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The Phone Wars: Could Major Design Patent Reform be coming from the Supreme Court?

<p>A design patent case potentially headed to the Supreme Court could narrow what is covered in a patent, which could have major implications to health and nutrition companies that hold this type of intellectual property.</p>

Most companies in the supplement and nutrition industries are well aware of patents. Utility patents—what people usually think of when they think of patents—cover inventions such as formulations or using a product for a specific purpose. However, design patents should also be considered. Design patents are seen in, for example, a packaging design such as a beverage bottle; a unique design could potentially be patented using a design patent. It could also be applied to specialized implements, for example a two-chambered beverage container that allows someone to carry both a workout beverage and a post-workout beverage; such an item could be the subject of a utility patent, a design patent or both. 

Design patents are limited to “any new, original and ornamental design for an article of manufacture." The claims of a design patent are typically a drawing that includes the claimed ornamental features, but also shows unprotected features, such as functional features or concepts that would be more properly the focus of a utility patent.  Alternative options for protecting designs (we’ll use the example of packaging), include trade dress/trademark registration and copyright. Each of the options has its pluses and minuses.

A design patent lasts for only 14 (or for applications filed after May 13, 2015, 15) years from the date the design patent is granted. A copyright also will eventually expire, but will generally last for at least 95 years. A trade dress or trademark registration for the packaging design can go on indefinitely, so long as a company continues to use the packaging design and maintain the registration at the U.S. Patent & Trademark Office (USPTO). Each option may differ in the amount of damages or the method of calculating damages that is available to a company if it is victorious in enforcement.  Indeed, while a design patent is the most limited in time, a design patent holder that is victorious in a design patent infringement lawsuit may elect infringer’s profits as a remedy, and under current law, that can be the entire profit from that infringing product.

This is the subject of one of the numerous patent battles between Apple and Samsung over their respective phones. Apple has won a judgment against Samsung for infringement of several of its design patents by certain Samsung Galaxy phones. The court considered all features shown in the design patent, and awarded damages in excess of US$500 million using the infringer’s profits remedy. Samsung appealed, but lost in the appeals court as well. Samsung is now seeking to have the U.S. Supreme Court review the case.

In particular, Samsung wants the Court to look at two questions:

1. Where a design patent includes unprotected non-ornamental features, should a district court be required to limit that patent to its protected ornamental scope?

2. Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?

Several other tech giants including Google, Facebook, Dell and HP have filed a brief supporting Samsung’s request to have the case heard. Likewise, a group of influential professors, an industry group and the Electronic Freedom Foundation have also filed briefs asking for the case to be heard. Among the concerns is that a new type of “patent troll" litigation could pop up if the entire profit can be obtained as damages. Since it is possible to infringe upon more than one design patent, a company could be subjected to losing the entire profit multiple times and be driven into bankruptcy.

Apple is expected to respond to the request imminently, likely opposing the Supreme Court hearing the case (if for no other reason than to protect the nine-figure payment it received from Samsung in damages).  Also, there may be briefs filed agreeing with Apple, with the Supreme Court deciding later this year whether to take the case.

So why should companies that aren’t in the phone industry care about this case? A ruling in this case will apply to everyone, not just this specific case or to only the phone industry, and could result in significant changes to design patent law. The last major design patent cases from the Supreme Court are actually from the 19th century.

The Supreme Court could narrow the scope of damages and/or narrow what a court can consider to be covered by a design patent, both of which would have significant implications for any company holding a design patent on, say, a beverage bottle, or by companies that could be subjected to design patent lawsuits. Narrowing the scope would, depending on the perspective, potentially reduce the value of design patent assets or reduce the risk of a company facing massive judgments should it infringe a design patent.

Going forward, it would affect a company’s intellectual property (IP) strategy with respect to designs and whether to seek protection as trade dress, a copyrighted design or a design patent—as noted above, the design patent is the shortest-lasting method of protection, so if an advantage in damages is curtailed, a company might consider using one of the other avenues of protection going forward. And while so-called “patent troll" litigation affects the tech industry more than the health and nutrition industry, this case could have the potential to cut off another potential avenue for an entity to buy patents in order to enforce a patent hoping to extract settlement cash from companies rather than use the design.

Thus, this case bears watching for the health and nutrition industry as well. If the Supreme Court decides to hear the case, a decision would be expected in 2017.

Brent Batzer is a registered patent attorney practicing in patent and trademark law at Amin Talati & Upadhye ( Batzer primarily provides patent litigation, patent prosecution and contract drafting services to food, drug, medical device and cosmetic companies, working with companies in the food and beverage industry on manufacturing process and design patents, freedom to operate opinions, and numerous contract manufacturing, supply and distribution agreements.

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