Thursday, June 2, 2016

Some Pending U.S. Supreme Court Patent Damages Matters

1.  The Court will be issuing opinions this coming Monday June 6 and the following three Mondays (June 13, 20, and 27).  One of these four days will be the day it decides the Halo and Stryker cases on the standard for awarding enhanced damages; for previous discussion on this blog, see, e.g., here.

2.  Earlier this week on FOSS Patents, Florian Mueller posted an interesting discussion of the Samsung v. Apple design patent dispute now pending before the U.S. Supreme Court.  (For previous discussion on this blog, see, e.g., here.)  Samsung's brief was due yesterday (June 1), and as soon as it becomes available electronically I'll post a link.  In case you're coming to this late, the issue is whether the district court and Federal Circuit were correct to award Apple Samsung's entire profit from the sale of certain devices that were found to infringe Apple design patents.  In U.S. patent law, this disgorgement remedy is available only for design patents and is governed by § 289  of the Patent Act, which states: 
Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.  
Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.  
On one reading, the statute is clear and unambiguous:  The statute states that the owner of a design patent is entitled to recover the infringer’s total profit, which in the present case would mean the entire profit Samsung earned from sales of infringing devices—even though much, surely most, of that profit must be attributable to other features.  As others have pointed out, however (none of the arguments below are original to me) on another reading the statutory text is not so clear.  First, the statute uses the term “article of manufacture” but doesn’t define it, thus leaving open the possibility that the relevant article of manufacture could be something other than the entire end product (such as the exterior of a phone without any of the functional components).  Another possible textual strategy would be to focus on the second sentence of § 289, where it says “he shall not twice recover the profit made from the infringement.”  Arguably this suggests that the owner is entitled to recover only profits made from the infringement, and not profits attributable to other sources of value such as the phone’s functional features.  Finally, on a policy basis, awarding the owner the defendant’s entire profit seems like overkill.  From an economic standpoint, the value of a patented invention is its contribution to profit or cost-reduction in comparison with the next-best available noninfringing alternative; moreover, it stands to reason that most of the value of a smartphone is attributable to features other than the product’s nonfunctional design.   And what if a product infringes multiple design patents owned by different firms:  does the defendant potentially have to disgorge the same profit multiple times?   

The case will not be argued until this fall, so it will be a while before we know whether the Court adopts the literal interpretation of § 289 or finds one of the alternative interpretations more persuasive..

3.  On Patently-O, Dennis Crouch has a short discussion of a cert petition recently filed by CSIRO in its litigation against Cisco (link here).  The question presented is "Is the Federal Circuit’s promulgation of rigid legal rules to control the weight to be given by the trier of fact to evidence of patent infringement damages proper under 35 U.S.C. § 284?"  (The word "rigid" seems almost de rigueur these days if you're trying to coax the Supreme Court to overrule the Federal Circuit.)  CSIRO argues, among other things, that the Federal Circuit has erred in rejecting the use of licenses that are not sufficiently comparable, in requiring adherence to the smallest salable patent practicing unit (SSPPU) rule, and in requiring that royalties not reflect the value of standardization (pp.14-18).  For my write-up on the Federal Circuit decision from this past December, see here.   

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