Damages in Patent Infringement Cases: Design vs. Utility

The drawn-out battle between Apple and Samsung isn’t over yet.

The federal court of appeals affirmed that Samsung infringed on a number of Apple’s designs, including the arrangement of the rounded icons on the screen. Apple Inc. v. Samsung Elecs. Co., 786 F.3d 983, 1001 (Fed. Cir. 2015) But Samsung is still fighting the battle. Samsung is trying to argue that, because of basic causation principles, damages should be limited to profits attributable to the infringement of the patents. The Court of Appeals rejected this argument because it is essentially similar to an “apportionment” argument made by Nike in Nike Inc. v. Wal-Mart Stores, Inc., where Nike argued that the patentee should be required to show what portion of the infringer’s profit, or of his own lost profit, was due to the design and what portion was due to the article itself. Nike Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1442 (Fed. Cir. 1998) In that case, Nike’s argument was rejected by the court when the court found that both the legislative history and clear language of the statute prevent the court from reading an apportionment requirement into awarding damages. Id.

Despite the setback, Samsung hasn’t lost hope yet. The Supreme Court granted certiorari limited to the question of damages. Samsung Elecs. Co. v. Apple Inc., 136 S. Ct. 1453 (2016)

It has been a long time since the Supreme Court has taken a design patent case. The last case that made it to the Supreme Court was the famous carpet case that started it all: in Dobson, the Supreme Court ruled that only nominal damages could be awarded in a design patent infringement case because plaintiff must show what profits or damages are attributable to the use of the infringing design. Dobson v. Dornan, 118 U.S. 10, 17 (1886) Because of the extreme difficulty in proving causation in design patent cases, plaintiffs rarely, if ever, received any damages even when infringement could be established. As a result, application for design patents decreased substantially in a short amount of time. That’s when Congress stepped in to fix the problem.

The current law with respect to damages in design patent infringement cases is codified in 35 U.S.C. §289, which reads “[w]hoever 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.” Legislative history suggests that Congress intended to do away with the apportionment equipment. The Congressional Record specifically explained that “it is expedient that the infringer’s entire profit on the article should be recoverable,” for “it is not apportionable,” and “it is the design that sells the article.” 18 Cong. Rec. 834 (1887)

It is important to note that this statute does not apply to all patents. §289 only applies to design patents. Maybe this is because it is particularly hard to prove damage and causation in design patents, or, like Congress put it, “it is the design that sells the article.”

The distinction between a design patent and a utility patent has important implications when it comes to awarding damages, because for infringement of utility patents, causation is required to be proved and damages are limited to lost profits caused by the infringement, whereas for infringement of design patents, damages equal to whole profits of the products sold are awarded. The standard for awarding damages in utility patent infringement cases is codified in 35 U.S.C. § 284, which reads “[u]pon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.” The Supreme Court reads this to mean lost profits that are attributable to the infringement, and, if that can’t be proved, a reasonable royalty.

So what exactly is the distinction between utility patents and design patents? Utility patents are issued for the invention of a new and useful process, machine, manufacture, or composition of matter, or a new and useful improvement thereof. Design patents, on the other hand, are issued for a new, original, and ornamental design embodied in or applied to an article of manufacture. In a design patent application, the subject matter which is claimed is the design embodied in or applied to an article of manufacture (or portion thereof) and not the article itself. Ex parte Cady, 1916 C.D. 62 (Comm’r Pat. 1916). Like their names suggest, design patents protect the look of an article while utility patents protect the way an article works. Maybe this distinction helps to shed light on the different standards in awarding damages.

The practice of awarding whole profits in design patent infringement cases has come under attack. It has been argued that it is harsh to apply such a standard, particularly in light of the fact that no one can really quantify the value of a design patent. At the end of the day, who knows how many people bought Samsung phones because of the arrangement of those rounded icons? Yet, applying the apportionment or causation requirement means we’ll be going back to the days when design patents were virtually useless and no one even bothered to apply. Right now, the entire tech world is eager to see how the Supreme Court comes down on this conundrum.

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