Posted on April 01, 2016
Already one of the fiercest and most significant patent cases of modern times, on March 21, 2016 the U.S. Supreme Court raised the stakes considerably when it agreed to hear Samsung’s appeal of rulings that Samsung infringed on Apple’s design patents for its iPhones. Making this case even more interesting is the fact that the Supreme Court has not heard a design patent case in over 120 years. The Supreme Court is likely to hear arguments in the case in its next term, which begins in October.
In 2012, a jury found that Samsung infringed Apple’s patents and awarded more than $1 billion in damages, but a damages retrial and a Federal Circuit Court decision in May 2015 reduced the award to $548 million. Samsung did not appeal the portion of the award dealing with utility patents, but focused its Supreme Court petition on the $399 million in damages related to the jury’s finding of design patent infringement, which the Federal Circuit upheld.
Samsung argues that the rule that companies must pay their “total profit” from expensive and complex products like smartphones found to infringe design patents makes no sense in the modern world. Samsung further states that the Federal Circuit misread 35 U.S.C. § 289 and argues that requiring companies to pay their entire profits when they are found to infringe design patents results in excessive awards, gives design patent holders too much power, and stifles innovation. To put this in perspective, even if the patented features contributed only 1% of the value of Samsung’s phones, Apple still gets 100% of Samsung’s profits. Indeed, few products embody more patentable designs and inventions than smartphones, making this a perfect case for a decision on how to apply § 289 to today’s multifunctional products.
Samsung is far from alone in its view, as other large tech companies have widely supported Samsung’s position. Google, Facebook, Hewlett Packard, Dell, and eBay are just some of the companies that filed “friend of the court” briefs with the Supreme Court in support of Samsung’s petition. Given that it chose to hear a design patent case for the first time in over a century, the Supreme Court may well agree with Samsung and the tech industry. By taking the case, the Supreme Court appears to be indicating that at least some of the justices agree with Samsung’s argument that awarding entire profits creates unwarranted windfalls for patent owners, and damages in design patent cases should instead correspond more closely to the value of the design elements at issue. On the other hand, the plain language of § 289 appears to favor Apple, and the Supreme Court could rule that it is simply up to Congress to change the law.
If the Supreme Court does change the standard, the practical effect will be to render design patents less valuable to their owners, but also less prone to abuse. It would likely help curtail the problem of so-called “patent trolls,” companies whose business model is to buy up patents, sue or threaten to sue other companies for patent infringement, and extract settlements for licensing fees. Stay tuned.
For questions regarding the above, contact the attorneys at Harpst Ross, Ltd. – Business Lawyers for the Construction Industry®, at (330) 983-9971.
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