Posts in Patents

By Fritz Klantschi
Download vCard

In 2016, the Supreme Court held that an “article of manufacture” under the law covering damages for infringement of a design patent could encompass either the entire finished product or a discrete component of the product. This distinction has had major implications on the amount of damages awarded to a design patent owner.  In Microsoft Corp. v Corel Corp. a District Court ruled that Microsoft was not precluded from disgorgement damages under Section 289 because the infringing article of manufacture is a software product. Microsoft Corp. v Corel Corp., 2018 WL 2183268 at *4 [ND Cal May 11, 2018]. This article highlights what constitutes a design patent and the potential for monetary damages awards for design patent infringement.

Utility patents protect the way an invention works and how it is used. In contrast, a design patent protects the ornamental features of an article, such as its shape/configuration or surface ornamentation. A patent holder, whether utility or design, can seek damages under Section 284 of the Patent Act (lost profits or reasonable royalty). However, a design patent holder also has the option to seek damages under Section 289 which allows the patent holder to disgorge the infringer’s total profits from the infringing article of manufacture. Section 289 states that

“[w]hoever 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.” (emphasis added)

In 2011 Apple sued Samsung alleging that several of Samsung’s smartphones infringed three of Apple’s design patents covering the phone’s front surfaces and screen icon grid. A jury found that a number of Samsung’s smartphones infringed Apple’s patents and awarded $399 million in damages. This was the entire profit of Samsung’s sales of their infringing smartphones, rather than a portion representing only the features covered by the design patents. The U.S. Court of Appeals for the Federal Circuit affirmed the damages award, and rejected Samsung’s argument “that the profits awarded should have been limited to the infringing ‘article of manufacture’” (the screen or case of the phone, not the whole smartphone).

Samsung appealed to the Supreme Court (Samsung Electronics Co., Ltd., et al. v. Apple Inc., 137 S.Ct. 429 (Dec. 6, 2016), hereinafter “Samsung v. Apple”) which laid out a two-step process for determining damages award under Section 289. As a threshold step, the Supreme Court first defined what an “article of manufacture” is when considering a multicomponent product. Is it the end product that is sold to a consumer (i.e, a smartphone) or can an “article of manufacture” be a component of that product (i.e., a discrete feature of the smartphone)? The Court first looked at the definitions of “article” and “manufacture” and concluded that an “article of manufacture” is “a thing made by hand or machine,” which is broad enough to encompass both a product sold to a consumer as well as a component of that product. Id. at 434-435. The two-step process the Court established is to first identify the “article of manufacture” to which the infringed design had been applied and, second, to calculate the infringer’s total profit made on that article of manufacture. Id. at 434 The Supreme Court remanded the case to resolve whether the relevant article of manufacture for each design patent is the smartphone or a component of a particular smartphone. In the remanded case, the Court adopted the four factors proposed by the Solicitor General in his amicus brief to the Supreme Court in determining the relevant article of manufacture: (i) the scope of the design claim; (ii) the relative prominence of the design within the product as a whole; (iii) the conceptual distinctiveness of the design from the product as a whole; and (iv) the physical relationship between the patented design and the rest of the product. Apple, Inc. v Samsung Elecs. Co. Ltd., 2017 WL 4776443, at *8 [ND Cal Oct. 22, 2017]

Design patents can be a valuable tool for a patent holder and should be considered when protecting a new product. Section 289 of the Patent Act may potentially provide a significant higher damage award than what is available under Section 284 for an infringement of a design patent. When drafting a design patent application, a patent filer needs to consider the above four factors to be able to properly protect and enforce a patented design.

By Fritz Klantschi

On October 26, 2018 the United States Supreme Court granted certiorari in Return Mail, Inc. v. United States Postal Service, 868 F.3d 1350 (United States Court of Appeals, Federal Circuit, 2017, “Return Mail v. USPS”) to determine whether the federal government can challenge patents under a provision of the U.S. patent law known as the America Invents Act (AIA).  Specifically, the Court will decide whether the federal government is a “person” who may petition to institute review proceedings under the AIA.

Background

AIA Section 18(a)(1)(B), which covers Covered Business Method (CBM) patents, reads “[a] person may not file a petition for a transitional proceeding with respect to a covered business method patent unless the person or the person’s real party in interest or privy has been sued for infringement of the patent or has been charged with infringement under that patent.” (emphasis added)

Return Mail filed suit against the United States Postal Service (USPS) for patent infringement in the U.S. Court of Federal Claims (“USCFC”). The USCFC is authorized by statute to award compensation to a patent owner for the government’s unauthorized use of the invention, as the government cannot be sued for patent infringement in federal court. The USPS then petitioned the Patent Trial and Appeal Board (PTAB) of the USPTO for a CBM review of the challenged claims of Return Mail’s patent.

Before the PTAB, Return Mail challenged the USPS’ ability to petition for CBM review on the basis that the USPS was not a “person” under the statute. The PTAB’s final written opinion held that the USPS had statutory standing to challenge the claims. Return Mail appealed to the United States Court of Appeals for the Federal Circuit.

Federal Circuit Decision

In a 2 to 1 decision, Federal Circuit affirmed the PTAB’s decision, holding that the meaning of “person” in the statute “does not exclude the government.”

Under the AIA, a party to a post-grant PTAB proceeding that reaches a final decision cannot later in federal court or before the International Trade Commission challenge the validity of the same patent claims. The dissent to the majority’s decision was concerned that including the federal government in the definition of “person” would circumvent the estoppel provision as to the government because the government can challenge the patent before the USCFC.

The dissent noted that “[t]he estoppel provision applies to petitioners litigating in district court or the ITC, but is silent as to petitioners litigating in the Claims Court.” This would allow the government to petition the PTAB, and later again re-litigate the same grounds raised during the CBM review proceeding before the USCFC. Return Mail argued in its petition for certiorari before the Supreme Court that this would give the government an advantage over all other litigants of being able to challenge a patent twice on the same ground.

Conclusion

The government is a frequent participant in the patent system and USCFC’s patent infringement actions are similar to those in district court in that they allow validity to be raised as an affirmative defense. Without defining whether the government is a person or not, the government would have two bites at the apple regarding claim validity. If the government does not like how the PTAB ruled, then it still can raise the same arguments at the USCFC, which does not have to give deference to the PTAB ruling. This can result in different outcomes and increased litigation cost and time for the patent holder.