The Disgorgement Remedy of Design Patent Law
46 Pages Posted: 8 Apr 2019
Date Written: February 1, 2019
U.S. design patent law has a unique statutory remedy that allows patentees to recover an infringer’s “total profit” on sales of “articles of manufacture” to which infringing designs have been applied. In the high-profile Samsung v. Apple case, the U.S. Supreme Court decided that the relevant article of manufacture could be either a component of an end product (i.e., the flat face of an electronic device) or the end product (i.e., smartphones). However, it provided no guidance about how to decide what the relevant article is or how to measure profits from sales of them. Upon remand, a jury awarded Apple $533 million for Samsung’s infringement of three patents on small external design features of smartphones. This was 25% higher than the “total profit” award that the Supreme Court vacated when rendering its Samsung decision. We are not alone in regarding this award as excessive and indeed punitive.
This Article scrutinizes the legislative history of the total profit disgorgement remedy and offers guidance about how the disgorgement remedy in design patent cases should be analyzed and applied going forward. “Total profit” disgorgement on end products may have been an appropriate remedy when patented designs covered the overall appearance of end products (e.g., carpet or wallpaper designs), as we believe that they did when this special remedy was enacted. The explicit premise was that the infringer contributed (almost) nothing of value to the end product. The nature of the design entitlement has, however, changed over the past 40 years in two key respects. First and most important, the entitlement has fragmented so that ever smaller design elements of end products are being patented. Second, patents are issuing for some designs that are more functional than ornamental. These changes have enabled design patentees to claim total profit disgorgement even when the entire profit on sales of end products is manifestly not attributable to the infringed designs, as was the case in Samsung.
The Article explains why and how courts should handle issues of causation and apportionment in applying the disgorgement remedy. Generally, total profits on an end product should be awarded only when none or very little of the profit is causally attributable to the defendant’s contributions to the infringing enterprise. When the defendant’s profit is attributable to the combination of its contributions to the infringing enterprise and the use of the infringing design, the initial problem is identifying profits the defendant would have made without use of the infringing design. The plaintiff is not entitled to any profits attributable to the defendant’s contributions. A second problem is to identify profits arising from the combination of the defendant’s contributions and its use of the infringing design. These profits should be apportioned.
The Article concludes with recommendations about reforms. It argues that judges should decide the relevant article of manufacture issue as part of pre-trial claim construction. As disgorgement is historically an equitable remedy in intellectual property cases, judges should also decide about the profits to be disgorged. But if disgorgement is tried to juries, they should be instructed to apply principles of disgorgement in rendering awards in design patent cases.
Keywords: design patents, article of manufacture, Samsung v. Apple, remedies, disgorgement, causation, functionality
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