High Court Looks Poised to Curb ‘Design Patent’ Damages

Rob Kunzig/Morning Consult

At least two Supreme Court justices aren’t convinced that U.S. patent law allows Apple Inc. to demand all the profits from sales of Samsung Electronics Co. smartphones found to infringe upon Apple’s “design patents.”

The patents in question applied only to the outer shell of Apple’s iPhone, and not the interior components or software.

The case heard before the court on Tuesday — Samsung Electronics Co. Ltd, et. al. v. Apple Inc. — focuses on a portion of U.S. law covering design patents that was written in the 19th century. It’s the first case involving design patents that the court has heard in the last 120 years.

Several technology experts believe the Samsung v. Apple case could have an outsized impact on intellectual property law in the country. U.S. design patent laws are outdated, and they say the court’s decision could impact innovation by recognizing the complexity of modern-day devices and the thousands of patents that go into them.

The central question centers around whether copying portions of a product’s design entitles the aggrieved party to the entirety of profits earned from sales of the infringing product by the offending company.

Justice Samuel Alito and Chief Justice John Roberts both expressed skepticism that the sweeping damages awarded to Apple by a federal circuit court are warranted, repeatedly noting that outer design and aesthetic components could not be the sole reason why consumers purchase complicated products such as smartphones.

“Nobody buys a car based just on the way it looks,” said Alito, referring to his fellow justices’ comparison of the iPhone’s aesthetic appearance to the iconic Volkswagen Beetle’s curved profile.

Alito wondered what Beetle sales would’ve looked like if the car had broken down every 50 miles.

Apple attorney Seth Waxman called the iPhone’s outer design “iconic” and claimed that Samsung copied more than simply a component of the iPhone when it infringed upon Apple’s design patents.

“A design is not a component, a design is applied to a thing,” Waxman said.

Roberts told Waxman he was “not grasping” his argument.

“It seems to me that the design is applied to the exterior of the phone. It’s not applied to all the chips and wires,” Roberts said.

Other justices also expressed skepticism over Apple’s argument, but they worried that jurors would be unable to accurately parse the difference between infringed design patents and other smartphone components.

“If I were a juror, I simply wouldn’t know what to do,” said Justice Anthony Kennedy to Samsung lawyer Kathleen Sullivan.

Sullivan argued that $399 million of $548 million in damages a federal circuit court ordered paid to Apple — a sum representing the company’s entire profit earned from the sale of 11 infringing smartphone models — should be returned on the grounds that not all those profits are attributable to the three Apple design patents in question.

She proposed a test, conducted through an examination of corporate accounting or consumer preference polling, to determine what percentage of profits should be apportioned to an infringed design.

Kennedy appeared to reject the corporate accounting method, which would look at how much time and money was invested in developing a component when determining how to divide the profits.

Also using the example of the Beetle, Kennedy imagined one designer having a “stroke of genius” that allowed him to come up with the iconic outer shell of the automobile in just three days.

“It seems quite unfair to say we would give them three days of profit,” said Kennedy, particularly if it then took Volkswagen 1,000 days to develop the motor.

Other methods of apportionment seemed better-received by the justices. Fletcher, arguing on behalf of the U.S. government, said consumer surveys and expert testimonies were both good strategies to help approximate how much a design patent factored into the total profits accrued through the sales of a device.

Apple’s Waxman argued that jurors should be allowed to award full profits to a party whose design patent is infringed, if they examine the relative prominence of the design in relation to the entire product and determine that such an award is appropriate.

Justice Kennedy said it seemed difficult to get away from some form of apportionment once it can be determined which parts of the device are infringing and which are not.

Waxman ultimately agreed that some form of apportionment would likely be necessary, even if it’s difficult to determine which method to pursue.

Computer and Communications Association Industry patent counsel Matt Levy said in a statement he believes it’s “very likely that the court will modify the lower court’s decision.”

He noted that Samsung, Apple and the U.S. government all agreed that design patent damages should not be focused on the entire product sold to consumers, and he urged the court to reverse the lower court’s ruling to the contrary.

“If the lower court’s decision stands, it would provide yet another tool for patent assertion entities to use to extract money from companies that produce complex products; patent assertion entities could threaten them with the loss of their entire profit,” Levy said.

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