In 2016 the supreme court reversed its decision in the design patent infringement case between Apple and Samsung. The ruling meant that Samsung's original patent damages bill of $399 million will be significantly reduced. This decision sets a new precedent for the calculation of damages from design patent infringement cases under "article of manufacture rules", meaning patent holders can no longer expect damages to be calculated based upon the entirety of the profits from the sale of a product infringing a design patent. Instead, they may only seek recovery from profits which are attributable to the infringing feature(s).
In the aftermath of yesterday’s ruling, there are multiple points of view on what the ruling means for future of design patents.
Laura A. Shoppe, President of Fuentek LLC was in agreement with the decision -
“When we do valuation work for a license, one of the components in the calculation is determining what is the attributable portion of the licensed technology to the resulting product sales. Basically, the licensee shouldn’t expect a big chunk of the profit if they are only contributing a small upgrade or feature. This decision seems consistent with that perspective.”
Hejab Azam, Intellectual Property Analyst at PatSnap felt that the decision was fair, and implied that certain types of design patent had been devalued by manufacturers' willingness to patent designs without real elements of novelty and that any other decision could have opened the floodgates to litigation:
“Today’s unanimous ruling is a very interesting decision from the Supreme Court. Personally, I agree with the decision in this case – the three design patents referred to were not seriously infringed because they do not incorporate particularly novel elements. There are now so many mobile devices on the market which incorporate a similar design. When it comes to something like a mobile phone, the important intellectual property, and the real source of novelty is the technology housed within.
If this were a case involving a different industry – say the fashion and apparel market – the design factor would be more important. That’s because the design of a Mulberry handbag or a pair of Nike trainers is almost always more important than the functional aspects of those products.
It feels like the Supreme Court or the Federal Circuit need to create a test which would look at the implications of the design upon other patents. For example in this case, if the Supreme Court had ruled in favor of Apple, it would create an unstoppable wave of litigation where almost any company in this space would be entitled to, and would almost certainly try to sue other companies with even slightly similar designs.”
We contacted Richard Nugent, Managing Director of Total info Ltd, for an opinion on the case and he responded by saying:
“This is a sensible decision by the SCOTUS. I doubt it will have a significant impact on design patent filings. Design patents still have a purpose."
Whilst many agree with the ruling, George Olaru, Head Innovation and Patents at Otto Männer GmbH, thinks that:
“The Supremes got it wrong in a very special case”.
He believes that Samsung wanted the look of the Apple product and that Samsung could have chosen any other design. This argument is about this ruling devaluing design patents. Case Collard, partner at Dorsey & Whitney LLP, had the following input on this topic:
“While they are still very valuable, this decision reduces slightly the advantages of a design patent by limiting the amount of damages that can be recovered.”
Peter Rouse, Director at Patent Annuity Costs Limited argued that design patents themselves had not been devalued by the decision, and businesses would remain averse to the risk and potential costs of litigation - “Damages that reflect the fact that only parts of a design have been infringed is less of a deterrent than being entitled to ALL the profits from sales of the product concerned, but is still a deterrent; the law also provides for other remedies, including injunctive relief that can have a major impact on the business of an infringer....I find it helpful to think of IP as an ‘uncertainty generator’ – business does not like uncertainty and infringement carries with it the uncertainty of possible loss of revenues/profit; business interruption; litigation costs; and costs of product changes."
This new ruling has certainly sent shockwaves through the patent industry and will have wide-reaching consequences for design patents and their owners.