Featured Expert Contributor – Intellectual Property (Patents)
Jeffri A. Kaminski, Venable LLP
The US Supreme Court will hear arguments on three patent cases in the October 2016 Term. Each case addresses a different area of patent law. In Samsung v. Apple (argument October 11), the Court will address the amount of damages awarded for infringement of a design patent. In SCA Hygiene v. First Quality (argument November 1), the Court will decide if the equitable defense of laches is available in patent cases. Lastly the court will tackle the question of liability for infringement when the product is made in a foreign country and only one component of the infringing product is provided from the U.S. to the foreign country in Life Technologies v. Promega (argument date to be determined).
Samsung v. Apple
The ramifications of the smartphone patent wars that raged earlier in this decade continue to be felt. As part of the long-running battle between Apple and Samsung, Samsung was found to infringe a number of Apple’s design patents. Design patents protect what a product looks like. A different type of patent, a utility patent, protects how a product functions. Design patents are less common than utility patents, and are also governed by different provisions of federal law regarding the amount of damages an infringer must pay. The statute regarding damages for infringement of a design patent states that the infringer “shall be liable to the owner to the extent of his total profit.” Courts consistently require the infringer of a design patent to turn over all of its profits associated with the infringing product to the patent owner.
The Supreme Court has framed the questions presented as:
Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?
Apple argues that the statute requires all the profits for the product be awarded as damages. The Federal Circuit agreed with Apple, reasoning that the statute is clear and courts should not be making a policy decision or deciding abstract fairness. Samsung argues that this rule should not apply in the modern digital era, pointing out in its brief that “even if the patented features contributed 1 percent of the value of Samsung’s phones, Apple gets 100 percent of Samsung’s profits.”
The court’s decision will greatly influence the future of design patents. Should the court decide the patent owner is entitled to the entire profit, design patents will become much more valuable. The ability to recover the entire profit for a product will be a tremendous incentive for companies to file more design patents and subsequently enforce those design patents.
Design patent are used to protect a very diverse set of products, ranging from car parts to shoes to fashion designs. The decision may also impact the burgeoning field of 3-D printing, where 3-D printers may be liable for producing items that infringe design patents. Many proponents of stronger protection of designs, such as fashion companies and car companies, have filed briefs supporting Apple’s position, while many tech companies have filed briefs supporting Samsung’s position.
A decision limiting the amount of damages to the profits attributable to the component in question would bring the law for design-patent damages into line with that for utility patents. The law for utility patents requires that the damages be apportion to cover the added value by the patented features and the patent owner is only entitled to that added value. Design patents would also maintain their “second-tier” status as a less desirable way to protect products.
SCA Hygiene v. First Quality
In this case the Supreme Court will address the availability of laches as a defense to patent infringement. The question to be answered is:
Whether and to what extent the defense of laches may bar a claim for patent infringement brought within the Patent Act’s six-year statutory limitations period, 35 U.S.C. § 286.
The patent laws set six years as the time limit for recovering past damages for patent infringement. Currently, laches is available as a defense to patent infringement if the court finds that the patent owner unreasonably delayed bringing suit, even if the suit is brought within the six-year period set forth in the statute. To succeed with a laches defense, the defendant must prove that the patent owner unreasonably delayed in bringing suit and that the defendant suffered material prejudice because of the delay. Laches has been a defense to patent infringement for many years, and a change could expose defendants to higher damage awards.
Laches encourages a patent owner to exercise their patent rights, rather than sit on them and allow damages to accumulate. Early notice of a potential patent issue may allow the defendant to design around the patent or to switch to a different, non-infringing product. This would limit the defendants’ exposure to damages. Eliminating the laches defense would allow a patent owner to wait six years before filing suit, no matter when the patent owner learned of the infringement. During this time period the defendant may be developing its product without knowledge of the infringement issue. The defendant might have committed substantial time and money to a particular design, and as product development continues, it become more difficult and expensive to modify the design. The defendant might lose all of the research and development investment, as well as be exposed to six years of damages if the patent owner is permitted to unreasonably delay filing suit.
The availability of laches as a defense would limit the defendant’s liability exposure when the patent owner delayed bringing suit. Numerous operating companies joined amicus briefs arguing that laches is an important defense that should remain available. Such companies argue that they “must frequently make choices about technology while facing uncertainty regarding the scope of protected patent rights.” If laches is no longer available start-ups and other companies will need to be more vigilant early in the development cycle in identifying patents relevant to their products, potentially delaying and making product development more expensive.
Life Technologies v. Promega
Lastly, the court will address the question of:
Whether the Federal Circuit erred in holding that supplying a single, commodity component of a multi-component invention from the United States is an infringing act under 35 U.S.C. § 271(f)(1), exposing the manufacturer to liability for all worldwide sales.
In the case at issue Promega had a US patent covering a genetic testing kit. The patent required five components. Life Technologies made and sold a genetic testing kit that included the patented components. Only one component, which is a “commodity,” was manufactured in the US. That component was then shipped from the US to the UK, where the remainder of the Life Technologies’ genetic testing kit was manufactured. The complete kit, including the US-made component, was then assembled in the UK The jury found that Life Technologies could be liable for all foreign sales of the testing kit as it supplied a “substantial portion” of the patented components from the US.
The decision in this case will impact multinational companies and global supply logistics. Many such companies are suppliers of “commodity” products, which include components that are subsequently assembled overseas into other products. When those “commodity” products are assembled overseas into a product that infringes a US patent, the supplier may be liable for patent infringement. For example, a supplier of a generic microprocessor—a commodity product—may be liable for infringement if that microprocessor is incorporated overseas into an infringing product. Most suppliers of commodity products do not have any control over how their products are subsequently used, yet they still may find themselves liable for patent infringement. The question in the case also addresses the extraterritorial reach of US patents. Typically, a patent covers activity occurring in the country that issued the patent. A UK patent covers infringement in the UK. If a company does not have a patent in the UK, it cannot stop infringing activity that takes place in UK. But the decision in Life Technologies could extend US patents to cover infringing activity that takes place in a foreign country.