Damage Awards in Design Patent Cases

The battle between Apple and Samsung continues.

On March 21, 2016, the Supreme Court granted certiorari limited to the question of damages in the case of Samsung Elecs. Co. v. Apple Inc., 136 S. Ct. 1453 (2016). This is the sixth year that this case has been in court. On April 15, 2011, Apple filed suit against Samsung, alleging that Samsung’s Galaxy cell phones and computer tablets infringed Apple’s trade dress, trademarks, and utility and design patents. Apple Inc. v. Samsung Elecs. Co., 2011 U.S. Dist. LEXIS 53233, at *2 (N.D. Cal. 2011) The case then went to Federal Court of Appeals, where the question on patent infringement was settled. Apple Inc. v. Samsung Elecs. Co., 786 F.3d 983 (Fed. Cir. 2015)

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. Id. at 1001 (Fed. Cir. 2015). But Samsung is still fighting the battle in terms of damages. Samsung argued, before the federal court of appeals, that because of basic causation principles, damages should be limited to profits attributable to the infringement of the patents. Id. The Court of Appeals rejected this argument as similar to an “apportionment” argument made by Nike in Nike Inc. v. Wal-Mart Stores, Inc.[1] 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’s argument was rejected by the Federal Circuit. The Court found that legislative history and the clear language of the statute prevents reading an apportionment requirement into awarding damages.[2]

The Supreme Court has not granted cert on a design patent case for 130 years. The last was Dobson v. Dornan, 118 U.S. 10 (1886), the famous carpet case. The trial court in that case found that defendant infringed on plaintiff’s carpet design and determined that the proper measure of damages was the entire profit plaintiff would have received from the sale of an equal quantity of their own carpets of the same pattern. Dobson v. Dornan, 118 U.S. 10, 12 (1886) The Supreme Court held that such an award of damages was improper and that only nominal damages should have been allowed because plaintiff was required to show what profits or damages were attributable to the use of the infringing design. Id.

Proving causation in design patent cases has proven extremely difficult. Plaintiffs are rarely awarded damages even when infringement can be established. As a result, application for design patents decreased substantially after the Dobson decision. 18 Cong. Rec. 834 (1887) In 1887, Congress codified a new design patent statute in an attempt 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. The distinction between design patent and utility patent has important implications with respect to awarding damages. Damages for infringement of utility patents require a showing of causation and are limited to lost profits caused by the infringement. This different treatment could result from the fact that it is particularly hard to prove damage and causation in design patents, or, like Congress puts it, “it is the design that sells the article.”

The practice of awarding whole profits in design patent infringements 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, it is extremely hard, if not impossible, to calculate 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 only nominal damages were likely to be awarded even if design patents were infringed. Right now, the entire tech world is eager to see how the Supreme Court comes down on this conundrum.

[1] Nike Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1442 (Fed. Cir. 1998).

[2] Id.

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