Design Patent Damages: Impact of Samsung v. Apple on...

Design Patent Damages:

Impact of Samsung v. Apple on

Patent Prosecution, Litigation and Valuation

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THURSDAY, MARCH 23, 2017

Presenting a live 90-minute webinar with interactive Q&A

Christopher V. Carani, Shareholder, McAndrews Held & Malloy, Chicago

Elizabeth D. Ferrill, Partner, Finnegan Henderson Farabow Garrett & Dunner,

Washington, D.C.

Robert S. Katz, Esq., Banner & Witcoff, Washington, D.C.

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4

Historical Overview

Design Patent’s “Total Profits” Remedy

March 22, 2017

Christopher V. Carani, Esq.

[email protected]

ccarani

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi7-byaiOvSAhUk3IMKHTUoBpMQjRwIBw&url=https%3A%2F%2Fwww.linkedin.com%2Fcompany%2Fstrafford-publications-inc&bvm=bv.150475504,d.amc&psig=AFQjCNGXsuPTS5lMtOyGw3oT6PFUuajF6A&ust=1490304811847825

© 2017 Christopher V. Carani 5

1) Comparative Overview of Remedies

2) Supreme Court and “The Carpet Wars”

3) 35 U.S.C. §289, Infringer’s Total Profits

4) Nike v. Walmart

5) Apple v. Samsung

6) Nordock v. Systems, Inc.

Road Map of Discussion


“The Patent Trial of The Century”?


Largest Patent Infringement

Jury Verdict (at the time)

Verdict: $1,049,343,540.00


Design Patent Remedies

• Lost Profits

• Reasonable Royalty

• Infringer’s Total Profits

• Statutory Damages ($250)

• Injunction (Preliminary, Permanent)


Each IP Right Has Different Aim

Striking Different Coverage Balance

IP Right Policy Requirements Term Protection

Design

Patent

Novel,

Non-obvious,

Ornamental

15 years

(from

issuance)

Substantially

the Same

Utility

Patent

Novel,

Non-obvious,

Useful

20 years

(from filing

date)

All elements;

Doctrine of

Equivalents

Copyright Expression,

Originality,

Non-useful

Life of

author + 70

yrs

Substantial

Similarity +

Copying

Trade

Dress

Secondary

meaning,

Non-functional

Potentially

Perpetual

Likelihood of

Confusion


Each Design IP Right Has Different Aim

Striking Different Coverage Balance

IP Right Injunctive Relief Damages

Design

Patent

-Preliminary Injunction

-Permanent Injunction

- Reasonable Royalty

- Lost Profits

- Infringer’s Total Profits

- Statutory Damages

Utility

Patent



- Reasonable Royalty

- Lost Profits

Copyright -Preliminary Injunction


- Lost Profits

- Infringer’s Profits

- Statutory Damages

Trade

Dress



- Lost Profits

- Infringer’s Profits

© 2017 Christopher V. Carani

Set the way back machine…1885

11


U.S. Civil War (1861-65)

The Battle of Fredericksburg of 1862 by N. Currier

12


Mr. John Gorham

Gorham Manufacturing Co.

Gorham v. White, 81 U.S. 511 (1871)

13


Mr. John Gorham

Gorham Manufacturing Co.

Gorham v. White, 81 U.S. 511 (1871)

INFRINGEMENT

14


Dobson v. Hartford, 114 U.S. 439 (1885)

D10,870 D10,778 D11,074

Dobson v. Bigelow

(“Bigelow I”) Dobson v. Bigelow

(“Bigelow II”)

Dobson v. Hartford

$737 + Injunction $750 + Injunction $1320.50 + Injunction

15


Dobson v. Hartford, 114 U.S. 439 (1885)

D10,870 D10,778 D11,074

Dobson v. Bigelow

(“Bigelow I”) Dobson v. Bigelow

(“Bigelow II”)

Dobson v. Hartford

16


Dobson v. Dornan, 118 U.S. 10 (1886)

D6822

$1320.50 + Injunction

17


Dobson v. Dornan, 118 U.S. 10 (1886)

D6822

18


United States Congress, 1887

19


The Design Patent Act of 1887 H.R. Rep. No. 1966 at 1 (1886), reprinted in 18 Cong. Rec. 834 (1887)

“It now appears that the design patent laws provide

no effectual money recovery for infringement. This

is the result of the statute, as applied to the peculiar

character of property involved, in a test case

decided April last by the Supreme Court of the

United States.”

20



“it is the design that sells the article.”

“…the infringer's entire profit on the

article should be recoverable,” for

“it is not apportionable,”

21



“Since that decision the receipts of

the Patent Office in the design

department have fallen off upwards

of 50 per cent, and the average

weekly issue of design patents has

also fallen off just one half.”

22


The Design Patent Act of 1887 (Ch. 105, Laws of 1887)

“By analogy to a known principle of

equity…one who mixes up the

patentee’s profits with his own that it is

impossible to apportion them, may

appropriately be mulcted in the amount

of his total profit.”

~Fredrick H. Betts

23


The Perplexing

Apportionment Question

“The courts could not tame the

apportionment beast despite extensive

experience in litigated cases…”

"the question [of apportionment] is in

its nature unanswerable."

Judge Learned Hand

Donald Chisum

24


The Design Patent Act of 1887 (Ch. 105, Laws of 1887)

D6822

25


35 U.S.C. §289 (current)

“Whoever during the term of a patent for a design, without

license of the owner

shall be liable to the owner to the extent of his total profit, but

not less than $250, recoverable in any United States district

court having jurisdiction of the parties.”

(1) applies the patented design, or any colorable

imitation thereof, to any article of manufacture for the

purpose of sale, or

(2) sells or exposes for sale any article of manufacture

to which such design or colorable imitation has been

applied


“Whoever during the term of a patent for a design, without

license of the owner

shall be liable to the owner to the extent of his total profit, but

not less than $250, recoverable in any United States district

court having jurisdiction of the parties.”




purpose of sale, or



applied

Manufacturer

Retailer


“Whoever during the term of a patent for a design, without license

of the owner

shall be liable to the owner to the extent of his total profit, but not

less than $250, recoverable in any United States district court

having jurisdiction of the parties.”




purpose of sale, or



applied


“Whoever during the term of a patent for a design, without license

of the owner

shall be liable to the owner to the extent of his total profit, but not

less than $250, recoverable in any United States district court

having jurisdiction of the parties.”

29

35 U.S.C. §289 (current) Whoever Does X Gets Y



purpose of sale, or



applied

X

Y


Fast forward…1998

30


Nike v. Wal-mart, 138 F.3d 1437, 1448 (Fed. Cir. 1998)(J.Newman)

INFRINGEMENT


“The statute requires the disgorgement

of the infringers’ profits to the patent

holder, such that the infringers retain no

profit from their wrong.”

Nike v. Wal-mart, 138 F.3d 1437, 1448 (Fed. Cir. 1998)(J.Newman)


• Plaintiff’s burden to set forth

infringer’s total sales.

• Defendant’s burden to set forth

deductible costs.

“Total Profits” = [Sales] – [Costs]

Nike v. Wal-mart, 138 F.3d 1437, 1448 (Fed. Cir. 1998)


Deductible Costs?

Fixed/direct costs have

included:

• overhead expenses,

• warehouse costs,

• utilities,

• administrative

• salaries,

• employee benefits

• training costs,

• building space

Variable/direct costs have

included:

• raw materials,

• manufacturing,

• printing,

• packaging,

• shipping,

• rebates and returns,

• labor costs per unit

• income tax

NOT DEDUCTIBLE… DEDUCTIBLE


Nike v. Wal-mart,

138 F.3d 1437, 1448 (Fed. Cir. 1998)

• No Trebling of Profits Under § 284

• Why? Profits are not technically

“damages,” which statute

addresses


Dowagiac Mfg. Co. v. Deere & Webber Co.,

284 F. 331 (8th Cir. 1922)

Manufacturer

profits

Importer

profits

• “Compartmentalized Profits”

• No Exhaustion Doctrine

•Name each party/profit center in complaint

• Indemnity issues?

Distributor

profits

Retailer

profits


Catalina Lighting Inc. v. Lamps Plus, Inc., 295 F.3d 1277 (Fed. Cir. 2002)

Asserted Utility Patent Asserted Design Patent

§284 Damages = $660,000 §289 Damages = $767,942


35. USC §289

“Nothing in this

section shall

prevent, lessen, or

impeach any other

remedy which an

owner of an

infringed patent has

under the

provisions of this

title, but he shall

not twice recover

the profit made

from the

infringement.”

Catalina Lighting Inc. v. Lamps Plus, Inc., 295 F.3d 1277 (Fed. Cir. 2002)

$660,000 $767,942


Apple, Inc. v. Samsung Elecs. Co.,

11-cv-1846 (N.D. Cal . 2012)

39

© 2017 Christopher V. Carani 40 40

Apple, Inc. v. Samsung Elecs. Co.,

Apple Design Patents-in-Suit


Jury Verdict Form

Samsung Product D’677 D’087 D’305 Total Award

(across all 11

asserted IP Rights)

Captivate - - Y $80,840,162

Continuum - - Y $16,399,117

Droid Charge - - Y $50,672,869

Epic 4G - - Y $130,180,894

Exhibit 4G - - - $1,081,820

Fascinate Y - Y $143,539,179

Galaxy Ace N - - $0

Galaxy Prevail - - - $57,867,383

Galaxy S 4G Y Y Y $73,344,668

Galaxy S II (AT&T) Y N - $40,494,352

Galaxy S II (T-Mobile) Y N - $83,791,708

Galaxy S II (Epic 4G

Touch) Y N - $100,326,988

Galaxy S II (Skyrocket) Y - - $32,273,558

Galaxy S Showcase (i500) Y - Y $22,002,146


Jury Verdict Form (cont’d)

Samsung Product D’677* D’087 D’305* Total Award

Galaxy Tab - - - $1,966,691

Galaxy Tab 10.1

(WiFi)

- - - $833,076

Galaxy Tab 10.1 (4G

LTE)

- - - $0

Galaxy S Showcase

(i500)

Y - Y $22,002,146

Gem - - Y $4,075,585

Indulge - - Y $16,011,184

Infuse 4G Y N Y $44,792,974

Mesmerize Y - Y $53,123,612

Nexus S 4G - - - $1,828,292

Replenish - - - $3,350,256

Transform - - - $953,060

Vibrant Y Y Y $89,673,957

$1,049,343,540

© 2017 Christopher V. Carani 43 43

Apple, Inc. v. Samsung Elecs. Co., 786 F.3d 983 (Fed. Cir., May 18, 2015)(J.Prost)

Relevant AOM

Entire Phone

Fed.Cir.: AFFIRMED. The relevant “article of manufacture” to

which the patent design has been applied is the entire phone.

Infringed Design Patents

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiV7prGhrDQAhUl5IMKHf3gA-cQjRwIBw&url=https%3A%2F%2Fecf.cafc.uscourts.gov%2F&psig=AFQjCNEwBHW-aLd1KU3gBqEbGjM1LtA4mA&ust=1479481050295075


Samsung Elecs. Co. v. Apple, Inc., 137 S.Ct. 429 (December 6, 2016)

SCOTUS: REVERSED & REMANDED. Term “article of

manufacture” broadly encompasses both “entire phones”

and “component”

Entire Phone Front Face

or


Apple v. Samsung,

Up & Down

District Court

Federal Circuit

Supreme Court Federal

Circuit District Court

$399mil

Affirmed

Reversed

&

Remanded Remanded

PENDING


Relevant AOM

Entire Dock Leveler Infringed Design Patent

Fed.Cir.: REVERSED. The relevant “article of manufacture” to

which the patent design has been applied is the entire dock

leveler.

Nordock, Inc. v. Systems, Inc., 803 F.3d 1344 (Fed. Cir. Sept. 29, 2015)

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiV7prGhrDQAhUl5IMKHf3gA-cQjRwIBw&url=https%3A%2F%2Fecf.cafc.uscourts.gov%2F&psig=AFQjCNEwBHW-aLd1KU3gBqEbGjM1LtA4mA&ust=1479481050295075


Systems, Inc. v. Nordock, Inc., 137 S. Ct. 589 (2016)

SCOTUS: VACATED & REMANDED. Remanded for

further proceedings consistent with Samsung v. Apple.

Relevant AOM

Entire Dock Leveler Infringed Design Patent


Nordock Inc. v. Systems, Inc.,

Up & Down

District Court

Federal Circuit

Supreme Court Federal

Circuit District Court

$0

Vacated &

Remanded

for New

Trial

Vacated &

Remanded Remanded

For

New

Damages

Trial

PENDING


Thank You!

Christopher V. Carani, Esq. is a partner and shareholder at the intellectual property law firm of McAndrews, Held &

Malloy, Ltd. based in Chicago, Illinois. He is a leading voice in the field of design law. Chris counsels clients on a wide range of

strategic design protection and enforcement issues, both in the U.S. and abroad. He is often called upon to render

infringement, validity and design-around opinions and serve as a legal consultant/expert in design law cases.

Chris is the current chair of AIPPI Committee on Designs. He is immediate past chair of the American Bar Association’s

Design Rights Committee, and is the past chair of the American Intellectual Property Law Association (AIPLA) Committee on

Industrial Designs. In the landmark design patent case Egyptian Goddess v. Swisa, he authored amicus briefs on behalf of the

AIPLA at both the petition and en banc stages. In 2009 and 2011-12, he was an invited speaker at the United States Patent &

Trademark Office’s (“USPTO”) Design Day.

Prior to joining McAndrews, Chris served as a law clerk to the Honorable Rebecca R. Pallmeyer at the U.S. District Court

for the Northern District of Illinois. Chris was conferred his Juris Doctorate from The Law School at The University of

Chicago. He also holds a Bachelor of Science in Engineering from Marquette University. He is licensed to practice before the

U.S. Supreme Court, the U.S. Federal Circuit Court of Appeals and other U.S. District Courts. He is a registered patent attorney

licensed to practice before the USPTO.

He is on the faculty of Northwestern University School of Law as an Adjunct Professor teaching IP Law. Chris is the

author and editor-in-chief or the forthcoming book entitled “Design Rights: Functionality and Scope of Protection.” The book

will be published in October of 2017 by leading publisher Walters Klowers N.V.

He has published and lectured extensively on design law and is a frequent contributor to CNN on intellectual property

law issues. He is also often called upon to provide comment to other media outlets, including New York Times, Wall Street

Journal, NPR, PBS TV, CNBC TV, BBC, Bloomberg TV, Reuters, InformationWeek, Fast Company, ComputerWorld, PCWorld,

Washington Post, L.A. Times, Chicago Tribune, Forbes, Fortune, and FoxBusiness TV. Away from the law, Chris is a studied

jazz musician playing upright bass on the Chicago jazz circuit.

Christopher V. Carani, Esq.

Shareholder

McANDREWS HELD & MALLOY LTD.

500 West Madison St., Suite 3400

Chicago Illinois 60661

(Tel) 312 775 8000

(Fax) 312 775 8100

[email protected]

49

Finnegan, Henderson, Farabow, Garrett & Dunner, LLP

Implications of Damages Analysis

Elizabeth Ferrill

March 23, 2017

51 51

Agenda

• Purpose of § 289

• Prior § 289 Analysis

• Analysis outlined by Supreme Court in Apple v.

Samsung

• Identifying the Article of Manufacture

• Calculation of Infringer’s Profits

• Burdens & practical implications

• Potential effect of calculations in common

scenarios

52 52

Purpose of § 289

• Dobson held:

– “[C]omplainant must clearly prove what part of his own

damage or what part of defendant’s whole profit on the

article made and sold was directly due to the

appearance of those articles as distinguished from their

material, their fabric, their utility, etc.” – Senate Report

• Congress enacted § 289 in response to Dobson

– House report: “[I]t is the design that sells the article.”

– Senate report said: “It has been abundantly shown … even if

any such showing [as in Dobson] were necessary, that the

proof thus called for can never be furnished.”

53 53

Previous § 289 Profits Analysis

Identify

Infringing

Product as Sold

Where Claimed

Design was

Applied

Infringer’s Total

Profits on Entire

Product

Single Step

“Whoever … applies the patented design, … , to

any article of manufacture …shall be liable to

the owner to the extent of his total profit….”

54 54

Supreme Court December 2016 Opinion

• Outlined analysis for damages under §289

55 55

Likely New Framework

Identify the Article of

Manufacture (AOM) to

which the infringed

design has been

applied.

Entitled to the

infringer’s total

profits made on

that AOM

Step 1 Step 2

56 56


• Holding: “Article of manufacture” = “product sold to

a consumer” or “component of that product”

57 57




which the infringed

design has been

applied.

Entitled to the

infringer’s total

profits made on

the AOM

Step 1 Step 2

Single Component

Product = AOM

(e.g., dinner plate)

Multi-Component Product

“More difficult”

(e.g., kitchen oven)

58 58

Likely New Framework?



which the infringed

design has been

applied.

Entitled to the infringer’s

total profits made on the

AOM (component of

kitchen oven)

Step 1 Step 2

Single Component

Product = AOM

(e.g., dinner plate)

Multi-Component Product

“More difficult”

(e.g., kitchen oven)

Entitled to the infringer’s

total profits made on the

AOM (dinner plate)

59 59

Article of Manufacture: Question of Fact or Law?

• Not addressed by Supreme Court

• Solicitor General: identification is question of fact

• CAFC Feb 2017 order remanding Apple case:

– “Setting forth the test” for identifying the relevant AOM –

Question of law

– Application of the test - ?

• CAFC March 2017 order remanding Nordock case:

– “The trial court will also have the opportunity to consider

the parties’ arguments with respect to the relevant

‘article of manufacture’ in the first instance.” -- All a

question of law?

60 60

Supreme Court Step 1

• Identify the “article of manufacture” to which the

infringed design has been applied

• Possible distinction between “single component”

and “multi-component” products

• Goal (per Solicitor General):

– “[T]he factfinder’s overarching objective should be to

identify the article that most fairly may be said to

embody the defendant’s appropriation of the plaintiff ’s

innovation.”

• Should there be a presumption (end product as

sold, unless defendant provides otherwise)?

61 61

Possible Factors to Identify Article of Manufacture

• Scope of the claimed design

• Relative prominence of the design within the

infringing product as a whole

• Whether the design is conceptually distinct from

the infringing product as a whole

• Physical relationship between the patented design

and the rest of the product

– Does the design pertain to a component that is

physically separable?

– Is the design embodied in a component that is

manufactured or sold separately?

62 62

Separately Sold or Separately Manufactured

• Furniture post that manufactured independently of

the rest of the sofa was “separate article” of

manufacture. Pullman Couch Co., v. Union, 39

USPQ 100 (D. Md. 1938) – SG brief

• Bush & Lane Piano Co. v. Becker Bros., 222 F.

902, 904 (2d Cir. 1915) asserting that a piano case

“may be and is sold separately from the music-

making apparatus”).

63 63

Purchaser’s Motivation

• Is the purchaser motivation for buying the article

attributable to the design? or something other

“intrinsic merits” of the article?

64 64





http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiw-8a8sObSAhXEMSYKHdDeAGwQjRwIBw&url=http://www.tiffany.com/engagement/the-tiffany-difference&psig=AFQjCNHF-wSiLJLtR1c9JzdcXi-MeBdK5A&ust=1490143817357604

65 65





1954 Alfa Romeo B.A.T. 7 1954 Alfa Romeo B.A.T. NTF

66 66


• Original Congressional Intent

– In Dobson, court reasoned that patentee should be

required to prove that the profits were solely attributable

to the design or take nominal damages.

– In response, Congress adopted “total profits” for 289;

emergency situation

• Practical considerations

– Difficult to conduct survey

• Inequitable result?

– Hypo: Two spoons

67 67







emergency situation





68 68







emergency situation





69 69

Additional Possible Factors

• Degree defendant’s marketing displays the

patented design

• Knowledge of perceived significance of design

• Essential component to primary purpose of article?

• USPTO class, search fields, references listed

• Infringer’s attempt to hide its infringing activities

• Infringer’s relative dominance and duration in

industry

70 70

Limited to “Non-machines”?

• Supreme Court: AOM means “simply a thing made

by hand or machine.” Apple v. Samsung

• But was focus of § 289 on “simple” products –

wallpaper, oilcloth & carpets?

– “Indeed, at the time Congress enacted Section 289, a

design for a complex, multicomponent device generally

would not even have been considered an ‘article of

manufacture’ under the design patent statutes.” –

Internet Association

– In 1887, a “manufacture” was most broadly defined as

any “‘thing’ made or manufactured by hand or by

machine” that was “not itself a ‘machine’ or a

composition of matter. – Burstein, Berkley Tech

71 71


• Step 2: Calculate the infringer’s total profit on that

article of manufacture

72 72

What does “Total Profit” Mean?

• Plain language of § 289 does not permit

apportionment (awarding partial profits)

– Congress did not intend apportionment. Bergstrom v.

Sears, Roebuck & Co., 496 F. Supp. 476, 495 (D. Minn.

1980); Henry Hanger & Display Fixture Corp. v. Sel-o-

Rak Corp., 270 F.2d 635, 642-44 (5th Cir. 1959)

– Federal Circuit observed that Congress removed the

apportionment requirement in the predecessor provision

to Section 289. Nike, Inc. v. Wal-Mart Stores, Inc., 138

F.3d 1437, 1441 (Fed. Cir. 1998)

– Supreme Court agreed. Apple v. Samsung, 580 U.S.

___ (2016) (“‘Total,’ of course, means all”)

73 73


What is Article of

Manufacture for a Given

Infringing Product?

Entire Infringing

Product as Sold

Infringer’s Total

Profits on the

Article of

Manufacture

Portion of

Infringing

Product as Sold

Infringer’s Total

Profits on that

Article of

Manufacture

Step 1 Step 2

74 74

Who Should Have the Burden?

• Patent owner

– Ultimate burden of establishing the infringer’s total profit

– Need to identify a AOM early in case? Need to identify

more than one AOM to hedge?

– Potential tendency to go “big” v. “safe”

• Adjudicated infringer

– Should it bear the burden of identifying any component

that it views as the relevant AOM?

• At what stage does AOM get resolved so that

profits can be awarded by the factfinder?

75 75

Practical Implications for Trial

• Who asserts AOM?

– Patent owner or defendant?

– Both? Simultaneously?

• When to identify asserted AOM?

– At the start of the case

• ND California rules (Feb 2017) – 50 days after invalidity

contentions

– After infringement (bifurcation)

• Juror confusion over infringement v. relevant AOM

• Would alternative theories of AOM undermine

patent owner’s case?

76 76

Potential Effect on Common Scenarios

• Common scenarios

• What factors might be relevant or helpful to the

finder of fact?

• What seems like the equitable result?

77 77

Nearly Exact Copies

Oakley v. Moda Collection, CACD-8-16-cv-00160 (Jan 29, 2016),

AOM Infringed

Design

End

Product

Oakley’s D573,172 Infringing Product

78 78

Replacement Parts Alone

Gillette Company v. BK Gifts, Docket No. 13-cv-02241 (N.D. Ohio)

Gillette’s D422,751

BK Razor’s Generic

Mach 3 Blades

AOM Infringed

Design

End

Product

79 79

Product with Replacement Part

Gillette Company v. BK Gifts, Docket No. 13-cv-02241 (N.D. Ohio)

Gillette’s D422,751

Generic 3-Blade

Razor

End

Product AOM

Infringed

Design

80 80

Near Exact Copies – Portion Claim

Oakley’s D573,172

Oakley v. Moda Collection, CACD-8-16-cv-00160 (Jan 29, 2016),

AOM Infringed

Design

End

Product

Infringing Product

81 81

Portion of a Design, But Unique

Dishwasher Handle Infringing Product

AOM End

Product

Infringed

Design

82 82

Portion of Design for Larger Product

Cup Holder Ferrari

AOM End

Product

Infringed

Design

83 83

Portion of Design for Larger Product

Cup Holder Ferrari

End

Product

Infringed

Design

AOM

84 84

A Part, But an Iconic Part

End

Product ?

Infringed

Design

Civic-DeLorean Hybrid DeLorean Door Patent

AOM

85 85

Inspired Design, But with More Functionality

Super Famous

Bear Design

“You should

wear a jacket

today.”

“Do your

homework…”

“Order more red

crayons”

Voice Assistant

AOM Infringed

Design

End

Product ?

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Speaker Information

Elizabeth D. Ferrill ([email protected]/1.202.408.4445)

Focuses her practice on all aspects of design patents, including

prosecution, counseling, and litigation

Extensive experience in utility patent litigation in the areas of software-

and hardware-related technologies

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Disclaimer

These materials are public information and have been prepared solely for

educational and entertainment purposes to contribute to the understanding

of U.S. intellectual property law. These materials reflect only the personal

views of the authors and are not a source of legal advice. It is understood

that each case is fact specific, and that the appropriate solution in any

case will vary. Therefore, these materials may or may not be relevant to

any particular situation. Thus, the authors and Finnegan, Henderson,

Farabow, Garrett & Dunner, LLP cannot be bound either philosophically or

as representatives of their various present and future clients to the

comments expressed in these materials. The presentation of these

materials does not establish any form of attorney-client relationship with

the authors or Finnegan, Henderson, Farabow, Garrett & Dunner, LLP.

While every attempt was made to ensure that these materials are

accurate, errors or omissions may be contained therein, for which any

liability is disclaimed.

Design Patent Damages: Impact of Samsung v. Apple on

Patent Prosecution, Litigation

and Valuation

MARCH 23, 2017

Robert S. Katz

Banner & Witcoff, Ltd. (202) 824-3181

[email protected]

www.bannerwitcoff.com/rkatz

BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 89

Overview

• What do these decisions mean?

– For design patentees

– For design patent applicants


For Design Patentees

• Design patents ≠ utility patents

• Motivation more like a trademark – Trade on your own design, not mine!

• Goal to have it be a deterrent that works

• Outcome of test and details unknown

– Equitable exclusion? or

– Whittle down rights


What Do Most Infringements Look Like?

and

What Do Most Infringers Look Like?


What We’ve Had

• Currently: relatively simple §289 analysis • ONE STEP: Total Profits = Total Revenue – Total Costs

• Total Cost = Direct Cost + some Indirect Costs

• Patentee’s burden to prove revenue

• Infringer’s burden to prove costs

• Only considerable battle indirect costs.


Likely Scenario

• Very complex and costly §289 analysis • Step 1: Determine the appropriate Article of Manufacture (AofM)

– Assume US Amicus Brief as example

(1) Scope of design patent claim;

(2) Prominence of design in product as a whole;

(3) Conceptually distinct innovations in product; &

(4) Physical relationship of design and product.

– Likely need considerably more discovery, survey evidence, and additional experts

Step 2a: if the AofM is product as sold, then use the current analysis; or

Step 2b: if the AofM is less than product as sold,

Profits associated with AofM…but relative to product as sold

Mess: might need to determine, entire profits, relative profitability, relative costs, relative benefits, etc.

Likely need considerably more discovery and additional experts


Likely Scenario

Pre AvS

• Battle over indirect costs.

Soon

• Battle over AofM

– Evaluate and present evidence on new factors

– Additional discovery

– Extra experts/survey

• Battle of relative profits on smaller component

– Considerably more proofs

– Battle over profits, costs, and indirect costs on a product and component by component basis


Likely Scenario

• Because of uncertainty in §289 analysis, patentees will try to keep reasonable royalty remedy alive as long as possible

• Further increasing the proofs needed, and length and cost of litigation

• Inevitable conclusions:

• Enforcement will be more complex and more expensive

• A number of design patentees will choose not to enforce its design rights when its designs are taken because of increased litigation costs

• Design patents will have less of a deterrent effect

• Infringers will be more emboldened to copy


Connect the Dots • What if the design patent laws has no effective teeth?

• More people would simulate the design instead of generating new designs (lower risk and lower cost)

• More copied designs means more knockoffs, simulations, and less demand for designers

• Harder to brand, harder to recoup investments, fewer investments made, less choice for consumers, less demand for original designers, more jobs elsewhere


What if §289 is further weakened?


What Else Can Design Patentees Do?

• If strong design rights are important, consider talking to representative and present an easy and inexpensive test to apply

• Design-driven companies can join together

• In view of potential weakening by AvS, consider improving design patent laws in other ways:

– Bring statutory damages portion of §289 up to date

– Award attorney fees when design is intentionally copied

– Enable customs enforcement of design patents

– …and many more


For Design Valuation

• Design patents are normally for insurance purposes

• Design patent rights worth more when practiced and design is coveted

• But, if the design laws have no teeth, there will be less investment in startups and emerging companies as it will be more difficult to secure a foothold and brand


For Design Patent Applicants

• Still unsure how it remedies will play out

• More aggressively procure design rights

– Add design patent claims to larger “portions” and overall designs

– Keep options open

• Consider impact of title

• Modify strategies as test begins to better unfold


For Design Patent Applicants

• Review product designs for potentially copyrightable works – Pictorial, graphical, or sculptural works

– Separability analysis

– Enable attorney fees and statutory damages

• Timely file to register

CHICAGO, IL

Ten South Wacker Drive

Suite 3000

Chicago, IL 6060

T 312.463.5000

F 312.463.5001

WASHINGTON, DC

1100 13th Street NW

Suite 1200

Washington, DC 20005

T 202.824.3000

F 202.824.3001

BOSTON, MA

28 State Street

Suite 1800

Boston, MA 02109

T 617.720.9600

F 617.720.9601

PORTLAND, OR

One World Trade Center

121 Southwest Salmon Street

11th Floor

Portland, OR 97204

T 503.425.6800

F 503.425.6801

www.bannerwitcoff.com

Robert S. Katz

Banner & Witcoff, Ltd. (202) 824-3181

[email protected]

www.bannerwitcoff.com/rkatz

Thank you!

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