Several years ago, my father and I were driving in my new car, an Infiniti. I was proud of the leather seats, the powerful engine, and the stereo system. My dad mentioned all of that, but he also made note of the white, analog clock on the dashboard, commenting, “Ah, the distinctive Infiniti clock.” The clock might have been distinctive, but neither he nor I thought it contributed to the car’s overall value, and it certainly was not what made the car profitable for the manufacturer or dealer. Yet under a provision of American patent law, if Infiniti’s clock had infringed on someone else’s design patent, Infiniti would have been liable to the patent holder for all of its profits earned on the car. Not just the profits attributable to the clock: all of the profits attributable to the car.
If that rule sounds like a problem, it is. It risks overcompensating a patent holder for value created by features other than his invention. It puts a manufacturer in such jeopardy that it might be feasible to defend against a charge of infringement, rather than to capitulate and settle. And, for anyone manufacturing a complex product that could infringe on more than one design patent, it puts the manufacturer at risk of having to pay a multiple of its profits, merely because it infringed on a design patent that was inconsequential to the manufacturer’s product.
How did we get here? Federal law allows for design patents for any “new, original, and ornamental design for an article of manufacture.” Articles of manufacture can include parts of a whole product, ornamental attachments, and even images or patterns. Design patents have been issued for new fonts, carpet patterns, cell phone shapes, and graphical user interface designs, among other things. In 1887, the Supreme Court decided Dobson v. Dornan, a case in which two brothers were found to have infringed patented designs for carpets. The Supreme Court held that the brothers were liable for no more than nominal damages of six cents because the patentees could not show what portion of their losses or the infringers’ profits was due to the patented design and what part was due to the unpatented carpet. Congress felt that the Supreme Court’s decision would discourage design patents, so it enacted a legislative fix, which is now found at 35 U.S.C. § 289, and which provides that, if someone infringes a design patent, he shall be “liable to the owner to the extent of his total profit.” Courts interpreting this statute have held that it does not require a plaintiff to “apportion” its damages, meaning that the plaintiff does not have to determine what part of a defendant’s damages came from the infringing part of the product. Instead, the plaintiff can recover all of the profits for the whole product. This rule is substantially different from the rule that applies to utility patents – patents that apply to function rather than form, generally.
The design patent rule poses at least two potentially significant problems. First, it risks dramatically overcompensating the holder of a design patent. In my hypothetical, someone who patented the design for an analog clock mounted on a car dashboard would receive all of the profits associated with the sale of a luxury vehicle. Those profits, though, are a product of all of the car’s features, with the clock contributing little or nothing to that profit. If the design patent holder were to recover all of those profits, it would be getting the profits not only for its own invention, but for the inventions and design work of everyone else who contributed to the design of the car and engineering that makes it run smoothly. The design patent holder did not create those profits, and it seems strange that the law would award them to him. Indeed, for utility patents the law requires a plaintiff to apportion its claimed damages between the patented and non-patented features of a product in order to avoid such a windfall.
A second problem with the measure of damages for design patents is that it creates a risk that a company that manufactures a complicated product could have to pay its profits to several different patent holders. In today’s world, many products, be they cars, smartphones, or televisions, contain many features, including design elements that could touch on multiple different patents. For example, a new smart television might have a beveled edge, rounded corners, and a unique on-screen font, each of which could be subject to a design patent. If the manufacturer infringed all three, it could wind up paying triple its profits on each television set. The risk of such multiple damages payments could, in turn, stifle innovation as manufacturers fear the hidden costs of new designs. In addition, it could create a race to the courthouse, as design patent holders want to be the first to sue, and first to recover, against a manufacturer that might have some limit to its ability or willingness to pay, or settle, claims. Again, the law of damages is different for utility patents, as it imposes various limits on the damages that a patent holder can recover.
These are not idle concerns about abstract language in U.S. patent law. Design patents were part of Apple’s litigation against Samsung over Samsung’s Galaxy line of cell phones. In August 2012, a jury in California awarded Apple more than $1 billion in damages because it concluded that Samsung copied some features for which Apple had design patents, including the ornamental design of a graphical user interface on an iPhone and elements of the design of the front face of the phone. Pursuant to Section 289, the jury awarded Apple all of Samsung’s profits on the phones at issue – totaling more than $1 billion. With awards like that, it is a near certainty that more design patent infringement lawsuits are sure to follow.
Congress adopted Section 289 more than 125 years ago. Regardless of whether it was good policy then, the passage of time, and technological advances, make it problematic today. There are high-profile cases making their way through courts, including the Apple vs. Samsung case, but Congress should consider addressing design patent damages now, as part of its larger patent reform package, to prevent future abuses. There are many potential solutions to this problem, including applying some doctrines from the law of utility patent damages to design patent damages, or making the process for obtaining a design patent more rigorous, or requiring a design patent holder to make a more definitive showing of infringement before awarding damages. Each of these solutions has merits, and each has flaws. What is clear, however, is that something should be done, preferably now, before damages awards under Section 289 get out of hand.
