By Scott Graham, From The Recorder

For the first time in 130 years, the U.S. Supreme Court is going to weigh in on design patent damages. The timing couldn’t be worse for Apple Inc.
The high court agreed Monday to review Apple’s epic battle with Samsung Electronics Co., specifically to decide whether the remedy for design patent infringement is disgorgement of all profits generated by the product. Samsung contends the 1887 statute on design damages—inspired by a Supreme Court decision on rug design—is no longer relevant in a world of complex electronic devices in which design may be one of hundreds of patented features.
The cert grant puts directly at risk the $399 million awarded for Samsung’s copying of the iPhone’s distinctive rounded corners and graphical interface with colorful icons. It also jeopardizes an additional $100-plus million awarded to Apple based largely on infringement of its “pinch-to-zoom” utility patent.
The Patent Trial and Appeal Board has canceled that patent, but the ruling is not yet final on appeal. Apple actually collected on that patent last fall as part of the judgment from its 2012 trial before U.S. District Judge Lucy Koh in San Jose. But now that the Supreme Court has revived Apple v. Samsung Electronics, there’s a chance the PTAB cancellation could become final while the Supreme Court is still hashing things out.
Those kinds of races are not uncommon when you have parallel proceedings between courts and the Patent and Trademark Office, said Knobbe, Martens, Olson & Bear partner Brenton Babcock. “It’s either a race or a foot-dragging competition,” he joked, noting that parties often look for ways to extend final judgment if they anticipate a better result on the opposite track.
Meanwhile, Samsung asked Koh on Monday to stay the companies’ second retrial, scheduled later this month, on the portion of the 2012 judgment that was sent back for retrial by the Federal Circuit. Design patents and pinch-to-zoom also features prominently in the retrial. Koh indicated she would rule quickly on the stay request.
Manatt, Phelps & Phillips partner Yasser El-Gamal pointed out that of the five intellectual property cases taken up by the Supreme Court during this term, four are focused on damages. “It seems to me the court is taking particular interest in damages in the context of IP,” said El-Gamal, who like Babcock is not involved in the Apple v. Samsung case.
Damages for patent infringement are typically apportioned based on the value of the patented feature relative to the infringing product. But design damages are an exception. The exception stems from an 1886 U.S. Supreme Court decision awarding 6 cents to the owner of a patented design on rugs. The high court stated that it could not separate the value of the design from the value of the rug itself, and so awarded nominal damages. Congress responded the next year by setting a minimum of $250 in damages “and the excess of such profit over and above.” The statute has been modified over the years but still refers to “the extent of [the infringer’s] total profit.”
Samsung has always challenged the $399 million award as absurd given all of the other technological features that make up its smartphones and tablets. “A patented design might be the essential feature of a spoon or rug,” Quinn Emanuel Urquhart & Sullivan partner Kathleen Sullivan wrote in Samsung’s cert petition. “But the same is not true of smartphones, which contain countless other features that give them remarkable functionality wholly unrelated to their design.”
Or, as she put it oral argument to the Federal Circuit in 2014, “It’s like ordering the entire profits on the car because of the patented design of the cupholder.”
Samsung has received steadfast support from Stanford law professor Mark Lemley, who wrote a 2013 law review article critiquing the total-profit rule and an amicus brief on behalf of 37 law professors supporting Apple’s petition for cert. “I’m very pleased they will take this up,” Lemley said Monday.
The case won’t be heard until the court’s next term, and Lemley, who is also a partner at Durie Tangri, said he believes Samsung will prefer to wait as long as possible. That would be in part to allow for finality of the PTAB judgment, “and because they would prefer to have nine justices on the court, since they need five to win either way.”
Apple argues that the patent damages statute means what it says and it’s up to Congress to change it. Indeed, Federal Circuit Chief Judge Sharon Prost and Judge Raymond Chen seemed nearly incredulous when Sullivan made the pitch at oral argument two years ago. “It’s a question of who gets to change [the law], even if you’re right and it’s absurd in your view,” Prost told her.
Wilmer Cutler Pickering Hale and Dorr partner William Lee has argued that it’s “by no means ‘absurd’ to award Samsung’s ‘total profit’ in this circumstance,” Lee wrote. The iPhone has been celebrated as “a beautiful and breakthrough handheld computer” and the iPad as a “beautiful new touchscreen device,” he argued in his briefs to the Federal Circuit. He points out that Samsung’s profits began skyrocketing in 2010, the same year it began marketing smartphones that, in Apple’s words, “slavishly copied” the iPhone design.
Lee argued to the Federal Circuit that Lemley and other academics lobbying for apportionment have written previously that the law as it stands requires payment of all profits. “Samsung made a deliberate and conscious decision to copy the iPhone’s innovative look and many of its other features,” Lee wrote in Apple’s cert opposition, “and its mobile devices became iPhone clones.”
Apple seemed to have all the momentum last fall in its battle with Samsung. The company had been forced to pay $548 million to Apple and the Federal Circuit ordered Koh to enter a limited injunction excluding a few patented features from Samsung phones. But earlier this year the Federal Circuit shot down those patents and a $120 million judgment that came with it, and the Supreme Court’s action now threatens to wipe out all of the original $930 million judgment Apple won at the 2012 trial.
IMAGE: Kathleen Sullivan, Quinn Emanuel, Urquhart & Sullivan partner
Jason Doiy / The Recorder
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