Federal Circuit Declines to Reach Design Patent Damages Issues

The decision, handed down on Friday, is Columbia Sportswear North America, Inc. v. Seirus InnovativeAccessories, Inc., with a precedential opinion by Judge Prost, joined by Judges Reyna and Hughes.  This a design patent case, involving the alleged infringement of D657,093, for “the ornamental design of a heat reflective material,” and this is the second time it has been to the Federal Circuit.  The first time around, the district court had granted a summary judgment of infringement, after which a jury awarded damages in the amount of $3,018,174.  The Federal Circuit vacated the grant of summary judgment of infringement and remanded for further proceedings, without reaching the damages issues.  This time around, the case went to the jury, which found no infringement.  On appeal, the parties dispute whether certain issues were “the law of the case,” as well as the correctness of the jury instructions on prior art and infringement.  Since this blog focuses on damages, I will pass over these except to note that the appellate court’s holdings on some of these issues—that “to qualify as comparison prior art, the prior-art design must be applied to the article of manufacture identified in the claim”; that the district court erred by “failing to instruct the jury as to the scope of the D’094 patent claim (design for a heat reflective material) and, relatedly, the proper scope of comparison prior art”; and that “just because a logo’s potential to eliminate confusion as to source is irrelevant to design-patent infringement, its potential to render an accused design dissimilar to the patented one—maybe even enough to establish non-infringement as a matter of law—should not be discounted”—would seem pretty important to the substantive law of design patents.   Nevertheless, because the case has to go back yet again for retrial, the court (correctly, in my view) leaves the damages issues (important thought they indeed are) for another day:

Seirus argues that, for purposes of calculating damages under 35 U.S.C. § 289,¹⁴ the relevant “article of manufacture” is the HeatWave material—not the entire end product to which it is applied (e.g., gloves with portions not made of HeatWave material). . . . Seirus also argues that the district court erred by instructing the jury (at the damages trial) that Seirus bore the burden of proving that the article of manufacture for § 289 damages purposes is less than the entire end product. According to Seirus, Columbia—as the patentee—bore the burden of proving what that article is. The parties further disagree as to whether any damages retrial on profit-disgorgement issues should be tried to a jury or the bench.

¹⁴ Section 289 provides (in relevant part):

 

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.

 

35 U.S.C. § 289.

 

As we indicated in Columbia I, these are important issues. See 942 F.3d at 1132. But we did not reach them there because our disposition left the case with no infringement determination. See id. Because our disposition here likewise leaves the case without an infringement determination, we do not reach these issues (pp. 32-33).

Cotter on Standing and Nominal Damages

I have a new paper up on ssrn, titled Standing, Nominal Damages, and Nominal Damages 'Workarounds' in Intellectual Property Law After TransUnion, 56 UC Davis Law Review __ (forthcoming 2023).  Here is a link to the paper, and here is the abstract:

            In June 2021, the United States Supreme Court held, in TransUnion LLC v. Ramirez, that plaintiffs lack standing to assert claims for statutory damages under the Fair Credit Reporting Act unless they can demonstrate “concrete harm” arising from those violations. Although TransUnion was not a case involving intellectual property (IP) rights, if the rationale of the decision is that Congress cannot authorize federal courts to entertain claims for statutory damages unless the plaintiff shows that it has suffered actual harm, some common monetary awards for the infringement of IP rights—specifically, statutory damages, reasonable royalties, and (in design patent law) awards of the infringer’s total profit, all of which are intended to reduce the risk that IP owners otherwise would be left with nothing more than nominal damages—would appear to be in jeopardy. This Article argues, nonetheless, that these three remedies, which the Article refers to as nominal damages “workarounds,” rest on a sufficient footing to overcome the sort of jurisdictional objection at issue in TransUnion, for two reasons. The first is that, as TransUnion itself recognizes, “history and tradition offer a meaningful guide to the types of cases that Article III empowers federal courts to consider”; and history and tradition show that for over a hundred years courts have presumed that violations of IP rights cause harm, sufficient to sustain (at least) an award of nominal damages (or in the case of copyright, statutory penalties). Second, because the value of IP rights (unlike the rights at issue in TransUnion) often lies in the owner’s ability to license those rights to others who can exploit them more efficiently, from a functional perspective it often makes sense to conceive of infringement as causing harm when it deprives the owner of an opportunity to license.

 

            The Article further argues three additional points: first, that reasonable royalties are generally superior to both statutory damages and total profit awards as a nominal damages workaround; second, that courts retain authority to award nominal damages, as opposed to awarding zero damages or dismissing a claim altogether, when IP owners fail to satisfy all of the necessary conditions to qualify for one of the workarounds; and third, that courts should award only nominal damages in two recurring situations, namely when the evidence shows that the IP in suit provided no advantage over the next-best available noninfringing alternative, or that the defendant manufactured or acquired the IP unlawfully but then failed to use it. The Article rejects the view, however, expressed by some scholars, that courts should award only nominal damages in patent infringement actions in cases brought by patent assertion entities.

Federal Circuit Update

1. This morning, in Junker v. Medical Components, Inc., the court reversed a judgment in favor of the owner of a design patent, on the ground that the design in suit was on sale more than one year prior to the critical date.  I mention the case here because the reversal also eliminates the lower court's award, under 35 U.S.C. § 289, of the defendant's profits in the amount of $1,247,910.  Last summer I had noted a district court opinion in this case applying the Solicitor General's four-factor test for determining the relevant "article of manufacture" in design patent cases (see here).  Thus far, the few decisions addressing the "article of manufacture" issue have been supportive of this test, notwithstanding its defects (as noted, for example, by Professor Burstein). 

2. Earlier this week in Nippon Shinyaku Co. v. Sarepta Therapeutics, Inc., the court reversed a district court order denying a preliminary injunction, holding that under the terms of a contract between the parties Sarepta is precluded from petitioning for an IPR of Nippon patents.  In a sense, this case is illustrative of a more traditional type of antisuit injunction, wherein a court would sometimes enjoin a party from proceeding with litigation in violation of a forum selection or arbitration agreement.  As Dennis Crouch suggests, however, it may seem a bit odd here that the court didn't address the possible implications of Lear v. Adkins and MedImmune v. Genetech.   

Two More District Court Decisions Applying the Four-Factor "Article of Manufacture" Test

As readers may recall, 35 U.S.C. § 289 permits the owner of an infringed design patent to recover the infringer's "total profit."  Interpreting this provision, the United States Supreme Court in Samsung Elecs. Co. v. Apple Inc., 137 S. Ct. 429 (2016), held that the determination of an award under § 289 “involves two steps.  First, identify the ‘article of manufacture’ to which the infringed design has been applied.  Second, calculate the infringer's total profit made on that article of manufacture.”  The Court didn't specify how to go about identifying the relevant article of manufacture, but in the cases decided immediately after Samsung courts were instructing juries to consider four factors initially proposed in an amicus brief the United States filed in Samsung.  See Sarah Burstein, The Article of Manufacture Today, 31 Harv. J. L. & Tech. 781, 783 & n.9  (2018) (citing Jury Instructions at No. 10, Columbia Sportswear N. Am., Inc. v. Seirus Innovative Accessories, No. 3:17-cv-01781-HZ (S.D. Cal. Sept. 29, 2017), ECF No. 378; Order Requiring New Trial on Design Patent Damages, Apple Inc. v. Samsung Elecs. Co., No. 5:11-cv-01846, 124 U.S.P.Q.2d 1917, 2017 WL 4776443 (N.D. Cal. Oct. 22, 2017), ECF No. 3530; Decision and Order, Nordock Inc. v. Sys. Inc., No. 2:11-cv-00118, 2017 WL 5633114 (E.D. Wis. Nov. 21, 2017), ECF No. 270).  The factors are (1) “the scope of the design claimed in the plaintiff's patent”; (2) “the relative prominence of the design within the product as a whole”; (3) “whether the design is conceptually distinct from the product as a whole”; and (4) “the physical relationship between the patented design and the rest of the product.”  Brief for the United States as Amicus Curiae Supporting Neither Party, Samsung Elecs. Co., Ltd. v. Apple Inc., 137 S. Ct. 429 (2016), (No. 15-777), 2016 WL 3194218.  

Recently I asked my research assistant Riley Ji to see if there are any more recent cases applying the four-factor test, or some other test, and she alerted me to two decided this year.  The first is Junker v. Med. Components, Inc.,  2021 WL 131340 (E.D. Pa. Jan. 14, 2021), in which the court applied the four-factor test to conclude that the relevant article of manufacture was "the entire introducer sheath product as sold by" the defendants.  The court then accepted the defendant's expert's methodology for determining the profit attributable to that article (since the product was usually sold as part of a kit) and awarded $1,247,910.  The other case is Red Carpet Studios v. Midwest Trading Grp., Inc., 2021 WL 1172218 (S.D. Ohio Mar. 29, 2021).  This court too applied the four-factor test and concluded that the relevant article was the entire "Solar Spinner" product sold by the defendants.  The court awarded profits totaling, altogether, $521,802.

Red Carpet Studios is also notable in concluding that there is no right to a jury trial on the issue of disgorgement of profits under § 289, because this is an equitable remedy.  This is consistent with the view I have previously expressed, see, e.g., here, but this is the first design patent case I've seen that actually addresses the matter.  

If readers are aware of any other cases we may have missed, please let me know.  So far, though, it appears that, for better or worse, the four-factor test is winning out.