The U.S. District Court for Northern California will be rehearing arguments next week in a major design patent case between the two tech giants Apple and Samsung. The case could very well be a turning point for the future of the tech industry. Major technology companies have largely weighed in on the side of Samsung as the industry worries about the long term impact of the case and its potential to empower a new breed of design patent trolls and encourage more litigation.
Apple Inc. launched a tense legal fight over whether some design features of its iPhone were infringed upon by Samsung devices. The dispute resulted in a longstanding legal dispute which eventually made its way to the U.S. Supreme Court. Apple argued that it could claim remedies equivalent to the total profits of an entire smartphone if even one design patent was found to infringe. This awarding of total profits came from a 19th century law written long before a multifunctional device as complex as a smartphone could be imagined.
The U.S. Supreme Court heard arguments in the case before sending it back down to the lower courts in its decision from December 2016. The justices unanimously overturned an earlier decision that awarded nearly $400 million to Apple and found that remedies for an infringing design patent can be less than total profits and instead should be based upon the “article of manufacture” of which the design applies vs. the entire devices. They also instructed the federal circuit to determine the standard or test for identifying the article of manufacture and determine remedies based upon the new test.
“The Supreme Court basically said we’re not going to tell you exactly what the test is but the assumptions you have made are wrong,” Joshua Landau, the patent counsel at the Computer and Communications Industry Association (CCIA), told InsideSources. “So the Supreme Court sent it back down to the federal circuit.”
U.S. District Court ordered the retrial after the case was handed back down from the Federal Circuit. The U.S. District Court was specifically asked to determine the definition of “article of manufacture” for such cases. Koh plans on using a four-part test in the determination – but ultimately the outcome of the case will be decided by a jury.
The article of manufacture is specifically what the design patent applies to. The four-part test is intended to determine how that should be applied when dealing with a patent for a specific component within a product.
“The most important phase of this dispute was when Samsung appealed the question of design patent damages to the Supreme Court and when the highest court in the land handed down its opinion,” Florian Mueller, an intellectual property analyst and consultant who founded the FOSS Patents blog, told InsideSources. “Compared to that phase, what’s at stake now is less spectacular. However, this case is still important since an outsized damages award in Apple’s favor could encourage other design patent holders to sue alleged infringers for huge amounts of money.”
Apple had claimed that the article of manufacture should extend to the entire smartphone it is built into. That would mean someone could then be held liable for the profits of the entire device or product for infringing a specific component within that design that has its own patent.
“One argument is, well I have a design patent for the case of a phone, that’s what the article applies to so I get the profits on the whole phone,” said Landau, who represents and advises the CCIA regarding patent issues. “The problem with that argument is, when taken to the extreme, you run into some real issues. So for one, there is the cup holder example.” Landau explains that patents that apply to specific components of a product are not just in tech. Someone might file a design patent for a cup holder that is installed into a car. He notes that it would be problematic for that person to get the profits on the entire car if the patent applies to just the cup holder.
“A similar problem comes up in the context of icons and computer graphics,” Landau said. “You can get a design patent on an icon. So the icon for my app, I can get a design patent. And formally the article of manufacture for an icon is the screen on which that icon is displayed because you have to have an article. So the icon is sitting on its own is just kind of free-floating ideas, but you have the screen that gives it a physical article and that’s how the patent office interprets the law. If that’s the article of manufacture, do I get the all of Apple’s profits on an iPhone if they used my design patent on an icon? Again, that seems a little overboard.”
The Supreme Court decision marked a critical moment in the legal dispute. The court essentially determined that remedies could be limited to the infringing component as opposed to the entire product. The decision reversed a lower court ruling that held that infringing on a design patent entitled the patent holder to profits on the entire smartphone.
“The focus this time around will be on whether the proper basis for a damages award over design patents is an entire smartphone or the casing,” Mueller said. “This is a consequence of the decision the Supreme Court made in 2016. The top U.S. court said that the relevant ‘article of manufacture’ can be an entire smartphone but it can also be a component.”
“So we have a design patent, the design patent covers ornamental design for an article of manufacture, your title to the profits on the article of manufacture,” Landau said. “But when you have a complex design like a phone or a computer, and you have a patent that only applies to a small portion of that, the question becomes, what should the article of manufacture be.”
Apple has filed multiple patents on its smartphones for both design and utility patents for function. The patents cover components of the smartphone and not just the entire product. But this isn’t uncommon for products with a lot of complicated parts like smartphones or cars. The question is whether the article of manufacture for that piece applies to the whole.
“It’s very open-ended in terms of how the courts will decide,” Brian Galli, an assistant professor of computer science and innovation at Long Island University, told InsideSources. Galli adds that it becomes more difficult when trying to argue the patent for a component applies to the whole phone. The court allowing full damages for the entire smartphone could also potentially encourage more lawsuits claiming full damages on a product for alleged patent violations for specific components.
Mueller concluded, “Even though Samsung could afford it, many others in its situation couldn’t, and if Apple got overcompensated for its design patents by a huge factor, all the great technology that is in those phones would be devalued.”
