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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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Historical Overview
Design Patent’s “Total Profits” Remedy
March 22, 2017
Christopher V. Carani, Esq.
[email protected]
ccarani
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© 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
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“The Patent Trial of The Century”?
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Largest Patent Infringement
Jury Verdict (at the time)
Verdict: $1,049,343,540.00
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Design Patent Remedies
• Lost Profits
• Reasonable Royalty
• Infringer’s Total Profits
• Statutory Damages ($250)
• Injunction (Preliminary, Permanent)
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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
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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
-Preliminary Injunction
-Permanent Injunction
- Reasonable Royalty
- Lost Profits
Copyright -Preliminary Injunction
-Permanent Injunction
- Lost Profits
- Infringer’s Profits
- Statutory Damages
Trade
Dress
-Preliminary Injunction
-Permanent Injunction
- Lost Profits
- Infringer’s Profits
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© 2017 Christopher V. Carani
Set the way back machine…1885
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U.S. Civil War (1861-65)
The Battle of Fredericksburg of 1862 by N. Currier
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Mr. John Gorham
Gorham Manufacturing Co.
Gorham v. White, 81 U.S. 511 (1871)
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Mr. John Gorham
Gorham Manufacturing Co.
Gorham v. White, 81 U.S. 511 (1871)
INFRINGEMENT
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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
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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
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Dobson v. Dornan, 118 U.S. 10 (1886)
D6822
$1320.50 + Injunction
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Dobson v. Dornan, 118 U.S. 10 (1886)
D6822
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United States Congress, 1887
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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.”
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The Design Patent Act of 1887 H.R. Rep. No. 1966 at 1 (1886), reprinted in 18 Cong. Rec. 834 (1887)
“it is the design that sells the article.”
“…the infringer's entire profit on the
article should be recoverable,” for
“it is not apportionable,”
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The Design Patent Act of 1887 H.R. Rep. No. 1966 at 1 (1886), reprinted in 18 Cong. Rec. 834 (1887)
“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.”
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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
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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
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The Design Patent Act of 1887 (Ch. 105, Laws of 1887)
D6822
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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
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“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.”
35 U.S.C. §289 (current)
(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
Manufacturer
Retailer
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“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.”
35 U.S.C. §289 (current)
(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
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© 2017 Christopher V. Carani
“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.”
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35 U.S.C. §289 (current) Whoever Does X Gets Y
(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
X
Y
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© 2017 Christopher V. Carani
Fast forward…1998
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Nike v. Wal-mart, 138 F.3d 1437, 1448 (Fed. Cir. 1998)(J.Newman)
INFRINGEMENT
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“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)
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• 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)
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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
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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
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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
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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
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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
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© 2017 Christopher V. Carani
Apple, Inc. v. Samsung Elecs. Co.,
11-cv-1846 (N.D. Cal . 2012)
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Apple, Inc. v. Samsung Elecs. Co.,
Apple Design Patents-in-Suit
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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
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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
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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
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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
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Apple v. Samsung,
Up & Down
District Court
Federal Circuit
Supreme Court Federal
Circuit District Court
$399mil
Affirmed
Reversed
&
Remanded Remanded
PENDING
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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)
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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
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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
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© 2017 Christopher V. Carani
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]
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Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
Implications of Damages Analysis
Elizabeth Ferrill
March 23, 2017
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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
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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.”
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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….”
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Supreme Court December 2016 Opinion
• Outlined analysis for damages under §289
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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
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Supreme Court December 2016 Opinion
• Holding: “Article of manufacture” = “product sold to
a consumer” or “component of that product”
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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
the AOM
Step 1 Step 2
Single Component
Product = AOM
(e.g., dinner plate)
Multi-Component Product
“More difficult”
(e.g., kitchen oven)
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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 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)
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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?
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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)?
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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?
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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”).
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Purchaser’s Motivation
• Is the purchaser motivation for buying the article
attributable to the design? or something other
“intrinsic merits” of the article?
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Purchaser’s Motivation
• Is the purchaser motivation for buying the article
attributable to the design? or something other
“intrinsic merits” of the article?
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Purchaser’s Motivation
• Is the purchaser motivation for buying the article
attributable to the design? or something other
“intrinsic merits” of the article?
1954 Alfa Romeo B.A.T. 7 1954 Alfa Romeo B.A.T. NTF
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Purchaser’s Motivation
• 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
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Purchaser’s Motivation
• 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
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Purchaser’s Motivation
• 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
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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
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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
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Supreme Court December 2016 Opinion
• Step 2: Calculate the infringer’s total profit on that
article of manufacture
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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”)
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Likely New Framework
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
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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?
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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?
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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?
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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
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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
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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
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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
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81 81
Portion of a Design, But Unique
Dishwasher Handle Infringing Product
AOM End
Product
Infringed
Design
Page 82
82 82
Portion of Design for Larger Product
Cup Holder Ferrari
AOM End
Product
Infringed
Design
Page 83
83 83
Portion of Design for Larger Product
Cup Holder Ferrari
End
Product
Infringed
Design
AOM
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84 84
A Part, But an Iconic Part
End
Product ?
Infringed
Design
Civic-DeLorean Hybrid DeLorean Door Patent
AOM
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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.
Page 88
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
Page 89
BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 89
Overview
• What do these decisions mean?
– For design patentees
– For design patent applicants
Page 90
BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 90
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
Page 91
BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 91
What Do Most Infringements Look Like?
and
What Do Most Infringers Look Like?
Page 92
BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 92
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.
Page 93
BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 93
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
Page 94
BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 94
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
Page 95
BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 95
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
Page 96
BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 96
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
Page 97
BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 97
What if §289 is further weakened?
Page 98
BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 98
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
Page 99
BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 99
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
Page 100
BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 100
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
Page 101
BANNER & WITCOFF | DESIGN PATENT DAMAGES | MARCH 23, 2017 101
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
Page 102
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!