Apple v. Samsung: Trade Dress Functionality and Total Profits without Apportionment

by Wilson Elser
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The highly publicized Apple v. Samsung litigation saga began in April 2011 when Samsung alleged various infringements of patents and trade dress related to Apple’s iPhone. A jury awarded more than $1 billion in damages. In a May 18, 2015, opinion, a three-judge panel of the Federal Circuit reversed on trade dress, decreasing some damages, but affirmed on design and utility patent infringement and damages. The sometimes forgotten design patents were the highlight of the opinion. The Court upheld an award of total profits from Samsung’s phones for infringement of Apple’s design patents, rejecting an apportionment or causality analysis that would relate the profits to only the infringing article. Based on the potential for total profits and the finding of functionality for trade dress, undoubtedly this decision will prompt businesses to closely evaluate the value of filing more design patent applications and enforcing existing design patents.

Trade Dress
Trade dress is often referred to as the “look and feel” of the characteristics of visual appearance of a product or its packaging. For the iPhone, Apple asserted unregistered trade dress claims based on elements such as a “rectangular product with four evenly rounded corners” and a registered trade dress for the “design details in each of the sixteen icons on the iPhone’s home screen.” However, the “rounded corners” of the iPhone improved “pocketability” and “durability,” and in the Court’s view, the combination of icon designs showed nothing other than an assembly of functional parts.

Because trade dress protects only nonfunctional aspects of a product’s physical detail or design and functional aspects fall within the purview of patent law, Apple’s asserted trade dress claims had some utilitarian functionality and were not protectable under the Lanham Act.The Federal Circuit applied the Ninth Circuit’s Disc Golf factors (i.e., utilitarian advantage, alternative designs, advertising of advantages, and method of manufacture) to analyze functionality. It recognized, however, the Supreme Court’s more recent and seemingly broader rule on functionality in TrafFix, “a feature is also functional … when it affects the cost or quality of the device.” Even under the Disc Golf factors, there was no question that the trade dress had some functionality and therefore were not protectable. The Federal Circuit referenced the “ease of use” claims by Apple to demonstrate utilitarian functionality, while Apple focused on the “beauty” of the design. Although the Court stated Apple pursued both functionality and beauty, aesthetic functionality, another potential bar to protection, was never at issue in the opinion.

In light of the Federal Circuit’s emphasis on non-functionality as a prerequisite to warrant trade dress protection, the case may inspire companies to evaluate their reliance on trade dress, design patents or an overlap of both.

Design Patents
The Federal Circuit rejected Samsung’s arguments challenging Samsung’s liability for infringement of Apple’s three design patents. First, Samsung contended that the district court erred by not excluding the functional elements from the claim scope and construction in the jury instructions. The Federal Circuit disagreed, finding that no rule exists that entire elements dictating functional purpose or structural aspects be eliminated from the claim scope.

Second, Samsung argued the district court erred by misleading the jury with the instruction that actual deception was not required and for providing guidelines in considering prior art. The Federal Circuit determined the jury instructions were clear and the jury must compare the asserted design against the prior art.

Third, and perhaps of most significance, the Federal Circuit upheld the ruling to allow the jury to award Samsung’s total profits on its infringing phones as damages. Samsung argued that an apportionment or causation analysis that limits profits to the infringement or infringing article of manufacture should be applied. The Federal Circuit quoted the entirety of section 289 of Title 35, which addresses design patent infringement damages. It emphasized that section 289 states, in pertinent part, an infringer of a design patent “shall be liable to the owner to the extent of his total profit….” Distinguishing Samsung’s phones as a single article of manufacture not sold separately, referencing a piano case and an entire piano in a 1915 case where the Second Circuit allowed an award of profits for only the piano case, the Federal Circuit held that the plain language of the statute and prior precedent required an award of total profits without apportionment. As discussed in a footnote in the opinion, an award of entire profits may make no sense in the modern world, but in the Court’s view the issue is a matter of policy and for Congress to decide.

Utility Patents
Nothing in the decision as to utility patents was surprising. For Samsung’s “indefiniteness” argument directed to the claim term “substantially centered,” the Court held that Samsung is seeking a level of precision that exceeds the definiteness required of valid patents. Samsung also argued claims were anticipated by a prior art reference; however, the Court found that the jury reasonably credited Apple’s expert who testified that the technology was not anticipated and taught by the prior art reference. The Federal Circuit affirmed the lost profits and reasonable royalty damages awarded.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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