Did those rounded corners seal the sale? (Photo by Sean Gallup/Getty Images)
For a lawsuit over Apple’s patents on its iconic iPhone design, U.S. Supreme Court justices spent an awful lot of time talking about the Volkswagen Beetle.
Perhaps that’s because the equally iconic Beetle represents the difficulties Samsung v. Apple presents for courts struggling to determine how to apply an 1842 law allowing companies to patent not just how a product works, but how it looks.
That law, as revised in 1887, says an infringer of a design patent shall be liable to the patent owner “to the extent of his total profit.” Apple argued Samsung’s “total profit” was the profit it made on phones that shared some of the iPhone’s patented features, and a court agreed, allowing jurors to assess more than $1 billion in damages, later reduced to $548 million in combination with another jury award.
At oral arguments today, the justices repeatedly asked lawyers for Apple, Samsung and the government how they can craft a rule courts can use to instruct jurors to award less in design patent cases, given the wording of the 1887 statute. Arguing for Samsung, Quinn Emmanuel Partner Kathleen Sullivan said jurors should focus on the “article of manufacture” the patent describes and calculate how much that contributed to profits. If it’s just the screen of an iPhone, she suggested, experts could explain how much it cost versus the overall cost of the phone and perhaps assign an average profit margin to the component.
The point is to avoid awarding a company all of the profits from a complex product like a smartphone when the bulk of its value has nothing to do with rounded corners. When Congress first allowed design patents they mostly covered simple items whose design distinguished them from the competition, such as cutlery or even stoves.
With more complex electronic devices, “you just can’t make a credible argument the reason buy a Samsung phone is the rounded corners,” said Mark McKenna, a professor of intellectual property law at the University of Notre Dame Law School.
Which leads to the VW Bug. Auto manufacturers have taken to filing design patents on most of the non-functional attributes of their vehicles, in part to thwart companies from selling competing spare parts. But what if VW had patented the entire exterior of the Bug when they introduced it to U.S. consumers for the price of $1,800? Was its success the result of the cute design, or other factors?
“What if it cost $18,000?” asked Justice Anthony Kennedy. “What if it got two miles per gallon? What if it broke down every 50 miles?”
Those are all good reasons for separating the body from the innards. But what if the design was a “stroke of genius” that took two days to complete, Kennedy asked. Would it be fair to order a copycat manufacturer to pay only the value of a couple of days’ work, when the engine consumed 100,000 hours of engineering time?
All the lawyers agreed the critical question is what is the “article of manufacture” covered by the patent. They even agreed that the article of manufacture doesn’t have to be the entire product. But there was no agreement on a general rule determining when to separate out a component from the whole, and how to value its contribution to a product’s profitability.
Sullivan, in her final argument, said the court “must remand and tell the naton’s economy that no one can claim a partial design patent on a portion of a front face of an electronic device and come in and get the entire profits on the phone.”
”If I’m the juror, I just don’t know what to do,” said Kennedy, however. “I’d have the iPhone in the jury room …I’d look at it. I just wouldn’t know.”
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