Let me start this post with the final two sentences from Matt Levy's IP Watchdog post on the design patent damages issues in the Apple v. Samsung remand proceedings in the Northern District of California:
"It's understandable that Apple wants that $400 million. But let's hope that we don't end up with a mess in design patents as a result."
I'm presumably not alone in getting really tired of that neverending story, but from time to time, such as today, I just have to remind myself of the fact that the question of the base for a disgorgement of design patent infringer's profits is the most important one and it's only now starting to get resolved. The Supreme Court would have liked to define a test for the relevant article of manufacture, but it decided to focus on only the question of whether Judge Koh and the Federal Circuit had interpreted the statute (35 U.S.C. § 289) correctly when they held that Apple was without a doubt entitled to a disgorgement of Samsung's entire profits on cetain smartphones. The top U.S. court held that the relevant article of manufacture could be an entire product or a component, but left it to others (until the issue might return to the Supreme Court later, be it in connection with this dispute or in any other) to do the rule-setting job.
The best way to solve the rule-setting problem for all eternity would be for Congress to amend the statute. There should be apportionment. That would lead to the most reasonable results. But as long as the old statute must be applied (which may be the case for a lot longer since I don't know whether Congress will deal with this issue anytime soon), the courts will simply have to decide whether to adopt a test that is likely to overcompensate design patent holders or an alternative one that may quite often result in undercompensation. Forget about absolute fairness under the existing statute. Apportionment is precise; anything based on the article of manufacture is a step function.
Apple and Samsung have meanwhile responded to each other's proposed tests (Apple brief, Samsung brief). They accuse each other's proposal of being inconsistent with the Supreme Court decision, other case law, and statutory law. Up to a certain degree, I agree with Mr. Levy's criticism of Apple's proposed test: Apple is simply trying to salvage a $400 million award through a test that has rather subjective elements such as "how" a design was used, "how" a product was sold, or "the degree to which the asserted article of manufacture is physically and conceptually distinct from the product as sold." That kind of test would be a recipe for lengthy trials and confused juries, in many cases even hung juries.
Case in point: Apple refers to evidence that Samsung internally acknowledged (after the iPhone came out) that it had a "crisis of design," and Samsung explained in its responsive brief that the word "design" was meant in a more architectural sense, referring to Samsung's choice of a mobile operating system (Samsung later selected Android). That's the kind of hair-splitting Apple's proposed test would inevitably lead to (lots of it, actually). There can't ever be a mathematical formula that identifies the relevant article of manufacture, but legal tests that can be handled in far more predictable ways than what Apple would like to see adopted.
I said before that I agree with Mr. Levy's take on Apple's proposed test "to a certain degree," and the limitation here is that I believe Apple could have taken much more problematic positions. The way I see it, Apple's proposal is the least problematic one of all tests that would make it more likely than not that Apple would end up defending the $400 million award.
Samsung's argument very much focuses on what the asserted design patents claim. Apple argues that this leads to a contradiction: while Samsung says the article of manufacture is a question of fact for the jury to determine, claim construction would be a question of law. That is an inconsistency indeed, but the alternative (massive overcompensation based on simply ignoring claim scope) would be far worse.
A really interesting panel debate--the 90-minute recording is worth watching in its entirety-- took place in Washington D.C. the week before last. A Law360 reporter attended and noted that this design patent damages issue divides the patent world. Professor Rebecca Tushnet (Harvard) published some of the panelists' statements on her blog. I'll probably get back to some of what was said on that panel at the next procedural juncture.
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