Monday, December 14, 2015

Apple v. Samsung: petition for Supreme Court to take first look at design patent case in 122 years

As it announced in August, Samsung has filed a petition for writ of certiorari (request for Supreme Court review) today in its almost five-year-old litigation with Apple. While it's statistically very hard to get the attention of the top U.S. court, I actually think the design patent-related issues Samsung's lawyers (of the Quinn Emanuel firm) raise here are extraordinarily certworthy:

  1. Where a design patent includes unprotected non-ornamental features, should a district court be required to limit that patent to its protected ornamental scope?

  2. Where a design patent is applied to only a component of a product, should an award of infringer's profits be limited to those profits attributable to the component?

The first question is about properly defining the scope of a design patent. If functional elements such as rounded corners (everyone carrying a phone in a pocket would agree that they have a practical benefit) were deemed to be "owned" by a design patent holder, juries could easily identify "infringements" where there aren't any, or they could consider design patents valid when the only relevant characteristics--the ornamental features--are not new. In other words, design patents would attain unreasonable strength.

The second question relates to the determination of damages. In Apple v. Samsung, the California jury was told that Apple was entitled to an unapportioned disgorgement of whatever profits Samsung made with products considered to infringe one or more Apple design patents. The Computer & Communications Industry Association as well as 27 law professors, among them three scholars who supported Apple's positions on FRAND licensing of standard-essential patents and a law professor who previously studied art and design and is now particularly interested in design patents, asked the Federal Circuit to ensure reasonableness in design patent damages. So did Google, HP, Facebook and others, who warned that a company could lose its entire profits over a design patent covering a single icon. But the appeals court claimed to have no choice under the law than to side with Apple.

There are two things to consider when reading Samsung's cert petition and thinking about its prospects:

  • Fate has it that Samsung is now the petitioner and that Apple will oppose. Apple simply wants to collect many hundreds of millions of dollars (in pretrial and supplemental damages) and hopes to have leverage to achieve a settlement with Samsung on its terms. If Apple's shoe were on the other foot and Samsung had prevailed on a design patent (if it had, as it did not, asserted one in its counterclaims), or if Apple faced this issue in a dispute with anyone else (such as a patent troll), there isn't even the slightest doubt that the world's most profitable company would now be doing the same thing.

    Even some people who are Apple's allies on other issues can't support its positions here with a straight face. I mentioned above that three law professors who had filed an amicus brief in support of Apple against Motorola (on SEPs) filed one in support of Samsung's position in this case. And even a mere blogger like me just couldn't support Apple on this one. Generally speaking, I have disagreed with both Apple and Samsung on their offensive cases and agreed with them on their key positions as defendants. In Samsung's case I took a critical position right away because its pursuit of injunctive relief over SEPs had me concerned; in Apple's case I used to be somewhat sympathetic for a while but the longer it took and the more apparent the shortcomings of Apple's patents as well as Apple's positions on remedies became, the more I spoke out in favor of the defendant's positions--as I do in connection with Ericsson v. Apple.

  • At this stage, it's not about who's right or wrong. It's only about whether the legal questions raised merit Supreme Court review, which has legal as well as economic implications.

    If the Supreme Court denied certiorari, the Federal Circuit ruling would be the last word on the issue, and as a result, design patents would be stronger than they should be and give their holders leverage beyond their reasonable value. A patent troll might acquire a design patent and sue a company like Google or Facebook--or Apple--for 100% of its profits. Worse still, and as Samsung's petition explains: the next patentee with a different design patent that is also a tiny part of a product could ask for the same. And so could potentially thousands of design patent holders, driving even the healthiest company into bankruptcy in such a scenario. If this here wasn't an issue of major importance to the U.S. economy, what would be?

There are strong and compelling arguments and interesting facts in all parts of today's cert petition, but they didn't save the best for last. Instead, the very first paragraph of the introductory section stresses that the case law surrounding U.S. design patents needs to be adjusted in the 21st century because of how products have changed since the late 19th century:

"[The Supreme Court] has decided many utility-patent cases in recent terms, but has not reviewed a design-patent case in more than 120 years. Late nineteenth-century [Supreme Court] cases considered design patents on such products as a spoon handle [1871], a carpet [188], a saddle [1893], and a rug [1894]. [...]

[...] A patented design may be the essential feature of a spoon or a rug. But the same is not true of smartphones, which contain countless other features that give them remarkable functionality wholly unrelated to their design. By combining a cellphone and a computer, a smartphone is a miniature internet browser, digital camera, video recorder, GPS navigator, music player, game station, word processor, movie player and much more."

On page 27 of the petition I found an argument that was exactly what I felt when I saw the Federal Circuit opinion on unapportioned disgorgement:

"The [appeals] court provided no basis for [that] interpretation, much less the strong justification needed where interpretation of a statute produces absurd results."

I mean, isn't that what judges are for? Interpreting the law reasonably. Identifying ridiculous results. I don't mean to argue that judges should be lawmakers. But when a law is very old and the world has moved on, when the products that lawmakers had in mind when they wrote and passed the law are very different from the products at issue in a case like Apple v. Samsung, then there must be a way to arrive at the result that the same lawmakers would have intended if they had known what was going to happen over a century later.

On page 31, absurdity is discussed again:

"As noted, the Federal Circuit's contrary interpretation of Section 289 produces absurd and anomalous results. The Federal Circuit's holding would require awarding Apple all of Samsung's profits for sales of a smartphone containing any Apple design patent, even a trivial one. [a footnote then points to an actual Apple design patent of that kind, which basically covers a musical not in a circle and also had the Patently-O blog stunned] And under this holding, profits on an entire car--or even an eighteen-wheel tractor trailer--must be awarded based on an undetachable infringing cup holder."

The petition then goes on to give examples of multiple disgorgements of total profits. Two easy-to-understand examples:

"[A] boat manufacturer whose boat infringed separately owned windshield, rooftop and seat designs, or a shoemaker that infringed separately owned design patents for the sole, heel and lace. Even if the first such award were deemed to have exhausted all profits, and the second and third patent holders in the race to the courthouse could obtain only a reasonable royalty, the infringer would still have to pay more than its full profits. Congress could not have intended such absurd results."

Actually, I think the petition even understates the potential scope of the problem. There aren't just "thousands" of designs in modern high-tech products that could infringe a design patent. There could be tens or even hundreds of thousands. If you think of all the apps preinstalled on a smartphone, and consider that each icon or even a part of an icon, each screen or even part of a screen, could be covered by a design patent, then the possibilities--in a negative sense--are pretty limitless.

I'm going to talk about this cert process more in the weeks and months ahead. I believe Samsung will get a lot of support from amici curiae, presumably even more than it did in the Federal Circuit proceedings. Apple will also get some support but hardly any from other information and communications technology companies. Still, there will be letters by "friends of the court" to talk about.

For now, I just wanted to highlight a few more things that I found interesting in Samsung's petition (and that one might easily overlook):

  • I agree with the warning that the Federal Circuit's ruling, if allowed to stand, would turn design patents into "a weapon to take profits from others, even where those profits are attributable to their own innovations that have nothing to do with the patentee's ornamental design."

  • It's an interesting fact that the Federal Circuit threw out the trade dress-related part of the decision in Apple's favor because of the functional aspects of the relevant trade dress, but allowed the design patent part to stand, though there is hardly a difference between what both types of intellectual property rights were meant to cover in this case.

  • While design patents and utility patents are different, the petition does make some interesting references to Bilski, a Supreme Court decision on patent-(in)eligible subject matter.

  • Samsung's lawyers draw analogies to the limits imposed on the scope of, and the damages for infringing, other intellectual property rights such as trademarks and copyright.

  • At first sight (and I'll think about this some more), Samsung's argument on disgorgement appears to put the definition of "article of manufacture" front and center, which was at the heart of CCIA's amicus brief mentioned further above.

  • Circuit conflicts are not as key for patent-related cert petitions as for most other cases, given that the Federal Circuit is now the only circuit to hear U.S. patent appeals, but still, Samsung's lawyers cite some old decisions by various circuits that are, as far as I can see, rather different from the Federal Circuit's position on unapportioned disgorgement.

Finally, here's the a copy of the petition (as uploaded to Scribd by Re/code's Ina Fried):

Samsung vs Apple - Samsung's Appeal to the Supreme Court by inafried

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