03 March 2013


'A Rational System of Design Patent Remedies' by Mark A. Lemley at Stanford Law School argues that
A design patent owner who wins her suit is entitled to the defendant's entire profit from the sale of the product, whether or not the design was the basis for buying the product. No other IP regime has this rule, and it makes no sense in the modern world, where a design may cover only a small component of a valuable product. The culprit is section 289 of the Patent Act, a provision added in the nineteenth century, when design patents were very different than they are today. We should abolish section 289 and bring rationality to design patent remedies.
Lemley comments that
In the summer of 2012, a jury in San Jose, California awarded Apple the largest extant patent damages verdict in history, over $1 billion, in its case against Samsung The case attracted enormous press attention. The verdict was rightly portrayed as a big win for Apple, but also generally understood to be just one small piece in a much larger smartphone patent fight that has entangled all the companies and led to more than fifty lawsuits. While everyone agrees $1.05 billion is a lot of money, it also seems to be just a cost of doing business for Samsung, one of many costs in a global fight that has cost nearly $20 billion so far and shows no signs of abating. In one important respect, however, $1.05 billion is not simply a cost of doing business. For the phones at issue in the case, it was the entirety of the business. $1.05 billion wasn’t a reasonable royalty on the sale of technology covered by a patent; it represented Samsung’s entire profit from the products at issue in the case. Never mind Samsung’s own patents, its engineering and design work, or the technologies of Google and countless other inventors incorporated in the Samsung phones. The jury awarded all the profit from the sale of those phones, regardless of source, to Apple as damages. And curiously, it was parts of Apple’s product design, not any technical features, that was responsible for the overwhelming majority of the damages award.
The jury did this because current law required it to. Unlike patents on technical inventions, or for that matter copyrights or trademarks, design patent law requires that infringers – even innocent infringers – pay the plaintiff their entire profit from the sale of the infringing product, even if the design was only a small feature of that product.
That rule, developed more than a century ago, makes no sense. As applied to a modern, multi-component product it drastically overcompensates the owners of design patents, and correspondingly undervalues technical innovation and manufacturing know-how. It punishes even innocent infringers, particularly now that one can infringe a design patent merely on a finding that two independently developed designs are too similar to the ordinary observer. And it leaves troubling questions about what to do with all the other claimants to a share of the defendant’s profits. There can be no question that the entire profits rule has to go; the only question is how to get rid of it. I begin in Part I by discussing how we got to this unfortunate pass. In Part II, I describe the problems the entire profits rule creates for innovation and competition. I conclude in Part III by offering some suggestions for what to do about the rule.