March 5, 2013
Law360
Authored by Elizabeth D. Ferrill and Robert D. Litowitz
In the eyes of many, the $500 million awarded by a California jury in Apple Inc. v. Samsung Electronics Co. Ltd. for design patent infringement has revitalized the business case for design patents. But, the denial of injunctive relief to Apple creates uncertainty about the "right to exclude" with design patents even after infringement has been established.
The holdings in Apple present design patent owners with a dilemma—protect only the most innovative parts of their article and increase their chances of proving infringement and thus damages while decreasing the prospects for an injunction, or protect their entire article in the hopes of obtaining an injunction, but thereby possibly decreasing the chances of establishing infringement in the first place.
Prior to 1980, the U.S. Patent and Trademark Office (USPTO) required an applicant for a design patent to claim a discrete article in full, using solid lines. But, Hajo Zahn applied for a design patent claiming only the shank of a drill bit, with the cutting portion of the bit depicted in broken lines. While Zahn's application depicted the entire drill bit, he only claimed the design of the shank. After the USPTO rejected the application, the U.S. Court of Customs and Patent Appeals, the predecessor to the Federal Circuit, held that a design for an article of manufacture may be embodied in less than the entire article.1 What followed was a sea change in design patent prosecution. For the first time, practitioners did not need to protect the entire article in one claim, but could instead create a set of complementary claims covering not only the design of the client's full article, but also its subparts.
Today, carefully prosecuted design patent applications often make use of this technique by claiming only the innovative, ornamental elements of an article in solid lines, and depicting remaining unclaimed portions in broken lines. By eliminating the extraneous detail, the resulting design patent is arguably broader, depriving competitors of easy design-around options.
Claiming only a portion of an article has advantages, in theory, because a finding of infringement should be more likely. When only a portion is claimed, the ordinary observer need only find the overall appearance of a portion of the accused article similar to the accused design. For instance, if the design patent depicted the bottom of a product in broken lines, then for the purposes of infringement, the ordinary observer would not need to consider the appearance of the bottom of the claim or the accused product.
But, depending on the situation, both the full article claim (sometimes called a "picture claim") and the portion claim are useful. For instance, manufacturers have used design patents to protect entire replacement parts from automobile fenders to disposable razors, whereas in 2008, Nike Inc. filed suit against Wal-Mart Stores Inc. on its design patent protecting only the back "springs" of its sneaker.
Once infringed, a design-patent plaintiff has a number of remedy options. For damages, the landscape is relatively well established. The patentee may select either damages under Section 284, including reasonable royalties or lost profits, or the additional remedy under Section 289 of "total profits" on the sale of the article. These "total profits" are not to be apportioned, meaning that profits on the entire article are recoverable even when the design does not claim the entire article. In deciding which type of damages to pursue, the patentee may consider the damages to its business, the potential future royalty stream, and the accused infringer's profits.
But, the story is different for injunctions. Following Winter v. Natural Res. Def. Counsel Inc., and eBay v. MercExchange, the standard four-prong test for injunctions in patent cases is clear. The patentee must show that (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in the absence of preliminary relief; (3) that the balance of the equities tips in the patentee's favor; and (4) that an injunction is in the public interest.
Similarly, to receive a permanent injunction, the patentee must show (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that the balance of hardships between the parties warrants a remedy in equity; and (4) that the public interest would not be disserved by a permanent injunction. But there is little direction from the courts on how to apply these tests to design patent cases. Following Winter, the Federal Circuit has addressed the issue of preliminary injunction for a design patent in only two instances.2 The Federal Circuit has yet to consider the issue of a permanent injunction for a design patent, but will likely do so in the near future.
The irreparable harm prong appears to a sticking point for design patent owners seeking either type of injunction. The Federal Circuit has explained that not only must the patentee show that it will suffer irreparable harm absent the injunction; it must also show a "sufficiently strong" causal nexus between the alleged harm to the alleged infringement.3 It is unclear, however, what type of evidence could adequately demonstrate this nexus for a design patent claiming only a portion of an article's design.
One of the patents that Apple asserted against Samsung claimed only the front portion of the smartphone, disclaiming the sides and back of the phone by depicting those portions in broken lines.4 At the preliminary injunction stage, to establish the nexus, Apple provided evidence that a percentage of smartphone purchasers bought the iPhone because of its design. But in denying the injunction, the district court characterized this evidence as "a small percentage" and concluded that the evidence was "even more ambiguous in light of the fact that Apple's patents do not claim the entire article of manufacture."5 On appeal of the denial of the preliminary injunction, the Federal Circuit affirmed, noting that the patentee must show that the infringing feature drives consumer demand for the accused product.6
At the permanent injunction stage, the district court again found that Apple's evidence failed to establish that any of Apple's three infringing design patents (two to portions of a smartphone and one to a user interface) covered a particular feature that actually drives consumer demand.7 The court characterized Apple's evidence regarding how consumers choose smartphones to be "ambiguous."8 The court noted, "Apple made no attempt to prove that any more specific element of the iPhone's design, let alone one covered by one of Apple's design patents, actually drives consumer demand."9 On appeal, Apple has argued that this standard seems "extremely difficult to satisfy"10 "if not impossible"11 and inequitable.
In the utility patent context, the Federal Circuit's decision in i4i v. Microsoft is instructive. Although the patent claims were directed to only a portion of Microsoft's infringing product, the Federal Circuit affirmed the permanent injunction.12 But, the injunction was narrow in scope, covering only products with the infringing feature purchased after a particular date. Rather than focusing on the demand for the patented feature, the court's irreparable harm analysis focused on the result of Microsoft's infringement—i4i's product was rendered obsolete and it lost much of its market share. By analogy, the i4i decision suggests that an irreparable harm may be easier to establish when the infringing product adopts a particularly unique and identifiable design feature. Further, when the design feature is particularly identifiable, it follows a patentee could show that this feature drives consumer demand.
These recent holdings suggest that to establish a causal nexus for irreparable harm, the patentee must prove that that claimed feature(s) drives consumer demand for the patentee's product. This burden is notable in two respects. First, it requires that the patentee's product actually embody the claimed design, which is not a requirement for proving infringement or damages. Second, if the claimed design is limited to portions of the article, then the patentee must prove that those portions of the article drive consumer demand.
For instance, if a patentee chooses to conduct a survey, the survey would need to establish that customers bought the product because of the specific feature claimed in the design patent, not other unclaimed features of the product. Arguably, the patentee would also need to show that the consumer's interest in the accused product is not due to some functional part of the claimed design. If the infringing design patent covers an entire article, then this survey should be relatively easy to conduct. But, it seems much harder when the survey asks consumers to parse out only certain features. As yet, no court has issued an injunction under the Federal Circuit's new test.13 Perhaps injunctions in design patents are limited to only straight knockoffs, but only time will tell.
If companies could look in a crystal ball, then they would know if they wanted an injunction or damages and could prosecute patents accordingly. But in the real world, if a company hopes to solve the remedy dilemma and fully protect its product designs, then it must strategically prosecute a quiver full of design patents, ranging from patents protecting specific innovative features to patents covering the entire article.
Depending on your industry, it may be advantageous to prosecute claims covering only the most innovative aspects of your products. While these patents may not eventually enjoin your competition, you may be able to take a bite out of their bottom line through an award of damages, which may include the defendant's total profits.
But to successfully exercise the "right to exclude," patentees must focus on proving the requisite nexus between infringement of a design and irreparable harm. That proof most powerfully will come in the form of consumer surveys carefully designed to test whether a design in fact drives consumer demand for the product at issue.
In sum, design patents are like Aesop's fabled bundle of sticks. A single design patent alone is not as powerful as a collection of thoughtful design patents. Just as a company would not likely prosecute a utility patent with a single claim, a single design patent may offer little protection. But, a collection of patents carefully prosecuted with your competitors in mind may prove lucrative in damages as well as effective in injunctive relief.
1 In re Zahn, 617 F.2d 261 (CCPA 1980).
2 Titan Tire Corp. v. Case New Holland, 566 F.3d 1372 (Fed. Cir. 2009); Apple Inc. v. Samsung Electronics, 678 F.3d 1314 (Fed. Cir. 2012).
3 Apple Inc. v. Samsung Electronics Co. Ltd., 695 F. 3d 1370, 1374 (Fed. Cir. 2012).
4 D618,677.
5 Apple Inc. v. Samsung Electronics, 678 F.3d at 1321.
6 Id. at 1324, 1326.
7 Apple Inc. v. Samsung Electronics, No. 11-cv-01846, at 8 (N.D.Cal. Dec. 17, 2012).
8 Id. at 4.
9 Id. at 8.
10 Petition for Initial Hearing En Banc, Apple Inc., v. Samsung Electronics, No. 2013-1129, - 1146, (Fed. Cir. Jan. 13, 2013).
11 Brief for Plaintiff-Appellant Apple Inc., Apple Inc., v. Samsung Electronics, No. 2013-1129 (Fed. Cir. Feb. 12, 2013).
12 i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831, 861-862 (Fed. Cir. 2010).
13 Hutzler Manufacturing Co. v. Bradshaw Int'l Inc., (July 25, 2012) (granting a preliminary injunction on the design for a garlic container, where the issue was briefed and argued before Apple and did not discuss the new test).
Originally printed in Law360 (www.law360.com). Reprinted with permission. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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