In December 2016, the U.S. Supreme Court issued its unanimous decision on design patent litigation in Samsung Electronics Co. v. Apple. This landmark ruling follows the years-long legal battle between Apple and rival smartphone manufacturer Samsung over how damages are determined for non-functional design patents when the design patents apply to only a component of the phone, not the full device.
Prior to that landmark Supreme Court ruling, total profit damages for design patent infringement, a legal concept that dates back to the nineteenth century, were awarded for design patents covering much simpler products. Today, however, many consumer products are far more complex. For example, estimates show that there are more than 250,000 patents integrated into a singular smartphone.
A retrial was ordered to take a fresh look at design patent infringement remedies in light of the Supreme Court ruling. Now it is up to the Northern District Court of California and Judge Lucy Koh to craft a fitting test that provides adequate protection for design patent holders while ensuring that remedies stemming from design patent infringement are reasonably calculated. Judge Koh proposed a four-part test, initially proposed by the U.S. Solicitor General, for determining the article of manufacture.
More than a year following the High Court decision, startups and innovators wait anxiously for the critical guidance on the construction of an appropriate test for determining the article of manufacture and subsequent remedies.
On February 7, 2018, Engine Advocacy convened a group of experts for a panel discussion at the National Press Club to highlight the developments which have emerged since Supreme Court decision over a year ago. Principal among the topics discussed were the challenges the current test is likely to create for entrepreneurs and businesses of all sizes.
The panel discussion, “Design Patents and Defining the Article of Manufacture – One Year Later,” was moderated by Julie Samuels, President of the Board at Engine Advocacy and Executive Director at Tech:NYC. The expert panel also featured Charles Duan, Senior Fellow and Associate Director of Tech and Innovation Policy at R Street Institute; G. Nagesh Rao, a 2016 USA Eisenhower Fellow and former Patent Examiner and Senior Policy Advisor at the USPTO; and Matthew Levy, former Patent Counsel at the Computer and Communications Industry Association (CCIA).
As the panelists agreed, the Supreme Court’s 2016 decision marked a historic change for future design patent disputes and the calculation of associated infringement remedies. However, the Supreme Court stopped short of stipulating how to determine the relevant “article of manufacture” to which the protected design is applied, and there are differing opinions.
Though the test, as proposed, is far too broad and would be inherently difficult for judges and juries to interpret, at the very least it makes clear that the article of manufacture must be something less than the entire device. However, it is imperative that the proposed test is simplified in an attempt to offer clarity for all innovators, but especially startups. The test Judge Koh put will foster an environment of increased uncertainty.
The limited legal guidance within and subjective nature of the test which is set to be implemented is likely to hinder startups’ ability to secure the outside capital they need for need for growth. This effect has the potential to harm startups focused on emerging technologies most acutely, because disruptive innovation is always a high-risk venture.
The crafting and establishment of this test presents a uniquely impactful opportunity to aid startups and entrepreneurs by protecting those who are subject to a frivolous claim from a patent troll or perhaps larger competitor hoping to maintain their market sector lead. A sensible test would also aid those who want to protect their often massive investments in research and the duration of their intellectual property protected innovations.
Engine advocates to advance the interests of startups and attracting the capital investments needed for growth is a chief concern among our community. The vague test, as proposed, creates additional variables which hinder development and reduce incentives. Conversely, a universally fitting test would help startups attract investors, rather than decrease the appeal of investing into groundbreaking technology, which is often already a relatively uncertain venture.
Engine Advocacy and the startups and innovators which we support look forward to the establishment of a simple, clear, and fair test which clarifies the design patent law which is critical so that our innovation economy can continue to flourish.
