates to multi-component devices. In an era in which dozens of innovators contribute to the development and production of technologies like smartphones, this simply makes sense – determine the value of the component and remedies accordingly, vs. simply awarding total profits from the entire product
But the Supreme Court’s decision was limited in that it provided no clarification regarding the manner in which the “relevant ‘article of manufacture’” is determined. Which brings us back to the retrial in the Northern District Court of California, where the only remaining issue to be decided is exactly that – what is the article of manufacture and the profits attributable to the article (or articles).
That issue goes to the heart of the case and is why the retrial is so important to the future of innovation. The article of manufacture test – if done right – will provide clarity and certainty to design that will drive inventions and investment in new products and technologies. But if the test is not suitable to properly determine the article and awards, we should expect a host of unintended consequences that will stunt innovation and encourage a new front in patent trolling over frivolous designs.
For purposes of the new trial in the Northern District of California, the Court will apply the four-factor test for determining the article of manufacture that was originally proposed by the U.S. Solicitor General (USSG) in an amicus curiae brief filed during the Supreme Court proceedings. However, the USSG test fails to bring much needed clarity and simplicity to design patent law. As it stands, the test is overly complicated and unpredictable – and threatens to stall innovation and incent opportunistic litigious design patent holders.
Extremely broad and vague terminology employed by the USSG test such as “relative prominence” and “conceptually distinct” will be incredibly difficult – if not impossible – for juries to interpret consistently or with any confidence. That unpredictability will create an environment of uncertainty for companies to do business in – particularly so for start-ups and entrepreneurs on the forefront of innovation. Patents can serve as a major asset for innovators, but that could very well not be the case if patent holders have no sense of the litigious hurdles they would face if they end up on the wrong side of a lawsuit where total profits are at stake over a design that may have no bearing on the commercial success of the product.
Simply put, if design patents are broadly interpreted and the article of manufacture expanded beyond the component or feature the design applies to, innovators may not know what they can and cannot make. While Stephen Colbert joked about this encouraging innovation of things like an Escher or Mobius phone, in reality, inventors will be gun shy and unable to put new products on the market if they are concerned that an overly broad design patent will be found infringed and total profits from the entire product, not just the component or feature to which the design was applied, are awarded to the patent holder. Common sense would suggest that Apple shouldn’t be entitled to all of the smartphone profits when there are hundreds of thousands of other inventions incorporated into the devices. But the test the jury is being asked to apply is confusing and can easily go awry.
A more straightforward test will provide clear guidance to all parties and allow innovators of all sizes to operate with confidence. And while the attribution of profits related to an article of manufacture may be challenging to determine, in the utility patent space it’s done every day with highly knowledgeable experts. In fact, courts already have a well-established and time-tested process for calculating royalties in similarly complex utility patent cases.
After years of litigation in courtrooms ranging from San Jose to Washington, D.C. and back, and on the heels of a unanimous Supreme Court decision, it’s critical to get the article of manufacture test right as it will set the course for the future of all intellectual property law and not just design patent law. Innovators and IP practitioners everywhere are watching.