7 The Future of Design Patent Remedies is Unclear
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The Future of Design Patent Remedies is Unclear

Authored by Derek F. Dahlgren and Spencer J. Johnson for Law360

May 11, 2018PDF

December 2016 saw the U.S. Supreme Court siding with Samsung Electronics Co. Ltd. in its first substantive ruling regarding design patents in a century. In interpreting 35 U.S.C. 289 which provides for an award of total profits from the “article of manufacture” to which an infringed patented design is applied, the court held that an “article of manufacture,” could be a component of a product and not necessarily the entire product. The court refrained both from determining whether Apple Inc.’s asserted design patents covered the final, consumer-ready product (in this case mobile devices) or a component of that product, and in setting out a test for determining what is the article of manufacture for a given patent, remanding for further proceedings.

Following the Supreme Court’s remand, the Federal Circuit in February 2017 similarly remanded to Judge Lucy Koh of the Northern District of California to determine “what additional proceedings, if any, are needed” to resolve these issues. Finally returning to where the case began, Judge Koh in July 2017 first determined that Samsung had not waived its arguments related to the definition of the article of manufacture. In October 2017, Judge Koh ordered a new trial on patent remedies as the jury instructions given at the previous remedies trial did not state the law as provided by the Supreme Court, and the error was prejudicial to Samsung. Judge Koh further determined the test that would be used in the new trial for determining the identity of the article of manufacture.

The retrial is scheduled to begin on Monday, May 14, 2018. The path to this point has been quite complicated, and the issue at the center of the trial — how to determine the article of manufacture for which the total profit will be calculated — is not simple. Not only by establishing a test to determine the article of manufacture, but by seeing it applied in this by-now-familiar legal dispute, this trial presents the opportunity to clear up confusion and uncertainty for those wishing to assert or those potentially facing design patent infringement claims. However, how the test is developed and then implemented at trial also presents the risk of creating more confusion — reversing the clarifying progress made by the Supreme Court decision — by reducing predictability for stakeholders and obfuscating the decision-making process.

What Is an Article of Manufacture?

Prior to the December 2016 ruling from the high court, the Federal Circuit had established a standard that appeared to define an article of manufacture by being an entire product when components in question are not sold separately to ordinary purchasers. This definition leads to situations where 100 percent of profits for the entire accused product are awarded as remedies even in situations where the design patent is directed to less than the entire product. As we have previously written in Law360, this creates a disconnect between remedies awarded and what a design patent actually claims and discloses, and can distort the market, causing a chilling effect on productivity. Other commentators similarly noted the disconnect at the time, predicting that the “absurd results” from liability for an entire product infringing a design patent covering only a part could lead to an “explosion of design patent assertions.”

The Supreme Court rejected the Federal Circuit’s standard, holding that the article of manufacture is not necessarily the entire consumer-level product, but that the term “is broad enough to encompass both a product sold to a consumer as well as a component of that product.” The court, however, did not go further in defining what an article of manufacture is for the asserted Apple patents. Neither did the court set out a test for identifying the relevant article of manufacture, despite having before it a test suggested by the United States solicitor general as amicus curiae.

In her October 2017 decision, Judge Koh adopted the solicitor general’s test over proposals by both Apple and Samsung. This test includes four factors:

  • the scope of the design claimed, including the drawing and written description;
  • the relative prominence of the design within the product as a whole;
  • whether the design is conceptually distinct from the product as a whole; and
  • the physical relationship between the patented design and the rest of the product, including whether the design pertains to a component that a user or seller can physically separate from the product as a whole, and whether the design is embodied in a component that is manufactured separately from the rest of the product, or if the component can be sold separately.

Despite being presented with the same four factor test proposed by the solicitor general in the United States amicus curiae brief, the unanimous Supreme Court did not adopt it. Notably, Apple supported the test at oral argument, while Samsung stated it preferred “a briefer test that we think is more administrable.” But the Supreme Court declined to articulate a test stating that it did not view the issue as being briefed by the parties. If it supported the solicitor general’s test, the court could have easily included a statement indicating as much, especially considering that both the United States and one party expressly supported the test at oral argument. This has set the stage for the current dispute.

Issues Facing Application of the Test

The test, as presented by the solicitor general and adopted on remand by the trial court, is unfortunately complicated, and little explanation has been provided as of the time of the writing of this article for how the test will be administered, including: how individual factors are to be analyzed by a jury, weight to be given to the different factors, or the final form of any jury instructions or jury verdict forms to be used at the conclusion of trial. Although the parties have entered their proposed jury instructions and verdict forms, only the preliminary jury instructions appear to have been ruled on at this time, and some of the proposed instructions and forms appear to increase, rather than decrease, uncertainty.

For example, at one end of the spectrum of leading to future unpredictability: If the question of determining the article of manufacture is simply sent to the jury as a list of these four factors to consider, and a jury simply returns a remedy figure having presumably (1) decided the article of manufacture, and (2) determined the profits attributable to that article, then no future parties viewing this case will find any guidance in determining their chances in either asserting or defending against a design patent for a multicomponent product. Further, the parties to this case will be left peering through remedy award numbers like so many tea leaves attempting to reverse engineer how their case has actually been decided.

The first part of the above hypothetical, simply sending a list of the four factors to the jury, is essentially what Apple has advocated in its proposed final jury instructions. Without sufficient additional guidance to ensure the jury applies the test in a way which could be predictable to the parties in the case, or indeed, any future parties, the determination of the identity of the article of manufacture risks becoming completely opaque. While how a jury will weigh an issue is always somewhat uncertain (why bother with a trial otherwise?), the perception of justice provided through the legal system decreases when parties have little idea how a jury will interpret what they are being asked to do.

Samsung’s proposed final jury instructions, however, attempt to break down the issue of determining the article of manufacture into smaller, clearer instructions for the jury. This provides guidance for the jury to conduct a case-specific analysis of the relationship among the design, the product and any components, as was advocated by the United States in its amicus curiae brief. For example, the proposed instructions define an article of manufacture and how the design is applied to a product, describe the parties’ contentions as to what portions of the product the designs were applied, and finally describes its interpretation of the test, including giving example outcomes that would be found in different situations.

Similarly, the entire hypothetical above — vague jury instructions being given and only a remedies value returned — is what Apple has essentially advocated in its proposed final jury instructions and proposed verdict form combined. Apple’s proposed verdict form merely asks for the total dollar amount of remedies for the design and the utility patents grouped separately, with each category further broken down by value per product. This proposal lends itself to an additional layer of uncertainty: Not only is it uncertain how the jury determined the appropriate article of manufacture, it is unclear what the jury even determined the article of manufacture to be. It also results in a much murkier record for any future appeals.

Samsung’s proposed verdict form, by contrast, asks the jury to select whether the article of manufacture is Samsung’s identified components or the entire phone, before asking for the amount of remedy per product. In this way, parties would at a minimum be aware of what the jury identified as the article of manufacture. The remedies analysis may still be complicated but at least the court and the parties will know the article for which remedies are calculated.

Conclusion

With the test now set in place for the upcoming trial, how it is applied at trial may be the difference between setting precedent as a test with unpredictable outcomes to stakeholders or one which can provide guidance and clarity to the parties of this case and those in the future. As it stands, any clarification provided by the Supreme Court decision risks being overwhelmed by the potential increase in uncertainty as to how a jury will actually view the test for determining the pertinent article of manufacture.

The solicitor general’s test, without additional guidance, creates more questions than it answers. A bare recitation of a list of things to keep in mind provides very little guidance of value to the jury without explaining what the factors are, what weight they are to be given, and how they are to be applied. A properly applied test should not only guide the jury, it should provide clarity to parties dealing with design patents in the future.

When 35 U.S.C. 289 was created, design patents were being sought for things like home décor. The Supreme Court rightly recognized that when design patents are applied to complex products like mobile devices, especially when the patents do not cover the entire device as is the case with the patents at issue (there is no argument that the patents are for the design of a bezel, a graphical user interface and front face of an “electronic device”), the appropriate article of manufacture can be something less than the final product sold to consumers. This case presents an opportunity to modernize the application of laws to adapt to contemporary technologies, which produces increasingly complicated, multifaceted products combining inputs from a host of global sources. The Supreme Court gave the green light to such an interpretation in finding that the definition of article of manufacture was not bound to entire consumer-level products. To have what could be a promising modernization of the law become overwhelmed by newly created uncertainty through a complicated test such as the one being applied in the upcoming trial can only be described as unfortunate.

This article was originally published in Law360's Expert Analysis section on May 11, 2018. To read the article on Law360's site, please visit: https://www.law360.com/articles/1042627/the-future-of-design-patent-remedies-is-unclear.