Samsung filed a petition yesterday for an en banc (full-court) rehearing concerning the design patents-related issues relating to the Federal Circuit's mid-May appellate opinion in the first Apple v. Samsung case. Apple did not file a petition concerning the part that was unfavorable to it (the one on trade dress), so Apple appears to accept that a third California trial in this first case (one also took place last year in the second California Apple v. Samsung case) will be necessary.
There are different angles from which to look at the part on design patents. Samsung did derive certain commercial benefits, including market share, from building products approximately five years ago that looked significantly more similar to the iPhone and iPad than certain alternative Android-based products made by, for example, HTC and Motorola. Should any valid intellectual property rights have been infringed that way, Apple would have to be compensated, not because it would need the money but as a matter of (in that case) justice. However, the longer the whole Apple v. Samsung litigation takes (it started more than four years ago and ended everywhere except in the United States last summer), the more I am concerned about some of Apple's core positions in this context, though I can understand that some people in Cupertino were not amused when they saw some of the early Samsung Galaxy products. The two key concerns here relate to overbreadth and overcompensation:
If correctly interpreted and applied, design patents are relatively narrow intellectual property rights. However, juries really need help from judges to get this right. The ability of the average jury member to independently distinguish between functional and ornamental elements of a design is presumably not greater than that to figure out the inner workings of event handlers in operating systems or just-in-time optimization strategies of compilers. Technical patents are hard to understand without specialized knowledge, but just like most consumers don't care to learn about what makes their smartphones work, they also don't usually think about smartphone designs in terms of functional and non-functional, ornamental elements. As a result, they will often consider a design patent infringed because of functional rather than ornamental similarities, and they will consider a design patent valid just because the overall combination of technical and ornamental aspects appears to deserve protection, though an analysis focused on only the ornamental parts might lead to a different conclusion.
What's even worse is that an overbroad interpretation of design patents can result in monopolies over abstract concepts such as general screen layout and user interface ideas.
If an entire product constitutes an infringement of intellectual property rights, it's reasonable that damages exceed the infringer's profits. However, in the hypothetical scenario of a product that is highly multifunctional, does not infringe any valid technical patents, but is deemed to violate three design patents held by three different right holders, it would be irrational to let each of the three design patent holders collect the total profits made with that product.
Apportionment alone does not guarantee reasonableness, but there can be no reasonableness in infringement damages without it.
Considering that the panel decision was unanimous and that the panel included the appeals court's chief judge, I wouldn't hold my breath but I still think it would be the right thing for the Federal Circuit to give further thought to the points Samsung's lawyers have made in their petition for en banc rehearing. And if not, then I sincerely hope Samsung won't give up. Apart from injunctive relief over standard-essential patents, I haven't seen a "certworthier" matter in all the smartphone patent disputes I've been watching since 2010.
I'll show you Samsung's petition and comment on a couple of points below the document:
Samsung's petition discusses the absence of guidance for the jury with respect to functional (thus irrelevant) aspects of Apple's design patents first, followed by damages. This does not say anything about its priorities. It's logical to discuss liability prior to remedies.
The legal argument for a full-court review is mostly about conflicts with prior decisions (some of which were made by other circuit courts, going back to when there was no exclusive jurisdiction over patent law) and also about the exceptional importance of these issues.
Samsung's lawyers note that "[i]n contrast to its detailed analysis of trade-dress functionality, the panel spent barely 3 pages rejecting Samsung's argument that the district court had improperly allowed the jury to base its design-patent infringement finding on the same or similar functional features." While I agree with Samsung (by now) that Judge Koh should not have instructed the jury to just compare those design patents, based on the overall appearance of the covered designs, with Samsung's products and should instead have clarified which ones are legally irrelevant because they are functional, I don't think the panel had to write more than three pages. Those three pages were sufficient for the judges to explain their reasoning. The number of pages also doesn't necessarily reflect the amount of thought that went into this part of the ruling. One can spend weeks thinking about a single word or write ten pages in a couple of hours.
Their argument on substance is much stronger. For example, I like this passage:
"[T]he judicial obligation to construe the scope of a design patent cannot be satisfied merely by reciting the term 'ornamental,' which already appears on the face of the patents themselves [...]. Nor can it be satisfied by telling the jury to look at the 'patent figures' unaided by guidance as to what is (or is not) ornamental about them, for the term 'ornamental' is not self-executing, and there can be no doubt that the figures of Apple's design patents contain functional elements, as the panel's trade-dress holding confirms."
With respect to damages, the panel said that it had no alternative under statutory law but to affirm Judge Koh's decision to tell the jury that design patents entitle their holder to a total disgorgement of infringer's profits. 35 U.S.C. 289 says an infringer of a design patent is liable "to the extent of his total profit," but I still don't believe the Federal Circuit panel couldn't have found a way to decide in favor of reasonableness.
Samsung's petition outlines three ways, any single one of which (and especially the combination of two or all three of which) would make it possible to achieve a proportionate result nonetheless:
"[T]he phrase 'to the extent of his total profits' is best read as a term of limitation that makes total infringer's profits a ceiling not a floor;"
"the phrase 'profit made from the infringement' shows that Section 289 permits only profits caused by the infringement"
In this context, the petition mentions an interesting fact relating to the legislative intent:
"[T]he bill's sponsor, Representative Martin, disclaimed any intent to displace the bedrock causation principles underlying patent law, reassuring skeptics that the new act would not permit total-profits awards 'without any proof that this arises from the use of the design' or where 'those profits arise … from various other circumstances which may enter into the manufacture.' 18 Cong. Rec. 835 (1887) (Rep. Martin) (emphases added [by Samsung's lawyers])."
"the term 'article of manufacture' is most naturally interpreted to mean the portion of a product as sold to which the patented design is applied, as otherwise a defendant could be held liable for all its profits multiple times over if its product infringed design patents held by multiple patentees."
(This point was stressed by industry group CCIA in an amicus brief.)
Cases cited in this context include "an award of infringer's profits from sale of a watch case to which the design was applied and not from sales of the watch itself." I'm quite sure Apple would not want to be liable for total profits made with its smartwatch if someone happened to hold a design patent on its case...
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