Has the tide of hyper-litigation in the world of high-tech intellectual property begun to recede?
Last month,
Perhaps — and if so, it’s good news. But we are still stuck with several decades’ worth of overissued patents, and the much needed patent reformation won’t be complete for some time.
Despite their détente outside the U.S., Apple and Samsung are, for example, still battling in U.S. appeals courts over a large award Samsung was ordered to pay for violating iPhone “design” patents. In additional to “utility” patents, which govern technical functionality, the government also issues design patents that cover the look and feel of products. A jury found that several Samsung smartphones and graphical icons too closely resembled the shape of Apple’s iPhone and its icons. Because of a quirk of design patent law, however, Samsung was ordered to pay Apple all of the profits associated with the products that contained these designs — no matter the import of the designs, their relative contribution to Samsung profits, or any effect on Apple. Samsung’s penalty totaled $929 million, the sum now under appeal.
The first order question is whether many of these design patents should ever be awarded in the first place. Consider the “patent” pictured below. Issued in October of 2012, it is Apple’s iTunes icon. But did Apple invent the beamed eighth note? Similar musical icons have appeared regularly since the 13th century or so. Steve Jobs was brilliant, but this patent, on which he is listed as a co-inventor, is silly. It’s just another example of the profligate issuance of patents for entirely obvious or commonplace business practices, lines of software code, or graphic designs.
The second order question is whether the remedy in these cases — the award to the plaintiff of the total profits earned by the defendant’s product — makes any sense in the modern world.
A smartphone, like so many modern products, is a complex integration of thousands of hardware and software technologies, manufacturing processes, aesthetic designs, and both specific and conceptual functionalities. These many components may each be patented, or licensed, or not at all, by any number of firms. But even if it were provable, a case in which one patent drives the purchase of a product is going to be a very rare event. A smartphone, by one estimate, may contain up to 250,000 patents. Apple truly invented many important components of the iPhone, but the idea of a smartphone had been around for a couple decades, and actual (although unsuccessful) smartphones had been around for years.
The idea that a minor design patent comprising a minute fraction of a product’s overall makeup drives the purchase decision is an even more remote possibility, and is in any case beyond anyone’s ability to judge. Technology, functionality, look and feel are all important to a product’s popularity, but so are marketing and a dozen other unmeasurable factors. If company A’s product contains one infringing component among many thousands, even if it has no knowledge or intent to infringe, and even if the patent should never have been issued, does it make sense that company B gets all company A’s profits?
Advocates of design patents and the total profit penalty, however, say all this is irrelevant. Just read the plain text of the 1887 law, they say. At first glance, the phrase — “shall be liable to the owner to the extent of his total profit” — may appear to support their view. But a more common sense reading, especially in light of modern technology, undermines their claim. To see why the phrase should be interpreted in a common sense way, consider an alternative plain reading. Why couldn’t “total profit,” for example, mean the entire profit of the firm, including profits derived from unrelated products?
Does anyone think this is the meaning of the law? No. Among other common sense readings, the phrase “to the extent” is a modifier that can easily be read to limit the award in proportion to the severity of the infringement. An additional consideration is that many design patents better resemble trademarks and copyrights, and in fact trademark and copyright law (although imperfect themselves) often provide for more common sense remedies.
Design patent absolutists also argue that the total profit penalty is the only effective deterrent against infringement. They argue that apportionment would be like paying a royalty, a simple cost of doing business, and thus would not discourage copying patented designs. But this presumes the quality control of the issued design patents. In a world awash in ubiquitous “designs,” no one can hope to completely avoid infringement, and thus no one is safe from the total loss of one’s profits.
The IP issuers, accumulators, and absolutists have been helping to undermine the important IP system that they claim to cherish. If the appeals court reins in the outsize $929 million award in this case, the patent reformation will achieve another important advance.
