Apple's Patent Strategy Jeopardizes Innovation
Apple is undeniably one of the world’s most innovative companies when it comes to technology. But the way that Apple has been pursuing and enforcing its design patents threatens the entire technology sector. Apple has taken a “win at all costs” approach that may produce a courtroom victory but will be counterproductive in the long run.
Design patents, unlike what we normally think of as “patents,” cover ornamental features of products. A design patent is essentially a set of drawings that show the claimed design. There are many products for which the ornamental features are the primary reason people buy them, such as shoes, vases, rugs, and wallpaper. Phones are not one of those products.
A few weeks ago, I participated in an Electronic Frontier Foundation event in San Francisco focused on an ongoing legal case about design patents. As I argued during that discussion, no one would spend several hundred dollars on an empty phone shell, no matter how aesthetically appealing it was. Aesthetics are a consideration, to be sure, but it’s ultimately the functionality that makes a phone a desirable product. Apple itself certainly seems to think so, as it has been improving the features and capabilities of its phones for the last decade.
And yet, if you listened to what Apple has said in its design patent suit against Samsung, you might think that the outside of the phone is the only thing that matters. In the original trial, Apple successfully argued that Samsung should have to pay the entire profits for several phone models that infringed three of Apple’s design patents. None of those design patents was for the entire shape of the phone; each was for a small aspect of the shape and appearance of the phone.
Apple has pursued a strategy of patenting every tiny visible piece of its products — these are design patents, covering the ornamental appearance of a product, as opposed to its functional parts. The famous Coca Cola bottle shape has a design patent, as do portions of Nike sneakers, and even the Statue of Liberty. While no one would mistake a Samsung phone for an iPhone, Apple has patented the designs of so many small aspects of its phones that it can pick out little bits of Samsung’s designs here and there that infringe Apple’s design patents.
Back in 2012, a jury found that Samsung had infringed three of Apple’s design patents: part of the shape of the front panel of the iPhone; the bevel around the front of the phone; and the arrangement of icons on an iOS device screen. The jury awarded Apple almost $1 billion — later reduced to $399 million — which amounted to Samsung’s entire profits for the infringing phones. That was a nice windfall for Apple.
Why did this happen? Because Apple and the lower courts erroneously interpreted the words “article of manufacture” in the relevant statute as meaning the end product sold to consumers. As a result, Apple was awarded $399 million based on a few ornamental features. The Supreme Court eventually reviewed the case and unanimously held that there is no requirement that the infringer’s profits (which have to be paid to the patent owner) be based on the entire product sold.
It’s now up to Judge Lucy Koh of the Northern District of California to determine a new standard for determining design patent infringement remedies. This is a historic opportunity to provide clarity to both innovators and designers, with wide ranging implications for today’s digital economy.
Ultimately, Judge Koh will have to decide two key questions: How do you determine the article of manufacture to which a patented design is applied? And what profits are attributable to that article of manufacture? The goal of patent infringement law is to compensate the patent owner for harm suffered, not to hand out winning lottery tickets. A remedy standard tied to the correct article of manufacture will bring design patent remedies more in line with that goal.
In practice, the court should use industry experts and economic analysis to calculate the appropriate remedy. If a patented design is particularly important in generating sales, the experts can take that into account in determining the correct profit. Less important designs obviously create less profit.
By contrast, Apple is still arguing that it is entitled Samsung’s entire profits for several phone models. If Apple wins, there could be long-term negative consequences for the entire smart phone industry, not to mention the diverse range of sectors that rely on design patent protections. In particular, technology companies would be exposed to the risk of losing all of their profits on the devices they make, possibly deterring them from making new products in the first place.
That’s why it is crucial that the court create a reasonable, realistic standard to determine what the “article of manufacture” is as well as what the profits attributable to it are. A standard that is fair for all of the parties involved would incentivize creativity without scaring off new innovations. That would be a windfall for the entire technology industry.
Matt Levy is the former Patent Counsel at the Computer and Communications Industry Association (CCIA), where he handled legal, policy advocacy, and regulatory matters related to patents and wrote the Patent Progress blog. He is now a consultant on patent policy issues and patent litigation.