'; Design patents now more complicated

Design patents now more complicated

August 3, 2017 Chicago Daily Law Bulletin

Design patent practice has changed significantly over the past decade. In late 2008, the Federal Circuit, sitting en banc, issued a unanimous opinion in Egyptian Goddess, Inc. v. Swisa, Inc., that addressed the test for whether a design patent has been infringed. Most commentators agree that Egyptian Goddess strengthens design patents because it simplifies and clarifies the presentation required to demonstrate infringement. The term of design patents was subsequently extended by statute from fourteen to fifteen years from issuance.

Most recently, in December 2016, the Supreme Court held in Apple v. Samsung that damages for infringement of a design patent having multiple components can be limited to the profits attributable to individual components, rather than the total profits earned on the entire product. The Court’s decision in the ongoing Apple v. Samsung litigation means that calculating damages for design patent infringement is now more complex and fact-intensive.

Design patents protect the ornamental aspects of manufactured articles. To qualify for protection, the design must be new, original, non-obvious and not inherently functional. When issued, the patent owner has the right to exclude others from making, using and selling the design. Unlike utility patents, this right is not subject to payment of periodic maintenance fees.

A further distinction between design patents and utility patents is how damages for infringement can be calculated. In addition to remedies available under the patent statute common to utility patents, namely lost profits and a reasonable royalty, there is an additional remedy for infringement of a design patent. 35 U.S.C. § 289 provides that when an infringer applies the patented design to an “article of manufacture,” the infringer is liable to the design patent owner to the extent of the infringer’s “total profit.”

The Court’s opinion in Apple v. Samsung reversed and remanded a decision by the Federal Circuit that awarded Apple the total profit Samsung earned on smart phones which had multiple components that were covered by several design patents. Since consumers could not purchase a phone’s component parts separately, the Federal Circuit held that the “article of manufacture,” as used in § 289, could only mean the phone itself. Accordingly, the total profits based on sales of the entire phone were deemed to be the appropriate measure of damages. The Supreme Court reversed and held that the term “article of manufacture” might encompass either the product sold to a consumer or a component of that product. The standard for determining whether damages are properly based on the product sold or an included component was left to the lower courts. In holding that damages under § 289 could be limited to profits attributable to a component, the Court acknowledged the challenges inherent in such an analysis.

To take advantage of § 289, design patent litigants will now have to argue which of two potential damage formulas, i.e., profits attributable to one or more components or total profits from the final product, should apply in their case. The difficulty of presenting these analyses may make § 289 effectively unavailable for infringement of anything other than a single-component product, or infringement of a design patent that is directed to the design of only a discrete and separable portion of a product. This may mean that a reasonable royalty, which requires that a court undertake a hypothetical negotiation between the patent owner and the infringer to determine the royalty the patent owner would have taken and received had it licensed the patent to the infringer, will become a more common basis for damages in design patent litigation.

The Supreme Court’s ruling will also encourage those preparing design patent applications to draft the application to cover an entire product, or substantially all of that product, even though such an application is arguably narrower than one that covers only a portion of a product. It may now also be even more desirable to file multiple design applications when bringing a product to market – one application directed to the entirety of the product, and other applications directed to the design of component parts, or to different aspects of the overall design. But one thing is clear: in many instances drafting and enforcing design patents will be more complex in light of the Court’s holding in Samsung v. Apple.