Q&A: The design patent system’s damaging consequences

Outdated rules for damage awards in design patent infringement cases stifle innovation, says Stanford Law Professor Mark Lemley.

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In 2012, Apple won a $1.05 billion judgment against Samsung for patent infringement, which marked a major victory for Apple in the ongoing “smartphone wars” between the two companies.

While the size of the award was unusual – it was one of the largest ever granted in the history of patent litigation –  this case was also unique because of the basis on which Apple won its suit. What the jury found was that Samsung had violated a “design patent” held by Apple on the rounded rectangular shape of the iPhone. A significant portion of the award in this case came specifically from the jury’s finding of design patent infringement.

Intellectual property law experts such as Professor Mark Lemley of the Stanford University School of Law argue that the Apple-Samsung case raises broader concerns about the way that current law treats design patent infringement.

In May 2014, Lemley led a group of 27 law professors who filed an amicus brief supporting Samsung’s appeal of the judgment. In particular, the brief argued that the system of awarding damages in these cases is both obsolete and inconsistent with other aspects of current patent law:

Unlike patents on technical inventions, or for that matter copyrights or trademarks, the court held that design patent law requires that infringers—even innocent infringers—pay the plaintiff their entire profit from the sale of the infringing product, even if the design was only a small feature of that product… That rule, based on rather different circumstances that are more than a century old, makes no sense. As applied to a modern, multicomponent product, it drastically overcompensates the owners of design patents, and correspondingly undervalues technical innovation and manufacturing know-how.

The implications of the Apple-Samsung judgment, Lemley argues, go far beyond the smartphone wars and to the future of innovation.  

R3.0: Using Apple v. Samsung as an example of how current law was applied, what does the $1 billion judgment in that case represent? Why was Apple awarded that amount? 

Lemley: If you infringe a design patent, the patent owner is entitled to be paid your entire profits from the sale of the product, whether or not those profits were attributable to the design.

R3.0: In contrast, how are damages calculated in other types of patent infringement cases?  

“Making design patents so valuable means that other patents become less valuable, and it encourages people to enforce design patents in dubious cases.”
Lemley: Regular (or “utility”) patents do not allow the patentee to capture a defendant’s profits at all.  Instead, the patentee can get paid only for their own lost sales, or, alternatively, a reasonable royalty.  Other intellectual property regimes (copyright, trademark, and trade secret) will sometimes allow a plaintiff to capture the defendant’s profits, but each of those regimes requires that we “apportion” those profits, so that only the profits caused by the infringement are owed.  Design patents are alone in [allowing the award] of all profits.

R3.0: What’s the history behind this system?

Lemley: In the late 19th century, the Supreme Court took a series of patent cases involving infringement of a design for a rug.  The Court decided that it couldn’t tell whether the design or the manufacturing quality was responsible for the sale, so it felt it couldn’t award damages or profits, and instead gave the winning party only $0.06.  Congress was outraged, and passed a law requiring courts to award a defendant’s profits.

R3.0: Why doesn’t current law work in the modern context? 

Lemley: As products become more complex, the odds that the design is the only thing that makes the customer buy the product go down.  The iPhone has a great design that deserves protection, but the fact that it has rounded corners or a cool iTunes icon (both patented by Apple) is hardly the only or even the main reason people buy Apple’s phones.

R3.0: What reforms would you propose that, in your view, make more sense? 

Lemley: I think the law of design patents should look like the law of other patents – you can recover for your lost sales, or at least get paid a reasonable royalty, but you shouldn’t be able to capture the entire value of the defendant’s product unless you can show that the design was the reason people bought the product in the first place.

R3.0: If the system doesn’t change, what impact will that have on other inventors or on innovation more generally? 

Lemley: While design is important, it is not the only thing we want to encourage.  Making design patents so valuable means that other patents become less valuable, and it encourages people to enforce design patents in dubious cases.

Inventors should get paid for their ideas.  But it is important to remember that in most cases there are inventors on both sides, and awarding too much money to one inventor discourages the other inventor.