Apple v. Samsung – Appeal Decided by the Federal Circuit

In its May 18, 2015 decision, the U.S. Court of Appeals for the Federal Circuit rejected Samsung’s arguments that the damages awarded to Apple for design patent infringement should be apportioned. Samsung had argued that Apple failed to prove that the infringed design patents “caused any Samsung sales or profits”. This argument was soundly rejected by the Court. This had been the major point of contention in this appeal, drawing 11 amicus briefs, most of which were in favor of maintaining the current “total profit” rule.

The Court stated:

“Section 289 explicitly authorizes the award of total profit from the article of manufacture bearing the patented design.”

In so doing, the Court noted that the arguments of the 27 Law Professors in their amicus brief that the “total profit” rule makes no sense in the “modern world” is a policy argument that should be directed to Congress:

“We are bound by what the statute says, irrespective of policy arguments that may be made against it”.

The Court distinguished the so-called “piano cases” of 1915 where a court had allowed an award of profits on the patented design of a piano case but not from the sale of the entire piano, saying that “the innards of Samsung’s smartphones were not sold separately from their shells as distinct articles of manufacture.”

The possibility of obtaining an infringer’s total profit on sales has been a major deterrent to knock-offs, and a critical factor in the decision of many companies, especially small businesses, to obtain design patents.

Samsung had argued that the lower court had failed to “factor out” functional features of the claimed designs during claim construction before handing the case to the jury to determine infringement, relying on the notorious Richardson case that seemed to say just that. Samsung had argued that elements “dictated by their functional purpose” should have been excluded [note this author’s previous  post to the effect that there are in reality no designs whose appearance is dictated by their functional purpose].

The Federal Circuit disagreed with Samsung’s argument, noting that Richardson “did not establish a rule to eliminate entire elements from claim scope…”

This holding should put to rest one of the major (and most expensive) litigation arguments advanced by design patent infringers, namely, that all “functional” features need to be ignored before determining infringement. Such an argument, of course, falls of its own weight when one considers that all patented designs – all of them – consist of elements that are “functional”; otherwise they would not qualify for design patent protection (35 U.S.C. 171 requires a design, in order to be patentable, to be “for an article of manufacture”).

This finding confirms long-standing case law. Survey experts will have to satisfy themselves with trade dress cases where likelihood of confusion is the test for infringement.

The Court was unkind to Apple when it came to their claims for unregistered and registered trade dress infringement. The Court relied on the doctrine of trade dress functionality to deny relief to Apple, and reversed the district court.

Citing the 9th Circuit’s 1999 Leatherman case, and the Qualitex case from the Supreme Court, the Federal Circuit cautioned that trade dress protection for source identification must be balanced against a “fundamental right to compete through imitation of a competitor’s product” which “can only be temporarily denied by the patent or copyright laws”. This is one of the strongest endorsements by the Federal Circuit of the “right to copy” doctrine.

The Court noted that the 9th Circuit, under whose law functionality had to be analyzed, rightfully has a “high bar” for proving non-functionality because of the fact that trade dress rights can last in perpetuity whereas design patents expire after a limited time as required by the U.S. Constitution (Note: the limited time is 14 years for applications filed before May 13, 2015, after which the term is 15 years due to the Hague Agreement).

Citing to a footnote in the Supreme Court’s 1982 Inwood case, which interestingly was elevated to a rule of law in the 1995 Qualitex case, the Court said that “a product feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article”. That is a very low bar for accused infringers to win on functionality. It is so low that almost any first year law student can concoct a credible argument.

After paying lip service to this very difficult test for proving non-functionality, the Court “nevertheless” proceeded to analyze trade dress functionality by resorting to a 4-prong analysis used in the 9th Circuit’s 1998 Disc Golf case, which mirrored the 4-prong analyisis from the CCPA’s seminal 1982 Morton-Norwich case, namely:

1. Does the product feature provide a utilitarian advantage?

2. Are there alternative designs?

3. Does the advertising tout utilitarian advantages?

4. Are there more economical methods of manufacture?

Some of the more astonishing requirements noted by the Federal Circuit regarding the 9th Circuit’s 4 factors: (a) the trade dress must be proven to serve “no purpose” other than source identification; (b) the trade dress alternative designs must offer “exactly the same features” as the asserted trade dress; (c) the advertising of the trade dress must virtually be devoid of touting utilitarian advantages; and (d) the method of manufacture must relate to the asserted trade dress rather than the overall product.

COMMENT: What an incredible burden of proof for trade dress owners: (a) there is really no such thing as product configuration trade dress that serves “no other purpose” other than source identification; (b) there is also no such thing as an alternate design that has “exactly” the same features as the asserted trade dress (other than the accused design); (c) no company advertises products that have no function whatsoever touted in advertising; and (d) what, pray tell, is the method of manufacture of graphical-user-interfaces, for example?

The only glimmer of good news in the trade dress portion of the Court’s opinion is that the treatment of trade dress functionality is clearly distinct and independent of the analysis of design patent functionality. Thus, recent decisions conflating the two (e.g. the Federal Circuit’s decision in PHG Technologies, LLC, v. St. John Companies, Inc.,) are now clarified.

All in all, the Federal Circuit split the baby: a big win for design patent owners, and a big black eye for trade dress owners.

BNA has quoted the author in its report of the case.

If you or your clients do not use design patents to protect product designs, you are clearly missing out on what is now the strongest form of design protection in the U.S.