Design Patent Damages Awards Under 'Apple v. Samsung'

On May 18, the United States Court of Appeals for the Federal Circuit issued its opinion[1] in Apple v. Samsung, which affirmed that Samsung infringed upon Apple’s design and utility patents, upholding a damages award of over half a billion dollars.[2] The design patents at issue were the design of the iPhone’s front facing, including its rounded edges and those features extending to the phone’s bezel, as well as the “ornamental design for [the iPhone’s] … display screen,” all of which the court determined Samsung’s products infringed.[3]

Notably, in calculating damages for infringement of the design patents, the court declined to employ a rule of apportionment, instead ordering Samsung to pay 100 percent of its total profits on the infringing smartphones. Conversely, in calculating damages for infringement of the utility patents, the court apportioned damages, awarding only a “reasonable royalty.”[4] Thus, Apple, with its robust damages award, provides a strong incentive for intellectual property owners to explore a sometimes-overlooked vehicle for protection of their rights in the form of design patents.

Design Patents

Design patents protect the non-functional features of useful objects. Appearance, rather than utility, is the critical factor in issuing design patents.[5] Because design patents sometimes require lengthy prosecution, averaging 15 months to issuance, some consider them an inefficient method for protecting intellectual property in an era of rapid product cycles and mass consumerism.[6] However, others suggest that “the cost of obtaining and enforcing a design patent might be miniscule in comparison to losing a design to [a competitor or] the knockoff industry.”[7] Apple strongly supports the latter proposition, establishing design patents as an efficient tool for protection and recovery of damages.

Rule of Apportionment Applies to Utility Patents, But Not Design Patents

Apple confirms that design patents possess at least one distinct advantage over other forms of intellectual property rights: no apportionment of damages awards. The general rule for calculating damages in other intellectual property fields is that the inventor may only recover those damages “attributable to the infringing features.”[8] No such requirement exists, however, for design patents. The Patent Act of 1887 expressly removed the apportionment requirement for design patent damages when the patentee seeks disgorgement of profits.[9]

Thus, unlike copyright, trademark and utility patents, which all employ a rule of apportionment, damages for infringement upon a design patent may include an award of the infringer’s total profits on the infringing article.[10]

Damages Award In Apple

The court arguably allowed Apple to recover damages that were disproportionate to Samsung’s infringement. Thus, this decision paves the way for more lucrative damages awards for patent holders who proactively seek design patent protection for their properties. Consider, in the alternative, a scenario in which utility patent infringement was Apple’s sole cause of action: the court would engage in a value-added assessment, determining the extent to which Apple’s “rounded corners” and other design features contributed to Samsung’s profits on its infringing smartphones.[11]

Because the “rounded corners” and other design features are arguably dually functional and ornamental, Apple could have filed a utility patent instead, resulting in, at best, recovery of only an apportioned damages award. By making substantially the same claims under the umbrella of design patents, Apple increased its damages award exponentially. Insofar as the court upheld the validity of Apple’s design patents despite their dually utilitarian purpose, this decision plausibly indicates that courts and the USPTO have, to some extent, liberalized the functionality restriction on design patent eligibility.

Conclusion

The dramatic distinction between an apportioned damages award for utility patents and a disgorgement of profits damages award for design patents should not be lost on intellectual property owners. Apple established a favorable precedent for patent holders seeking to protect their properties more extensively.[12] By incorporating design patents into a comprehensive protection strategy, patent holders may now enjoy more robust protection and lucrative damages awards.

Notes

  1. Apple Inc. v. Samsung Elecs. Co. Ltd., Nos. 2014-1335, 2015-1029, 2015 WL 2343543 (Fed. Cir. 2015).
  2. On June 17, Samsung filed a petition with the Federal Circuit for a rehearing en banc. Pet. for Reh’g En Banc, Apple Inc. v. Samsung Elecs. Co., Nos. 2014-1335, 2015-1029 (Fed. Cir. June 17, 2015).
  3. On appeal, the Federal Circuit addressed three distinct bodies of intellectual property law: trade dress, utility patents and design patents. This article focuses exclusively on the design patent issues before the court.
  4. The Apple court affirmed the trial court’s use of the Georgia Pacific factors in assessing a reasonable royalty. See Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1119-20 (S.D.N.Y. 1970) (one such factor being, for example, the “extent to which the infringer has made use of the invention and the value of such use.”).
  5. See Blisscraft of Hollywood v. United Plastics Co., 294 F.2d 694, 696 (2d Cir. 1961) (noting that the design must be the “product of aesthetic skill and artistic conception.”).
  6. The PTO offers an expedited examination procedure in which the average design patent issues in only five months. Elizabeth Ferrill and Tina Tanhehco, “Protecting the Material World: The Role of Design Patents in the Fashion Industry,” 12 N.C. J.L. & Tech. 251, 297–8 (2011)(citing U.S. Pat. And Trademark Off., Design Patent Report: Parts A1, A2, B (1977–2009), available at http://www.uspto.gov/web/offices/ac/ido/oeip/taf/design.htm).
  7. Ferrill, supra note 6, at 296.
  8. VirnetX v. Cisco Sys. Inc., 676 F.3d 1308, 1326 (Fed. Cir. 2014).
  9. “Notably, when Congress expressly eliminated the apportionment requirement for infringement of design patents, it only eliminated it where the infringer’s profits were sought.” Eric B. Bensen, “Apportionment of Lost Profits in Contemporary Patent Damages Cases,” 10 Va. J.L. & Tech. 8 ¶ 55 n.206 (citing Nike Inc. v. Wal-Mart Stores Inc., 138 F.3d 1437, 1441 (Fed. Cir. 1998) (“The Act of 1887, specific to design patents, removed the apportionment requirement when recovery of the infringer’s profits was sought) (emphasis added)).
  10. 35 U.S.C. § 289.
  11. As evidenced by the Apple court’s application of the Georgia Pacific Factors.
  12.  On Aug. 13, 2015, the Federal Circuit summarily denied Samsung’s petition for rehearing en banc. See Order on Petition for Rehearing En Banc, Apple Inc. v. Samsung Elecs. Co. Ltd., Nos. 2014-1335, 2015-1029 (Fed. Cir. Aug. 13, 2015), available at http://patentlyo.com/media/2015/08/Samsung-en-banc-denial.pdf.

JAMIE STARLING is a 2015 summer associate at Patterson Intellectual Property Law PC, in Nashville. He is a third-year law student at Belmont University and a 2013 graduate of the University of North Carolina at Chapel Hill. His main fields of interest include copyright, trademark and patent litigation, as well as intellectual property protection and licensing strategies.

SETH R. OGDEN, Ph.D., is an associate at Patterson Intellectual Property Law PC in Nashville. His practice includes patent litigation and prosecution, patent due diligence and opinion work, and client counseling for all types of intellectual property. He received his Ph.D. in Cancer Biology from Vanderbilt University in 2009 and his law degree from American University Washington College of Law in 2012.

Ryan Levy is a shareholder at Patterson Intellectual Property Law PC in Nashville. His practice includes patent and trademark litigation as well as management of intellectual property portfolios for clients. He received bachelor’s degrees in biochemistry and chemical engineering from N.C. State University in 2001 and his law degree from Duke University School of Law in 2005.

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