By Bret Swanson
May 17, 2018 at 5:00 am ET
In December 2016, the Supreme Court unanimously overturned a $399 million award Apple had received against Samsung. Under the 1879 Patent Act, Apple had won the “total profits” Samsung had earned by selling a line of smartphones that were found to infringe three minor design patents (some infringed less than three). Because a modern high-tech product like a smartphone contains hundreds of thousands of patents, however, the Supreme Court said the “article of manufacture” referenced in the special remedies statute (35 USC 289) isn’t necessarily the whole phone but something less. That, however, wasn’t the end of the story.
Although the court unequivocally struck down the lower court’s interpretation of the 1879 law, it did not lay out a new interpretation of its own. Instead, it sent the case back to the federal district court for a retrial. The court must therefore find a more reasonable way to apply the old law to modern products.
A simple rug or doorknob contemplated 140 years ago, when Congress wrote the law, bears little resemblance to today’s automobile or mobile phone. Design patents govern the ornamental appearance of products, which a century ago usually applied to a single object. Today’s products, however, often combine thousands of parts, with wide arrays of embedded intellectual property, in unimaginably complex packages that are physical but also dynamically digital. Today’s products even change in appearance.
The absurdity of the $399 million award was thus readily apparent. Awarding “total profits” for infringement on an “article of manufacture” depends crucially on the scope and definition of both the article and the design. Does the shape of an app icon determine the value of the entire phone? Under the old interpretation, the curve of a headlight or cupholder could, in theory, put in jeopardy the total profits of an entire line of pick-up trucks or minivans. If the original $399 million award had stood, holders of insignificant design patents could increasingly control the rights to larger complex machines.
The 8-0 Supreme Court ruling was an essential first step toward reasonableness. We know how not to apply the law. Establishing new affirmative guidelines, however, will be tougher. Where should we draw the lines? How narrowly or broadly should we define article of manufacture, and how much value does a particular design contribute to that article?
In pretrial briefings for the main event, which began on May 14, the trial court identified four factors that will guide the determination of the article of manufacture:
1. the scope of the design claimed in the plaintiff’s patent, including the drawing and written description;
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.
These are the same factors proposed by the solicitor general in his brief to the Supreme Court. Although the high court did not adopt these four guideposts, some lower courts are, as in a recent case where Columbia Sportswear won a total profit award against Seirus for the incorporation of a “wavy line” design into a jacket.
The four factors may seem like a good starting point to improve application of design patent law. But they are still too vague and don’t give lay jurors enough structure to render meaningfully better judgments on these increasingly complex questions.
If the new test and remedies established in the Apple-Samsung retrial don’t substantially modernize and improve our conceptual framework, the Supreme Court’s important ruling could be wasted. Which would be a shame. Because after so many years of maddening litigation between two important technology companies, it would be useful for consumers, innovators and the economy to have a better understanding of intellectual property law. Especially when the Supreme Court clearly indicated we need one that does not violate common sense and does recognize the complexity of contemporary innovations.
Bret Swanson is president of Entropy Economics, a research firm focused on technology and the global economy, and of Entropy Capital, a venture firm that invests in early-stage technology companies; he is also a visiting fellow at the American Enterprise Institute’s Center for Internet, Communications, and Technology Policy.
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