Apple v. Samsung: Justifying Profit Disgorgement

AppleBriefApple has filed its merits brief defending the longstanding principle of profit-disgorgement as a remedy for design patent infringement. [AppleResponse]

The statute states that an adjudged infringer “shall be liable to the owner to the extent of his total profit.” 35 U.S.C. 289.  Apple argues that the lower courts are correct in finding that Samsung should be liable for profits associated with sales of its Galaxy phones that were adjudged to be infringing Apple’s iPhone design patents.

Apple writes:

The only issue before this Court is whether Samsung will be able to avoid fairly compensating Apple for its adjudicated infringement. Samsung takes aim at 35 U.S.C. § 289, which provides that a design patent infringer is “liable … to the extent of his total profit” on the “article of manufacture” to which the patented design has been applied. Congress enacted this remedy because it recognized that “it is the design that sells the article” and, because profits attributable to design are often “not apportionable,” “[i]t is expedient that the infringer’s entire profit on the article should be recoverable, as otherwise none of his profit can be recovered.” 18 Cong. Rec. 834 (1887). As the Solicitor General correctly notes (Br. 10-15), Samsung’s effort to read an apportionment requirement into § 289 is at odds not only with the statute’s plain language, but also with Congress’s contemporaneous explanation that the remedy was enacted in response to decisions of this Court taking exactly the approach Samsung now advocates. And as the government also correctly explains (Br. 16-31), identification of the relevant “article of manufacture” on which § 289 allows an award of total profit is a factual question for the jury on which the defendant bears the burden of proof. . . .

Samsung invokes highly speculative policy grounds that it believes justify upending the settled interpretation of a statutory remedy first adopted in 1887, readopted in 1952, and left unchanged since then. Samsung’s arguments are addressed to the wrong branch of government: It is not for this Court to decide whether to alter the statutory balance that Congress has chosen and left undisturbed for decades. Samsung’s farfetched hypotheticals are just that; and they ignore the reality of this case. Samsung is a sophisticated company that chose to copy the design innovations of its biggest competitor and profited significantly from doing so. That is precisely the type of conduct Congress long ago decided deserves an effective remedy.

What makes this case so big is the numbers involved – Here, the profits disgorged are hundreds of millions of dollars.

Noted design patent attorney Perry Saidman filed an amicus brief supporting Apple’s case on behalf of a group of companies that rely upon design patents in their business.  Saidman argues that design patents are critical to allow companies to protect ‘visually striking products’, and that the profit disgorgement “gives teeth to design patents” in a way that promotes settlements.   [AppleSaidman]

An additional supportive brief was filed on behalf of a group of “113 distinguished industrial design professionals and educators.”  The brief – filed by Mark Davies – argues that a product’s visual design is critically important in the sales of complex products. “[A] product’s visual design has powerful effects on the human mind and decision making processes, and eventually comes to signify to the consumer the underlying function, origin, and overall user experience of that product. [AppleDesigners]

The these two friend-of-the-court briefs are interesting in that they essentially make the same argument that I made in my old paper on Design Patents as Trademarks.

= = = = =

Oral arguments for the case are set for October 11, 2016 in Washington DC.

54 thoughts on “Apple v. Samsung: Justifying Profit Disgorgement

  1. 7

    I’m curious to everyone’s opinion: with trade dress, what exactly IS the purpose for granting design patents?

  2. 6

    I’d be curious to know what design patents looked like in, say, 1885 (when this portion of the statute was apparently drafted), how many patents were applied for, how many were granted, what the examination was like, and what sort of lawsuits were being filed.

    Did Ford ever get sued for infringing the ornamental design of, say, the steering wheel or door handles on the Model T? Anybody know? Or maybe Ford just settled with the patentee because of the massive potential damages?

    1. 6.1

      You can see images of early design patents using the PTO’s patent number search. For example, “D2” is a design patent from 1843 for a design impressed into a metal comb “which consists of a female figure having in her hands and over her head festoons of flowers in which is inscribed the motto ‘Forget me not’ …”

      D016000 is from 1885 – a floral design for carpets

        1. 6.1.1.1

          What…?

          No indignation at someone grubbing, er, grabbing a design patent for a female figure or for floral designs….?

          Maybe some samples from Ancient Greece are in order….

          1. 6.1.1.1.1

            No indignation at someone grubbing, er, grabbing a design patent for a female figure or for floral designs….?

            I haven’t seen the claims. I wasn’t referring to their potential obviousness. I was referring to the fact that the designs are ornamental in character. You know, as opposed to a handheld computer display that’s (be sure to sit down!) rectangular with curved corners.

            Maybe some samples from Ancient Greece are in order….

            Go for it.

            1. 6.1.1.1.1.1

              You do not think that the (arbitrary) shape of and object is ornamental…?

              O Rly?

              Just what does your “junky” meter run on?

              Never mind – I really don’t want to know.

              1. 6.1.1.1.1.1.1

                (arbitrary) shape

                LOL!

                Love the parentheses. Love them!

                Sure, rounded corners and a rectangular shape are totally arbritary choices for a display.

                LOLOLOLOLOLOL

                But you’re a very serious person.

  3. 5

    Saidman argues that design patents are critical to allow companies to protect ‘visually striking products’

    Visually striking, you say. You mean like round corners?

    1. 5.1

      That is actually arguing that a proper 103 test for design patents is the issue that should be before the Supremes here, rather than just design patent infringement damages. You are not the only one who thinks that, but it cannot now be done in this case. WHY not is a very good question for Samsung’s attorneys.

          1. 5.1.1.1.1

            PS They agreed the patents were valid and infringed.

            … after spending a zillion dollars arguing that the patents weren’t valid or infringed. “Agreed” kinda fudges the history here. The actual facts are more like “Samsung made a business decision that continuing to fight over those issues wasn’t worth the expense.”

            1. 5.1.1.1.1.1

              There is no “fudging history” except your attempt to somehow not come to the proper conclusion of things.

              Another instance of inconvenient facts for you there Malcolm.

              1. 5.1.1.1.1.1.1

                There is no “fudging history”

                Because “anon” said so! And he discussed this history himself, after all.

                Oh, except that he didn’t. Oops! Probably just forgot.

                Sure he did. He’s a very serious person!

                1. The history and point that you are avoiding HAS been presented at 5.1.1.1:

                  “They agreed the patents were valid and infringed.”

                  That’s not something that you can make disappear with snippets of the case.

  4. 4

    From Apple’s brief:

    Congress enacted this remedy because it recognized that “it is the design that sells the article”

    Sometimes. It depends on the nature of the article and the specifics of design. For utilitarian objects, it’s almost always not the design that sells the article. Anybody who tells you otherwise has been sm0king way too much design patent crxp. What sells utlitarian articles in most cases is (1) a lower price with similar functionality compared to competitors and (2) product placement/advertising/packaging. Nobody’s paying $20 more for a thumb drive because, e.g., they like the cute star embossed on the surface.

    because profits attributable to design are often “not apportionable,”

    In fact they’re just as apportionable as utility features. You just have to poll prospective consumers and ask the right questions, e.g., “How much more would you pay if the object had this design?” Maybe back in 1887 this seemed super mysterious but it doesn’t anymore.

    Again: this problem is going to be fixed and, at the end of the day, it really doesn’t matter what Apple or some “distinguished industrial designers” think about the “value” of their designs.

    1. 4.1

      What exactly is this “problem to be fixed”…?

      Methinks that you might think that the problem is the law itself.

      That’s just not something for the courts to fix.

      No matter how that makes you feel.

        1. 4.1.1.1

          Maybe you should – since this is a blog on patent law and not patent “feelings,” you would do well to pay attention.

    2. 4.2

      MM, “For utilitarian objects, it’s almost always not the design that sells the article. ”

      Obviously, MM is not a girl.

      1. 4.2.1

        Ned: MM, “For utilitarian objects, it’s almost always not the design that sells the article. ”

        Obviously, MM is not a girl

        Right. I’m an adult with a budget.

        Let’s get some history straight: was Apple able to get its initial foothold in the public education system, where many peopel first were exposed to its operating system, because of the ornamentation of its computers? Of course not.

        How did it happen? Jobs lobbied legislatures for new laws that would give the company a tax credit for donating computer equipment to schools. And then Apple gave their computers away. So much for the power of those “striking designs”.

        See, e.g.: link to hackeducation.com for more info.

        Corporations create myths about themselves and they spend hundreds of millions of dollars shoving those myths into your brain. Some of Apple’s ornamentation is nice. But a lot of their ornamentation was (and is) b u t t u g l y.

        1. 4.2.1.1

          “Right. I’m an adult with a budget.”

          MM has a budget? I’m calling BS.

          Either way, I think it’s fair to say that I likely bought my old Iphone likely because it looked the cools (ornamentation). The google androids were out too at that time and I didn’t get one of those.

          1. 4.2.1.1.1

            I likely bought my old Iphone likely because it looked the cools (ornamentation).

            The particular degree of curvature of those rounded corners really impressed you, huh?

            I bet you’re a big connoisseur of d00rknobs, too.

            link to mcsweeneys.net

            Bruce Gerrie is the organizer of “Jewelry for Buildings: The Art of Antique Doorknobs,” an exhibit that examines doorknobs within an historical and technological context, addressing design, craftsmanship, function, and classification. …

            Q: So has the doorknob been improved since the early 1900s?

            Gerrie: I don’t think so. There was tremendous quality control back then. Craftsmen were interested in doing their best. They were more concerned with the quality than the cost. Along with technology and catalogs, quality is what got doorknobs into people’s houses.

            100 years of design patents => squat

            Clearly we need more of them! And more damages. Lots more damages. This has nothing to do with David Kappos trying to line his wallet. Nope.

            1. 4.2.1.1.1.1

              What? People want to use patents to make money?

              O
              h
              N
              o
              e
              s
              !
              !
              !
              !
              !

              /off sardonic bemusement

    3. 4.3

      Actually, Steve Jobs sought to differentiate (Apple) products from other, similar products, based on design, particularly of their casings.

      He succeeded.

      1. 4.3.1

        Ned: Steve Jobs sought to differentiate (Apple) products from other, similar products, based on design, particularly of their casings. He succeeded.

        I’m not suggesting that people haven’t succeeded in branding or distinguishing their products with a design choice (I’m pretty sure nobody is suggesting that).

        The issue is : to what extent were purchases of a device driven by the ornamental design of some aspect of the device? Years ago, did I buy Apple’s u g l y and functionally counterproductive teardrop shaped wireless router because it was “visually striking”? Nope. I bought it because I thought it would be the easiest and most reliable router for my Mac. That was a poor decision and a waste of money, by the way.

        1. 4.3.1.2

          MM, one of the things I have found out about Apple is that they do not always or even usually put the best technology into their products, especially if that technology has nothing to do with “look and feel.”

        2. 4.3.1.3

          On the “prove the demand” issue, I think the reforms of 1887 or such were intended to remove that item of proof and provide instead a categorical presumption that the reason for the purchase by the consumer was because of the patented design.

  5. 3

    As summarized, Saidman’s brief presentes little more than a generic excuse for raising damages across the board, in every case. More people will settle … because higher damages!

    design patents are critical to allow companies to protect ‘visually striking products’

    Whether or not that’s true, it has nothing to do with this case. Neither Apple’s design nor Samsung’s design is “visually striking” (not when compared to the prior art, anyway). And the designs (“rounded corners”, as I recall) are not what’s motivating people to pay hundreds of dollars for either company’s phones.

    There was also nothing “visually striking” about the placement of hinges on Nordock’s “dock leveler”. Nobody purchased either party’s “dock levelers” because they were impressed by the “ornamantal” choice of hinge location relative to competing brands.

    US design patent law is a j0ke and the system is staring at the abyss, ready to melt down just as the utility patent system did when Judge Rich and Kappos opened the gates to litigious vermin without a clue. If the Supreme Court doesn’t fix this silliness, then Congress will have to do it.

    [shrugs]

    1. 3.1

      If the Supreme Court doesn’t fix this silliness, then Congress will have to do it.

      Let’s use the proper means to your desired ends.

      See post 1 below.

    2. 3.2

      MM: show me the prior art that contained an array of colorful icons, a visually striking, groundbreaking, earth shattering design if there ever was one, a design that (the evidence clearly showed) Samsung intentionally copied to stay in the smartphone game, a design that was patented by Apple and intentionally infringed by Samsung, who now complains that they should not have to pay the piper for having its hand caught in the cookie jar. The original 2007 iPhone was an incredible visual advance – who doesn’t remember the photo of someone’s right hand (the fingers on the left side of the phone, the thumb on the right side) holding the iPhone showing the array of colorful icons? Regarding Nordock’s dock leveler design, the court disagreed with you: check out footnote 32 of my brief.

      1. 3.2.1

        B-b-but Perry, Malcolm’s feelings are all the evidence he needs (all that he has!) to prove that he is right (in his own mind) as usual.

        He has chosen “noble” ends, so it just does not matter the means to those ends.

      2. 3.2.2

        the prior art that contained an array of colorful icons

        That would be my desktop display.

        visually striking, groundbreaking, earth shattering design

        We’re talking ornamentation here. From an ornamentation perspective, here’s absolutely nothing “groundbreaking” or “earth shattering” (LOL) about a hand-sized rectangular box with round corners. Of course it displays icons. Everybody knows what icons are for.

        a design that (the evidence clearly showed) Samsung intentionally copied

        There’s nothing wrong with copying obvious ornamental designs. People do it all the time.

        1. 3.2.2.1

          Maybe you missed the part where Samsung admitted to the design patent being valid….

          (Kind of changes the “just copying” thing)

          1. 3.2.2.1.1

            Maybe you missed the part where Samsung admitted to the design patent being valid….

            Can you remind everybody: was that before or after Samsung argued in court that the patent wasn’t valid? Deciding not to appeal an issue really doesn’t mean squat, particular when the company is patenting the exact same kind of junk. This is not a new concept in the patent legal world. Apple wants a chunk of Samsung’s hide is really all that’s going on here. Put the shoe on Apple’s foot and Apple will happily shoot it full of holes if it makes business sense for Apple.

            link to theverge.com

            [Samsung’s expert] showed four examples of prior art when discussing the iPhone, including two Japanese design patents, a Korean design patent, and the LG Prada — all of which pre-dated the iPhone. All of the examples feature rectangular shapes with rounded corners and centered screens.

            1. 3.2.2.1.1.1

              You seem to be having trouble with the concept of “They admitted that the patent was valid and infringed.

              You look real cute parsing parts of the case, but you missed a pretty important one (and I love the insinuation of some grand scheme that everyone wants design patents so no one is going to “fight” too strongly – that’s a real winner, right next to your pointy shiny aluminum hat).

              1. 3.2.2.1.1.1.1

                You seem to be having trouble with the concept of “They admitted that the patent was valid and infringed./i>

                Not at all. People “admit” all kinds of stuff in court, for all kinds of reasons. Have you heard of plea bargaining? Look it up.

                More importantly, you’re the one who seems to be “having trouble with the concept.” Here it is again: there’s nothing wrong with copying an obvious design. I did it just now! You say you have a design patent on what I just did? That’s nice. If you sue me, you’re going to be forced very very quickly to drop the case or engage in sanctionable behavior. And you’ll be paying my fees.

                Do you understand “the concept”, “anon”? Gee, I hope so. After all, the “concept” has been crushing your dreams for years now. But keep pretending otherwise! You’re a very serious person.

                [shrugs]

                1. Lol – lots of words – meaning nothing (hint; your poker tell of “so serious” have you away again – you should work on that).

  6. 2

    Apple’s brief is grossly misleading. It states right up front: “Whether 35 U.S.C. § 289, which provides that a party that infringes a design patent may be held “liable … to the extent of his total profit” on articles of manufacture to which the patented design is applied…”

    That is a false an misleading recitation of the statutory language. The statute actually discusses the application of a patented design to article of manufacture, then says, “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.”

    Thus, the statute does not say “total profit on the article of manufacture”. Rather, it leaves open the question of what the profit is ON—that is, what is the base on which the profit is to be figured. An example where this distinction comes into play is the common patent license agreement provision that calculates a royalty on the “value added to a retail product by applying a patented invention”, rather than on the full retail price of the entire product.

    Have I missed something? Has this point been parsed before in court cases? If not, then why is Apple intentionally misleading the Supreme Court?

    1. 2.1

      Paul,

      I do not see the addition of the “floor” amount as in any way creating the “falsity” that you claim to be present.

      Can you explain why you feel the brief is misleading with a little more particularity?

      (The brief counters your “value add” directly, by the way)

      Thanks

      1. 2.1.1

        Yes, as explained in the note below, the Apple brief (at least the first page) states that the statues provides for “total profit on article of manufacture”. That is an incorrect recitation of the statue, and to my mind is intended to mislead. They are eliding the entire point of the case: what base is the profit be be counted on ? Just shifty lawyering, I guess, but it sure puts a bad taste in this reader’s mouth,.

        1. 2.1.1.1

          Their position is that the statute does NOT leave open what base the profit is to be on.

          That is not a misreading of the statute (contrary to your desired read – which every bit can be taken as a misread).

    2. 2.2

      Whoever during the term of a patent for a design, without license of the owner, (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 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.

      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.

      I agree the statute does not explicitly connect the “total profit” to the “article of manufacture”, but that doesn’t mean the courts are free to disregard the other language present.

      An alternate way of understanding the statute is to connect total profit to “for the purpose of sale, or (2) sells or exposes for sale” (which makes sense because sale = profit, usually) and the sale phrase is directly connected to articles of manufacture.

      1. 2.2.1

        ” to the extent of his total profit”

        What is the word “total” meant to convey? It sure sounds like an expansion over some alternative, less-than-total amount.

        Any legislative history about what “total” was meant to do?

        How does Samsung’s position account for that word?

        1. 2.2.1.1

          Total means total. Which means no apportionment. Samsung wants apportionment. Congress said no apportionment back in 1887 when they adopted the total profit remedy. If Samsung wants that changed, go back to Congress (which is likely where Samsung is heading regardless of what happens in SCOTUS).

          1. 2.2.1.1.1

            Yes, that is Apple’s position, and I agree that the word “total” is a strong argument for it. Question in my mind is how does Samsung account for that word. I have yet to see that addressed. If Samsung can’t deal with that word, then I think it will and should lose.

  7. 1

    Samsung’s arguments are addressed to the wrong branch of the government. It is not for this Court to decide whether to alter the statutory balance…

    Where have seen this concept before?

    Ah yes, 35 USC 101. See Chakrabarty. Contrast with the dissent dressed as a concurrence in Bilski.

    1. 1.1

      Chakrabarty specifically lists as exceptions to 101 the several prior Sup. Ct. decisions on unpatentable subject matter.

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