How valuable are design patents?
Contributed by: Jeffrey G. Sheldon from Law on IP.
They can be valuable, but they are not worth as much as they were yesterday.
A little background: Design patents cover ornamental designs. They are unlike utility patents which cover the useful feature of inventions.
The applicable statute for infringement of a design patent states that a person who applies a patented design to any “article of manufacture” is liable for infringement and “shall be liable to the owner to the extent of his total profit.” Based on that statute, Apple was awarded over $400 million against Samsung for infringement of a design patent on the appearance of the iPhone, essentially all the profits earned by Samsung.
Samsung argued that “article of manufacture” cannot and should not be the entire final cell phone, since the phone includes many features beyond the exterior appearance of the phone itself. Samsung noted that this measure of damages gives outsized value to design patents compared to utility patents, where damages usually are based on a reasonable royalty.
On December 6, the Supreme Court said that the award of $400 million was most likely wrong. The Court said owners of design patents are not always entitled to the total profits from the infringing product sold to consumers. In key language the court stated:
The term “article of manufacture” is broad enough to embrace both a product sold to a consumer and a component of that product, whether sold separately or not. Thus, reading “article of manufacture” in §289 to cover only an end product sold to a consumer gives too narrow a meaning to the phrase. When the device has multiple components, the award may be limited to the feature that infringed. Thus the term “article of manufacture” is not limited to the end product sold to a consumer.
The Supreme Court left it to the lower courts to determine the correct measure of damages based on its decision.
Since a cell phone has many components beyond the outside physical appearance, including software and electronics, we predict that the amount of damages awarded will be significantly less than $400 million.