Tuesday, September 13, 2016

Samsung to Supreme Court: Apple has made a "remarkable about-face" on design patent damages

This tit-for-tat took almost four years. In December 2012, Apple informed the United States International Trade Commission of what it portrayed as a "remarkable about-face" by Samsung in the form of withdrawing injunction requests in Europe. Samsung's August 29, 2016 reply brief in support of its Supreme Court appeal concerning design patent damages--thankfully published by the SCOTUSblog (PDF)--says the following about Apple's opposition:

"In its brief, Apple makes a remarkable about-face. It now admits, agreeing with Samsung and the government, that the "article of manufacture" to which a patented design is "applied" may be only a component of a product. And it now admits, agreeing with Samsung and the government, that, where the patented design is applied only to a component of a product, the total profit under Section 289 is the profit attributable to the component, not the product."

On page 36 of Apple's July 29 brief, Apple indeed says that "article of manufacture" has a broad definition ("anything made by human labor"), specifically, "that it may include a complete final product or a component thereof." Apple, hgowever, argues that this broad definition works in its favor and doesn't limit application of the total-disgorgement rule to "decorative" articles. Apple continues to argue that even highly complex, multifunctional products may fall under that rule for infringing a single design patent.

Having re-read some older documents from this litigation, I can't help but feel that Apple has indeed adjusted--or one might just say "softened"--its position as a result of the amicus curiae brief filed by the Solicitor General on behalf of the U.S. federal government.

Very closely related to this is how some of the "friends of the court" supporting Apple argued in their filings. There's something rather atypical about it when you see certain amici raise very case-specific, partly just procedural reasons for or against a decision instead of focusing more or less exclusively on a fundamental, substantive legal question. To a non-party it normally shouldn't matter too much whether a certain party did or did not present a particular kind of evidence or raise a particular kind of objection somewhere in the process. If anything like that turned out outcome-determinative, the key substantive issue in the case might not (and often would not) be adjudicated.

If an amicus curiae just wants to do one of the parties a favor, that's a different story. But the likes of Calvin Klein aren't Apple vassals. They have an interest in design patents being as powerful as possible, and the power of design patents is a more generic question than the specifics of this litigation.

Amici should care about clarification in their favor, and somehow they appear to be afraid that the Supreme Court might agree with the U.S. government on the definition of "article of manufacture"--in fact, on the broad and inclusive definition that Apple now also, suddenly, accepts.

A simplistic way to put it is that Apple and some of its amici would now content themselves with Samsung being the last victim of Judge Koh's and the Federal Circuit's interpretation of § 289, knowing that any remotely savvy litigant in future cases would know how to avoid the same problem. For Apple, winning is the only thing. And its amici primarily just don't want to lose. Another plausible explanation is that some amici believe that even a finding by the Supreme Court that the district court was too narrowminded on "article of manufacture" wouldn't affect the value of design patents too much in the public perception because people would just see that Apple gets many hundreds of millions of dollars. That would, of course, benefit trolls asserting design patents, at a minimum by showing to prospective defendants that an unapportioned disgorgement can be the ultimate outcome. The worst-case scenario makes trolls money.

We're still about four weeks away from the Supreme Court hearing, and I'll write about this case again in the meantime. For the remainder of this post I just want to focus on what's very likely (not certain though) to be the outcome-determinative issue. A few months ago I would have assumed that the meaning of "article of manufacture" would be at the center of the hearing. It still might be if that's what the justices focus on. But if the top U.S. court agrees with both parties and the U.S. federal government that "article of manufacture" can also be a component, then the question would be whether the record of this case supports one party or the other. Unsurprisingly, either party argues that the other has the burden of proof and failed to shoulder it, so the respective party could win even without a remand. With respect to the burden of proof, Apple has the U.S. government on its side. It's the only key issue on which the DoJ agreed with Apple (the rest doesn't really matter). At the October 11 hearing, the most important indication of the outcome that the justices give could be what they say about who has the burden of proof on what the appropriate "article of manufacture" in this case was.

Samsung's argument concerning the burden of proof is that patent holders generally bear the burden of proof for their claims and that § 289 differs from other disgorgement statutes that "explicitly shift burdens to defendants." Samsung also quotes from the legislative record, and the following passage suggests rather strongly that Apple had the burden of proof:

"'the patentee recovers the profit actually made on the infringing article if he can prove that profit' H.R. Rep. No. 49-966, at 3 (emphasis added)"

If the Supreme Court (or Judge Koh on remand) finds that Apple failed to identify the relevant "article of manufacture," then there won't have to be another jury trial--and the clear message to the rest of the world would be that rationality has been restored with respect to design patent damages, period.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn: