No. 15-

In the

Supreme Court of the United States

On PetitiOn fOr a Writ Of CertiOrari tO the United StateS COUrt Of aPPealS fOr the federal CirCUit

A(800) 274-3321 (800) 359-6859

PETITION FOR A WRIT OF CERTIORARI

263910

SYSTEMS, INC.,

Petitioner,

v.

NORDOCK INC.,

Respondent.

PhIlIP P. MannCounsel of Record

tIMothy J. BIllIckMann law GrouP1218 Third Avenue, Suite 1809Seattle, Washington 98101(206) 436-0900phil@mannlawgroup.comtim@mannlawgroup.com

John whItakerwhItaker law GrouP1218 Third Avenue, Suite 1809Seattle, Washington 98101(206) 436-8500john@whitaker.law

DavID a. affelDtaffelDt law offIces, s.c.8741 W. National AvenueWest Allis, WI 53227414-321-4560david.affeldt@affeldtlaw.com

Counsel for PetitionerJanuary 28, 2016

iQUESTIONS PRESENTED

In the case below, the Federal Circuit, relying on its recent decision in Apple v. Samsung (petition for writ of certiorari pending), set aside a jury verdict in Petitioners favor and held that, under 35 U.S.C. 289, design patent damages should be based on profits attributable to an entire apparatus rather than the actual portion of that apparatus to which the design is applied.

The questions presented are:

1. Where a patented design is applied to only a component of a product, should an award of infringers profits be limited to those profits attributable to the component?

2. Is the Federal Circuits interpretation and application of 35 U.S.C. 289 inconsistent with this Courts prior precedent?

ii

PARTIES TO THE PROCEEDING

Petitioner is Systems, Inc., which was the defendant in the District Court and was the Appellee/Cross-Appellant in the Court of Appeals.1

Respondent is Nordock, Inc., which was plaintiff in the District Court and was the Appellant/Cross-Appellee in the Court of Appeals.

1. The Federal Circuit caption also lists aliases for Systems, Inc. including Poweramp, DLM, Inc., and McGuire. Those aliases refer only to Systems, Inc. and do not identify any other party.

iii

RULE 29.6 DISCLOSURE

Pursuant to Supreme Court Rule 29.6, Petitioner Systems, Inc. states that it does not have a parent corporation and that no publicly held corporation owns 10% or more of its stock.

iv

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED . . . . . . . . . . . . . . . . . . . . . . i

PARTIES TO THE PROCEEDING . . . . . . . . . . . . . . . ii

RULE 29.6 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . iii

TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . iv

TABLE OF APPENDICES . . . . . . . . . . . . . . . . . . . . . . vi

TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . vii

PETITION FOR A WRIT OF CERTIORARI. . . . . . . .1

OPINIONS BELOW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

BASIS FOR JURISDICTION . . . . . . . . . . . . . . . . . . . . .2

CONSTITUTIONA L A ND STATUTORY PROVISIONS INVOLVED . . . . . . . . . . . . . . . . . . . . .2

STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . .3

A. DISCUSSION OF THE DESIGN PATENT DAMAGES STATUTE . . . . . . . . . . . . . . . . . . . . .3

B. THE PARTIES AND THE DOCK LEVELER INDUSTRY . . . . . . . . . . . . . . . . . . .5

C. NORDOCKS DESIGN PATENT . . . . . . . . . . . .6

D. PROCEDURAL HISTORY . . . . . . . . . . . . . . . . .7

vTable of Contents

Page

REASONS FOR GRANTING THE PETITION. . . . . .9

A. T H E F E D E R A L C I R C U I T S INTERPRETATION OF SECTION 289 ELIMINATES ANY MEANINGFUL

CAUSATION REQUIREMENT . . . . . . . . . . . . .9

B. T H E F E D E R A L C I R C U I T S INTERPRETATION OF SECTION 2 8 9 T R A NS F OR M S I T I N T O A PUNITIVE STATUTE DEVOID OF

ANY STANDARD OF CULPABILITY . . . . . .10

C. T H E F E D E R A L C I R C U I T S INTERPRETATION OF SECTION 2 8 9 I M P R O P E R L Y A W A R D S D E S I G N P A T E N T O W N E R S DA M AGES ON A RTICLES TH AT

WERE DISCLAIMED . . . . . . . . . . . . . . . . . . . .13

D. T H E F E D E R A L C I R C U I T S ERROR IS HAVING A VERY REAL A N D ACCELER AT I NG I M PAC T

ON DESIGN PATENT LITIGATION . . . . . . .15

E. T H E P E T I T I O N S H O U L D B E GRANTED TO PROVIDE GUIDANCE R E G A R D I N G T H E P R O P E R

ARTICLE OF MANUFACTURE . . . . . . . . .18

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

vi

TABLE OF APPENDICES

Page

A PPEN DI X A OPI N ION OF T H E UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT, FILED

SEPTEMBER 29, 2015 . . . . . . . . . . . . . . . . . . . . . . . .1a

APPENDIX B DECISION AND ORDER OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT

OF WISCONSIN, FILED JULY 31, 2014 . . . . . . .37a

APPENDIX C STATUTORY PROVISIONS . . . .56a

vii

TABLE OF CITED AUTHORITIES

Page

CASES

Apple, Inc. v. Samsung Electronics Co., 786 F.3d 983 (Fed. Cir. 2015) . . . . . . . . . . . . . . passim

Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476 (1964) . . . . . . . . . . . . . . . . . . . . . . . . . 10-11

Bush & Lane Piano Co. v. Becker Bros., 222 F. 902 (2d Cir. 1915) . . . . . . . . . . . . . . . . . . . . . . .19

Bush & Lane Piano Co. v. Becker Bros., 234 F. 79 (2d Cir. 1916). . . . . . . . . . . . . . . . . . . . . . . . . .9

Crawford v. Heysinger, 123 U.S. 589, 8 S. Ct. 399, 31 L. Ed. 269 (1887) . . . .14

Dowling v. United States, 473 U.S. 207 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Fla. Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank,

527 U.S. 627 (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

General Motors Corp. v. Devex Corp., 461 U.S. 648 (1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Goodyear Dental Vulcanite Co. v. Davis, 102 U.S. 222 (1880) . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

viii

Cited Authorities

Page

In re Blum, 374 F.2d 904 (CCPA 1967) . . . . . . . . . . . . . . . . . . . . . . .7

Microsoft Corporation v. Corel Corporation, Case 5:15-cv-05836 (CAND) . . . . . . . . . . . . . . . . . . . .16

Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437 (Fed. Cir. 1998). . . . . . . . . . . . . .4, 11, 12

Pacific Coast Marine Windshields, Ltd. v. Malibu Boats, LLC et al.,

6:12-cv-00033 (FLMD) . . . . . . . . . . . . . . . . . . . . . . . .15

Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978) . . . . . . . . . . . . . . . . . . . . .3

Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992). . . . . . . . . . . . . . . . . . . .11

ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860 (Fed. Cir. 2010) . . . . . . . . . . . . . . . . . . . .9

Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995) . . . . . . . . . . . . . . . . . . . .9

Seymour v. McCormick, 57 U.S. (16 How.) 480 (1854) . . . . . . . . . . . . . . . . . . . .10

Stearns v. Tinker & Rasor, 252 F.2d 589 (9th Cir. 1957) . . . . . . . . . . . . . . . . . . . .13

ix

Cited Authorities

Page

VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308 (Fed. Cir. 2014). . . . . . . . . . . . . . . .19, 20

STATUTES AND OTHER AUTHORITIES

U.S. Constitution art. I, 8, cl. 8 . . . . . . . . . . . . . . . . . . . .2

28 U.S.C. 1254(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

35 U.S.C. 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

35 U.S.C. 171 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

35 U.S.C. 284. . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

35 U.S.C. 289 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

Act of Aug. 1, 1946, ch. 726, Pub. L. No. 79-587, 60 Stat. 778 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Act of 1887, 24 Stat. 387 . . . . . . . . . . . . . . . . . . . . . . .11, 12

1PETITION FOR A WRIT OF CERTIORARI

Systems, Inc. (Systems) petitions this Court for a writ of certiorari to the Federal Circuit Court of Appeals correcting the Federal Circuits erroneous interpretation of 35 U.S.C. 289 (Section 289). The instant matter raises a nearly identical issue as that presented in Apple, Inc. v. Samsung Electronics Co., 786 F.3d 983 (Fed. Cir. 2015), for which Samsung Electronics recently filed its own petition for writ of certiorari. See Samsung Electronics Co. v. Apple, Inc., Petition for Writ of Certiorari No. 15-777 (currently pending).

The Federal Circuit has created an erroneous legal standard for determining the damages that can be awarded for infringement of a design patent. Under that standard, damages are defined as the total profit of an entire accused product even though the patented design is only applied to a small, insignificant portion of that product. The Federal Circuits interpretation of Section 289 should be reviewed to correct an error of law that is resulting in exorbitant and unjust damage awards in design patent cases.

OPINIONS BELOW

The opinion of the U.S. Court Of Appeals for the Federal Circuit is reproduced at App. 1a App. 36a. The U.S. District Courts order denying Respondents post-trial motion regarding design patent damages is reproduced at App. 37a App. 55a.

2BASIS FOR JURISDICTION

The judgment of the Court of Appeals was entered on September 29, 2015. On December 16, 2015, the Chief Justice extended the time within which to file a petition for a writ of certiorari to and including Thursday, January 28, 2016. This Courts jurisdiction is invoked under 28 U.S.C. 1254(1).

CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED

U.S. Constitution art. I, 8, cl. 8 provides in pertinent part that:

The Congress shall have Power ... To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

The additional remedy for infringement of design patent statute is 35 U.S.C. 289, set out below in its entirety:

Whoever during the term of a patent for a design, without license of the owner, (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 shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any

3United States district court having jurisdiction of the parties.

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.

STATEMENT OF THE CASE

The underlying action is a design patent dispute between two competitors in the dock leveler industry.

A. DISCUSSION OF THE DESIGN PATENT DAMAGES STATUTE

This Court is undoubtedly familiar with utility patents, which are available for any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof. 35 U.S.C. 101 (emphasis added). In contrast, design patents are available for any new, original and ornamental design for an article of manufacture. 35 U.S.C. 171 (emphasis added).

All patent owners for utility and design patents alike may recover damages adequate to compensate for the infringement under 35 U.S.C. 284 (Section 284). Damage awards under Section 284 today are generally either lost profits of the patent owner or a reasonable royalty. See Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1157 (6th Cir. 1978) (When actual damages, e.g., lost profits, cannot be proved, the patent

4owner is entitled to a reasonable royalty.). Historically, damage awards of infringers profits were equally available to both design patent owners as well as utility patent owners. See Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1441 (Fed. Cir. 1998)(recounting the history of infringers profits in the patent context). Congress eliminated infringers profits as a remedy under the precursor to Section 284 (the sole damages remedy for utility patents) in 1946. See Act of Aug. 1, 1946, ch. 726, Pub. L. No. 79-587, 60 Stat. 778. However, Congress maintained infringers profits as an additional remedy for design patent infringement, which exists today as 35 U.S.C. 289. Section 289 today provides:

Whoever during the term of a patent for a design, without license of the owner applies the patented design ... to any article of manufacture ... shall be liable to the owner to the extent of his total profit, but not less than $250 .

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.

The statute does not define what constitutes an article of manufacture.

Accordingly, infringers profits had been a component of damages for infringement of both utility patents as well as design patents from inception until about 1946. Today, however, infringers profits are available only for design patents, and only under Section 289.

5B. THE PARTIES AND THE DOCK LEVELER INDUSTRY

Petitioner Systems, Inc. is a Wisconsin corporation engaged in the business of building and selling so-called dock levelers. Respondent Nordock, Inc. (Nordock) is a Canadian company competing in the same industry.

A dock leveler is a large mechanical component used to bridge the gap between a delivery truck and a loading dock of a building. Set forth below is a representation of a dock leveler as it would be sold or viewed in a showroom.

The device is typically installed into a sunken cavity formed in a loading dock of a building. After a delivery truck backs up to the loading dock, the dock leveler is raised slightly (as illustrated above) and the lip portion is extended. Then the entire device lowers gradually until the lip portion engages the truck and creates a relatively flat bridge from the loading dock into the back of the delivery truck, thereby facilitating the loading and unloading of the truck.

6It should be appreciated that the entire dock leveler is a large and complex device that is almost exclusively functional in every respect. In addition, the lip portion that extends from the front constitutes a relatively minor component of the overall dock leveler.

C. NORDOCKS DESIGN PATENT

Nordock, Respondent in the instant matter, has secured several patents for its line of dock levelers. Most of Nordocks patents are utility patents. However, Nordock also obtained one design patent on what Nordock referred to as its Lip and Hinge Plate for a Dock Leveler U.S. Design Patent D579,754 (the D754 patent). Set out below is a reproduction of Figure 1 of the D754 patent showing a perspective view of Nordocks claimed design.

7Only one embodiment is shown in the several figures of the D754 patent. Indeed, in all the figures, everything except the lip and hinge plate is shown in broken line, which generally means it forms no part of the claimed invention. See, e.g., In re Blum, 374 F.2d 904, 907 (CCPA 1967). In fact, Nordock expressly stated that The deck and deck frame shown in broken lines in FIGS. 1 and 37, the drive brackets shown in FIGS. 15, the drive bar opening shown in FIGS. 13, and the assist spring mounting bracket shown in FIG. 1 represent environmental structure in order to show the claim in a condition of use and form no part of the claimed design. See D754 at page 1 (emphasis added). Accordingly, by Nordocks own admission, nothing except the lip and hinge plate is a part of the design, and Nordock expressly disclaimed everything else.

D. PROCEDURAL HISTORY

In 2011, Nordock sued Systems for infringement of its D754 patent in the Eastern District of Wisconsin. See Nordock, Inc. v. Systems, Inc., Case No. 2:11-cv-118 (WIED). Nordock accused six models of Systems dock levelers: three hydraulic models and three mechanical models in various sizes and configurations. After two years of litigation, the parties conducted a jury trial in March of 2013. At the conclusion of the trial, the jury found that Systems mechanical dock levelers did not infringe Nordocks design patent, but that certain hydraulic dock levelers did infringe.

During the trial, Systems damages expert testified that Systems profits on the front end (the lip and hinge plate) of the infringing dock levelers would be no greater

8than $46,825. Systems expert testified that he calculated profits on only the front end of the dock leveler because, as shown supra, only the front end of the dock leveler was claimed and Nordock itself had disclaimed everything else.

The jury awarded $46,825 as the total amount of money Nordock was to receive for the infringement. In post-trial motions, Nordock asked the District Court to enhance the jurys award to more than $600,000 because that amount more closely represented Systems total profit on the entire dock leveler. The District Court denied that motion and concluded that the evidence supported the jurys findings. See App. 37a App. 55a. Nordock appealed to the Federal Circuit.

While Nordocks appeal of this matter was pending, the Federal Circuit decided Apple, Inc. v. Samsung Electronics Co., 786 F.3d 983 (Fed. Cir. 2015) which involved a similar design patent damages issue. In that decision, the Federal Circuit held that the total profits of the entire accused product regardless of how much or little of the product embodied the claimed design is the appropriate measure of damages. Apple v. Samsung, 786 F.3d at 1002.

Relying on its recent Apple v. Samsung decision, the Federal Circuit vacated the jurys findings in the instant action and remanded the matter for a new trial on damages. In particular, the Federal Circuit found that the jury should have awarded Systems total profits on the entire dock leveler rather than only the profit attributable to the infringement, i.e., the profits on the claimed front end design. In so doing, the Federal Circuit applied

9the same erroneous interpretation of Section 289 it had applied in the Apple v. Samsung case. App. 20a App. 21a.

REASONS FOR GRANTING THE PETITION

This petition should be granted so that this Court can review the Federal Circuits erroneous interpretation of Section 289 set out in Apple v. Samsung. The Federal Circuits erroneous interpretation opens the door for exorbitant, unjust damages to be awarded for design patent infringement, and appears to contradict over a century of established jurisprudence. In doing so, the Federal Circuit has created a damages model completely devoid of the safeguards developed for damages recoverable under Section 284, and the safeguards Congress added to Section 289 in 1952. The Federal Circuits erroneous interpretation has resulted in a foot race to the courthouse with design patent holders seeking exorbitant windfalls that in some cases offend all notions of substantial justice.

A. THE FEDERAL CIRCUITS INTERPRETATION O F S E C T I O N 2 8 9 E L I M I N AT E S A N Y MEANINGFUL CAUSATION REQUIREMENT

The law of patent infringement as with tort law in general has always required some causal nexus between patent infringement and damages recoverable for that infringement. See Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1545 (Fed. Cir. 1995) (en banc) (lost profits); ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 869 (Fed. Cir. 2010) (per curiam) (reasonable royalty); c.f., Bush & Lane Piano Co. v. Becker Bros., 234 F. 79, 81-82 (2d Cir. 1916).

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Although Section 289 today is undeniably directed at recovering infringers profits, nothing about that statute suggests the measure of damages can be totally unrelated to the injury actually suffered as a result of the infringement. Rather, the language of Section 289 entitles the patent owner to the profit made from the infringement, which at least implies that some nexus exists between the infringement and the profits as a measure of damages.

Systems will not belabor the discussion of the law regarding causation which has been more than adequately set out in the co-pending petition for writ of certiorari to this Court filed by Samsung Electronics. See, Samsung Brief at pp. 32-35, Samsung v. Apple, Petition No. 15-777. The Federal Circuits misinterpretation of Section 289 eliminates the causal connection that should be present to establish any manner of compensatory damages.

B. THE FEDERAL CIRCUITS INTERPRETATION OF SECTION 289 TRANSFORMS IT INTO A PUNITIVE STATUTE DEVOID OF ANY STANDARD OF CULPABILITY

The Patent Act and relevant jurisprudence limit recovery for patent infringement under 35 U.S.C. 284 to compensatory damages, namely those actually incurred due to the infringement. See General Motors Corp. v. Devex Corp., 461 U.S. 648 (1983). Congress and the courts have consistently agreed that in order to recover more than compensatory damages for patent infringement, some measure of willfulness on the part of the infringer must be present. See Seymour v. McCormick, 57 U.S. (16 How.) 480 (1854); Aro Mfg. Co. v. Convertible Top

11

Replacement Co., 377 U.S. 476, 508 (1964); Dowling v. United States, 473 U.S. 207, 227 n.19 (1985); Fla. Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank, 527 U.S. 627, 663 n.15 (1999) (Stevens, J., dissenting) (quoting Read Corp. v. Portec, Inc., 970 F.2d 816, 826 (Fed. Cir. 1992)). In short, damages for patent infringement are limited to compensatory or actual damages unless the infringer acted with the requisite level of willful intent. And even if the infringement is willful, the patent owner may only recover at most three times actual damages. See 35 U.S.C. 284.

There is no rational basis for declining to apply the same standard for enhanced damages to Section 289 that undeniably applies to Section 284. Indeed, the history of Section 289 suggests exactly the opposite. More specifically, the history of Section 289 was discussed at length by the Federal Circuit in Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1441 (Fed. Cir. 1998). In that case, the Federal Circuit noted that the predecessor to Section 289 was enacted by the Act of 1887, 24 Stat. 387. Section 1 of the Act of 1887 did indeed establish that infringers profits were a measure of damages for design patent infringement. Nike v. Wal-Mart, 138 F.3d at 1441. However, as enacted in 1887, infringers profits were only available from an infringer knowing that the [design] has been so applied to an article of manufacture. Nike v. Wal-Mart, 138 F.3d at 1441 (quoting Section 1 of the Act of 1887)(emphasis added). In other words, the remedy available under what is now Section 289 was only available for willful infringement. Under that standard, the possibility of any damages being available under the precursor to Section 289 aligns with the requirement that the infringement be knowing, exactly as it does

12

today under Section 284. In other words, to the extent the precursor to Section 289 was intended to eliminate apportionment from the damages calculation for design patent infringement, it was only intended to do so in the context of willful infringement.

The design patent damages statute was not amended again until the Patent Act was codified under Title 35 in 1952. Nike v. Wal-Mart, 138 F.3d at 1442. When amended in 1952, the words knowing that the same has been so applied were omitted, thus transforming the damages statute from one requiring willful conduct into an innocent infringement scenario. In Nike, the Federal Circuit acknowledged that there is no apparent explanation for the deletion of the knowing phrase. Nike v. Wal-Mart, 138 F.3d at 1442. Nonetheless, the language was omitted thereby eliminating any intent element from the additional remedy for design patent damages.

Common sense suggests that to the extent the 1887 precursor to Section 289 authorized some heightened level of damages, it was tempered by the requirement that the infringement be knowing or willful. The elimination of any intent element from the statute in 1952 compels the conclusion that enhanced or exemplary damages should not be available under Section 289 today.

In addition, the 1952 amendments to Section 289 also added new language that the patent holder shall not twice recover the profit made from the infringement. Compare Act of 1887, 24 Stat. 387 with 35 U.S.C. 289. This new language would be meaningless if it were not intended as some form of cap on the damages that could be awarded under Section 289.

13

Taken in tandem, the two substantive amendments made to the language of Section 289 that the knowing requirement was eliminated and that the shall not twice recover the profit limitation was added indicate the intent of Congress that damage awards under Section 289 must bear a rational relationship to the actual damages attributable to the infringement.

In short, the evolution of Section 289 leads to only one proper conclusion: To the extent an additional remedy for infringement of a design patent is available, care should be taken that such a remedy is compensatory in nature and not punitive. However, and as demonstrated below, in the instant case and many others, damage awards using the Federal Circuits interpretation of Section 289 are undeniably punitive. In most cases, damages awards drastically exceed any actual damage resulting from the infringement. The Federal Circuits interpretation of Section 289 results in a mechanical award of defendants total profits regardless of whether those profits bear any relation to the actual injury suffered by the patent holder.

C. THE FEDERAL CIRCUITS INTERPRETATION OF SECTION 289 IMPROPERLY AWARDS DESIGN PATENT OWNERS DAMAGES ON ARTICLES THAT WERE DISCLAIMED

It is axiomatic that only a claim of a patent can be infringed. Stearns v. Tinker & Rasor, 252 F.2d 589, 596 (9th Cir. 1957). It is also long established that a clear disclaimer of claim scope takes the disclaimed subject matter outside the scope of the patent. See, e.g., Goodyear Dental Vulcanite Co. v. Davis, 102 U.S. 222, 227 (1880)([W]hen a patent bears on its face a particular

14

construction, inasmuch as the specification and claim are in the words of the patentee, it is reasonable to hold that such a construction may be confirmed by what the patentee said when he was making his application.); c.f., Crawford v. Heysinger, 123 U.S. 589, 602-04, 8 S.Ct. 399, 31 L.Ed. 269 (1887). Accordingly, under established law, disclaimed subject matter cannot contribute to patent infringement.

In the instant case as in many other design patent cases the Federal Circuits interpretation of Section 289, would entitle Nordock to Systems total profits on its entire dock leveler even though Nordock expressly disclaimed everything except the front end. But by illustrating everything in dashed lines except the lip and hinge plate, Nordock expressly dedicated to the public everything except the lip and hinge plate. See, supra, Statement of the Case, Section B. And as shown below, the contributions of a lip and hinge plate to an entire dock leveler are minimal. Below is a side-by-side view of an entire dock leveler next to Nordocks claimed lip and hinge plate.

15

Again, in the instant action, the testimony at trial was that the total profits of the claimed lip and hinge plate was only about $46,825 while the total profits on the entire dock leveler were between $630,000 and about $900,000. In other words, the profit made from the infringement was about $46,825; yet under the Federal Circuits interpretation of Section 289, Systems stands to be punished to the extent of at least thirteen times that amount. 35 U.S.C. 289 (emphasis added). There is no evidence that Congress intended this result when it enacted Section 289.

The injustice of such a result is especially disturbing in view of the safeguards that were introduced into Section 289 by Congress in 1952 as discussed above.

D. THE FEDERAL CIRCUITS ERROR IS HAVING A VERY REAL AND ACCELERATING IMPACT ON DESIGN PATENT LITIGATION

The Federal Circuits interpretation of Section 289 damage awards has created an environment where design patent owners are hurrying to cash in on the exorbitant damages now made available. Neither the Apple v. Samsung case nor the instant case are unique. Several other recent design patent defendants are suffering from the same injustice as both Systems and Samsung.

For example, the Pacific Coast Marine Windshields v. Malibu Boats case illustrates how district courts have applied the Federal Circuits draconian interpretation of Section 289 to reach unjust results. See, Pacific Coast Marine Windshields, Ltd. v. Malibu Boats, LLC et al., 6:12-cv-00033 (FLMD). In Pacific Coast, plaintiff owned

16

a design patent covering only a windshield design for a boat, yet defendant sold only entire boats. Shown below is a comparison of the patented design on the right with Malibus boat on the left:

Despite the obvious disparity, the district court ruled that Pacific Coast could recover Malibu Boats total profits on the entire boat even though the design patent only claims the windshield and even though Pacific Coast does not make or sell boats.

Equally as compelling is the recently-filed case of Microsoft Corporation v. Corel Corporation, Case 5:15-cv-05836 (CAND). In that case, Microsoft sued Corel for infringement of a number of patents, including five utility patents and four design patents. Using the Federal Circuits interpretation of Section 289, infringement of any one design patent would lead to an award of all of Corels profits for the entire accused product.

17

Below is a reproduction of one of Microsofts claimed designs, which is a graphical element used to scale the visible size of an electronic document.

And below is a reproduction of the Corel accused product purportedly using the claimed invention of Microsofts design patent.1 The portion circled in red is the accused element.

1. The particular patent-in-suit was awarded the Electronic Frontier Foundations Stupidest Patent of the Month award for December of 2015. See https://www.eff.org/deeplinks/2015/12/stupid-patent-month-microsofts-design-patent-slider

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Under the Federal Circuits interpretation of Section 289, the damages available for infringement of the single graphical element circled in red will be the total profits on the entire accused product, i.e., the whole word processing program.

The Federal Circuits rigid analysis achieves what can only be considered unjust results. Using the Federal Circuits analysis, regardless of how small or insignificant an infringing component is, if it is attached to a larger product, then the total profits for the entire product must be awarded as design patent damages. Absurd results become immediately apparent. For instance, if a patented design is applied to a carpet, does the patent holder recover the total profits for the building in which the carpet is installed? As Samsung points out in its brief, if a cup holder is attached to an eighteen-wheeled truck, is the profit for the entire truck available to one who holds a patent for the cup holder? These questions have never been addressed by this Court. It is time they are.

E. THE PETITION SHOULD BE GRANTED TO PROVIDE GUIDANCE REGARDING THE PROPER ARTICLE OF MANUFACTURE

The foregoing cases, and many others, highlight the lack of any guidance regarding what constitutes the infringing article of manufacture for the purpose of Section 289. More specifically, Section 289 authorizes infringers profits for any article of manufacture to which the claimed design is applied. 35 U.S.C. 289. Article of manufacture is not defined in Section 289.

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In the Apple v. Samsung case, Samsung argued that early design patent cases, such as Bush & Lane Piano Co. v. Becker Bros., 222 F. 902, 903 (2d Cir. 1915), compel a narrow interpretation for article of manufacture as being only the portion of the product to which the design is actually applied. See Apple Inc. v. Samsung Elecs. Co., 786 F.3d 983, 1002 (Fed. Cir. 2015). The Federal Circuit addressed Samsungs argument and rejected it without any meaningful analysis. In essence, the Federal Circuit distinguished the cases cited by Samsung on the grounds that they were factually different. The Federal Circuit concluded that the innards of Samsungs smartphones were not sold separately from their shells as distinct articles of manufacture to ordinary purchasers. Id.

The Federal Circuits discussion of what constitutes the accused article of manufacture appears to implicate the smallest salable unit analysis that the Federal Circuit has held applies in the computation of a reasonable royalty. See, e.g., VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1326 (Fed. Cir. 2014). In VirnetX v. Cisco, the Federal Circuit noted that the smallest salable unit approach was intended to produce a royalty base much more closely tied to the claimed invention than the entire market value of the accused products. VirnetX, 767 F.3d at 1327. However, the Federal Circuit then concluded that the analysis did not stop there. The Federal Circuit ruled that when performing the reasonable royalty analysis, the patent holder must first identify the smallest salable unit to establish the royalty base, and then perform the apportionment analysis. Id.

By analogy, a proper determination of damages under Section 289 should follow a similar framework. First,

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using the Federal Circuits reasoning in VirnetX, the patent owner should be required to identify exactly what the article of manufacture is for infringement under Section 289, and that article of manufacture should bear a close relation to the claimed invention. VirnetX, 767 F.3d at 1327. As noted by the Federal Circuit, that analysis is independent of any apportionment that may or may not be done.

As demonstrated above, the Federal Circuits interpretation of Section 289 is devoid of any analysis or even recognition that the article of manufacture must be identified before a profits analysis can be performed. Only after that is done should a patent owners entitlement to an infringers profits be considered.

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CONCLUSION

Systems petition for a writ of certiorari should be granted. The Federal Circuits erroneous interpretation of Section 289 is having a significant detrimental impact on patent litigation today, and the problem appears to be worsening rapidly. Such an unjust result cannot have been envisioned, or even contemplated, by Congress when it drafted the language of Section 289. It is time for this Court to review the Federal Circuits rulings and correct the error.

Dated: January 28, 2016. Respectfully submitted,

PhIlIP P. MannCounsel of Record

tIMothy J. BIllIckMann law GrouP1218 Third Avenue, Suite 1809Seattle, Washington 98101(206) 436-0900phil@mannlawgroup.comtim@mannlawgroup.com

John whItakerwhItaker law GrouP1218 Third Avenue, Suite 1809Seattle, Washington 98101(206) 436-8500john@whitaker.law

DavID a. affelDtaffelDt law offIces, s.c.8741 W. National AvenueWest Allis, WI 53227414-321-4560david.affeldt@affeldtlaw.com

Counsel for Petitioner

Appendices A-C.pdfAppendix AAppendix BAppendix C

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