For the past several years, SIIA has been trying to persuade Congress to change patent law to make it more difficult for non-practicing entities (e.g., trolls) to shake down technology businesses. What we don’t need is additional court decisions that make matters worse. To that end, SIIA, along with several leading tech companies, filed an amicus brief in the Supreme Court urging it to reverse the Federal Circuit’s decision in Apple v. Samsung. (For those of you that are curious, the Federal Circuit decision is here).
Apple and Samsung have been battling in court for the past several years over design patents, which cover only non-functional aesthetic elements of a particular product. A person who uses that design without an authorization is an infringer, in the same way that someone who used Apple’s “slide to unlock” feature without a license would owe them a royalty. Where the two kinds of patents differ, however, is in the language of the statutes creating remedies for infringement.
For “slide to unlock” and similar functional inventions, the patent law provides an apportioned remedy when infringement occurs. Thus, in the “slide to unlock” hypothetical, Apple would be entitled to a royalty based on that feature’s contribution to the value of a multi-component product. That long-standing rule flows from the language of the Patent Act, which permits recovery of a “reasonable royalty for the use made of the invention by the infringer.”
Design patents, however, are subject to a different rule, which states when the design patent is applied to any “article of manufacture,” the defendant “shall be liable to the [patent] owner to the extent of his total profit.” (emphasis supplied). The reason for this rule was that in the 19th century, a carpet manufacturer had a patented design applied to a rug. When the design was copied on rugs sold by competitors, he received nothing as the courts found that people bought the rug, not the design. Congress added the “article of manufacture” language to prevent that result.
The problem is that the modern cell phone bears as much relevance to a carpet as an apple does to an aardvark. Nonetheless, in December, the Federal Circuit read the phrase “article of manufacture” to be the entire Samsung phone. As a result, it decided to give Apple the total profits from all of Samsung’s phones that contained the patented “round corner” features: a whopping $548.2 million. That obviously absurd result is neither required by the statute or the policies that drive it.
There is an obvious qualitative difference between a single-function, single design object (like a carpet) and a modern, multi-function cell phone. Although it is certainly possible that the phone shell’s rounded corners may have had some role in its commercial appeal, consumers buy phones based on functionality and ease-of use. The lower court’s decision assumes that the design was more valuable to consumers than any of the phone’s functionality (patented or not), and that Congress intended that result. Far more likely, we think, that the “article of manufacture” is the casing to which the design is attached. As the brief points out, the text, purpose and history of the statute suggests a narrower meaning of that phrase. The statute was never intended to eliminate one windfall by creating another.
The Supreme Court has been recently been taking Federal Circuit cases mainly to reverse them, and so we are cautiously optimistic that they will avoid the lower court’s overbroad statutory reading. The United States has also filed a brief in support of Samsung, which is also encouraging. Promising indicia of reversal exist, but that result is not guaranteed.
If the lower court is affirmed, however, the tech industry had better batten down the hatches. The Federal Circuit decision makes design patents more valuable to non-practicing entities than utility patents. Design elements can show up anywhere—in screen icons, laptop casing, software interfaces, and so on. Design patents are also faster, easier, and cheaper to litigate than utility patents. The drain on innovation that patent trolls represent will mushroom.