Monday, May 18, 2015

Federal Circuit Affirms Damages Awards for Design & Utility Patent Infringement in Apple v. Samsung

Here is a link to the Federal Circuit's opinion, and links to my previous blog posts may be found here, here, and here

The bottom line is that the court (1) reverses the finding that Apple's trade dress was nonfunctional and thus protectable (an important topic in trademark law which, however, I will not address here); (2) affirms the findings that Samsung infringed Apple's design and utility patents; and (3) affirms the damages awards predicated on the design and utility patent infringement, but not on the trade dress dilution (thus remanding "for immediate entry of final judgment on all damages awards not predicated on Apple's trade dress claims").  I'm not sure off the top of my head what portion of the nearly $1 billion this entails, though I would expect most of the damages award will remain in place for reasons which follow.

The main damages issues of interest relates to the award for design patent infringement.  Section 289 of the U.S. Patent Act reads as follows:
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.
As I have written before, according to the Federal Circuit Congress included the words “total profit” when it revised the statute over one hundred years ago, expressly to overrule a Supreme Court case, Dobson v. Dornan, 118 U.S. 10 (1886), in which the Court had required the plaintiff to apportion the profit the defendant earned from the use of an infringing carpet design as opposed to the rest of the carpet (resulting, in that case, in only nominal damages).  See Trans-World Mfg. Corp. v. Al Nyman & Sons, Inc., 750 F.2d 1552, 1567 (Fed. Cir. 1984).  If this understanding is correct, it means that a court may award the defendant’s entire profit from the sale of design patent-infringing goods, even if the design patent in suit accounts for only a small portion of that profit.  Such a rule is indefensible as a matter of policy, and is not followed in trademark or copyright cases (or in other countries, where awards of infringers’ profits for utility patent infringement remains a viable remedy).   

As one who joined a law professor’s amicus brief arguing against applying § 289 in this fashion, I was hoping that the court might find a way out, based either on a causation rationale or by interpreting the words “article of manufacture” narrowly.  But it was not to be (though I wonder whether Samsung will find it worthwhile to try a cert. petition to the U.S. Supreme Court?).  Here is what the court says, in the opinion by Chief Judge Prost:
In reciting that an infringer “shall be liable to the owner to the extent of [the infringer’s] total profit,” Section 289 explicitly authorizes the award of total profit from the article of manufacture bearing the patented design.1 Several other courts also concluded that Section 289 authorizes such award of total profit. See Schnadig Corp. v. Gaines Mfg. Co., 620 F.2d 1166, 1171 (6th Cir. 1980); Henry Hanger & Display Fixture Corp. of Am. v. Sel-O-Rak Corp., 270 F.2d 635, 643-44 (5th Cir. 1959); Bergstrom v. Sears, Roebuck & Co., 496 F. Supp. 476, 495 (D. Minn. 1980). The clear statutory language prevents us from adopting a “causation” rule as Samsung urges.
Samsung continues its quest for apportionment by arguing, alternatively, that the profits awarded should have been limited to the infringing “article of manufacture,” not the entire infringing product. Samsung argues for limiting the profits awarded to “the portion of the product as sold that incorporates or embodies the subject matter of the patent.” Appellants’ Br. 38. Samsung contends that the Second Circuit had “allowed an award of infringer’s profits from the patented design of a piano case but not from the sale of the entire piano . . . .” Id. These Second Circuit opinions, however, addressed a factual situation where “[a] purchaser desiring a piano of a particular manufacturer may have the piano placed in any one of several cases dealt in by the maker.” Bush & Lane Piano Co. v. Becker Bros., 222 F. 902, 903 (2d Cir. 1915). That factual situation occurred in the context of the commercial practice in 1915 in which ordinary purchasers regarded a piano and a piano case as distinct articles of manufacture. The facts at hand are different. The innards of Samsung’s smartphones were not sold separately from their shells as distinct articles of manufacture to ordinary purchasers. We thus do not agree with Samsung that these Second Circuit cases required the district court to limit the damages for design patent infringement in this case.
We agree with the district court that there was no legal error in the jury instruction on the design patent damages. Samsung does not argue a lack of substantial evidence to support the damages awards under the district court’s jury instruction. We therefore affirm the damages awarded for design patent infringements.
1/ Amici 27 Law Professors argues that an award of a defendant’s entire profits for design patent infringement makes no sense in the modern world. Those are policy arguments that should be directed to Congress. We are bound by what the statute says, irrespective of policy arguments that may be made against it.
I can’t say I’m greatly surprised that the court adhered to the district court’s interpretation of § 289, but I am disappointed.  As design patents become more important in U.S. law, I would hope that Congress, if not the courts, consider revising this rogue statute.

No comments:

Post a Comment