Damages providing compensation for infringement of design patents can be determined based on either 35 U.S.C. Section 284 or Section 289. Whereas Section 284 is applicable to all types of patents, a separate remedy available under Section 289 pertains solely to design patents. Per Section 289, whoever manufactures or sells “any article of manufacture to which [a patented] design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250.”
Traditionally, Section 289 has been interpreted as making available to plaintiffs the profit on the entire product found to have incorporated their patented design. As multicomponent products have become more prevalent, U.S. courts have recognized that the question of properly defining the “article of manufacture” has become more complex and more important.
The question as to the proper interpretation of the phrase “article of manufacture” was appealed to the Supreme Court in the matter of Samsung Electronics Co. v. Apple Inc. (“Samsung v. Apple”). In December 2016, the Supreme Court issued its opinion, ruling that for multicomponent products, the relevant article of manufacture need not be the end product sold to the consumer but could be limited to a component of that product found to incorporate the patented design. The Supreme Court’s opinion went on to identify a two-step process for arriving at a damages award under Section 289. First, one must “identify the ‘article of manufacture’ to which the infringed design has been applied” and then one must “calculate the infringer’s total profit made on that article of manufacture.”
While Samsung and Apple asked the Supreme Court to help identify the relevant article of manufacture for each of the design patents at issue in their dispute, the court refused to specify a particular test or method, citing inadequate briefing of the issue by the parties. The case was remanded back to the Court of Appeals for the Federal Circuit (CAFC). The CAFC then remanded the case back to the district court to consider particular arguments and to determine whether a new damages trial would be required. In its opinion, the CAFC suggested that if a new damages trial were warranted, the district court would have the opportunity to set forth a test for identifying the relevant article of manufacture.
While Apple/Samsung has not yet progressed far enough (as of March 2018) to provide direction for a test to identify the article of manufacture, two other district court cases do provide some guidance. Columbia Sportswear North America, Inc. v. Seirus Innovative Accessories, Inc. (“Columbia v. Seirus”) in the Southern District of California and Nordock Inc. v. Systems, Inc. (“Nordock v. Systems”) in the Eastern District of Wisconsin both address considerations for determining the relevant article of manufacture under Section 289.
In Columbia v. Seirus, the jury was asked to assess liability and, if necessary, damages related to Seirus’ alleged infringement of one design patent, U.S. Patent No. D657,093, and one utility patent, U.S. Patent No. 8,453,270. The patents generally relate to a heat-reflective material that regulates temperature by retaining body heat and also provides other desirable benefits, such as breathability and moisture wicking. With regard to the design patent, Columbia was seeking the defendant’s total profits from the relevant article of manufacture, per Section 289.
In the jury instructions, the court explained the two-step process (as identified by the Supreme Court) for determining damages under Section 289. The court noted that the plaintiff bore the initial burden of producing evidence identifying the article of manufacture for which it sought the defendant’s profits and that it could satisfy that burden by: 1) demonstrating that the defendant applied the patented design to a product that was sold and 2) proving the total profit generated from the sales. The jury instructions indicated that if the product sold to consumers was a single-component product, then the relevant article of manufacture was the entire product. Alternatively, if the product sold to consumers was a multicomponent product, the jury would have to determine the relevant article of manufacture (whether it was the entire product or some infringing portion/component of the product). To make that determination, the jury instructions required the jury to consider the following four factors:
This section of the jury instructions was in large part taken from an amicus brief filed by the U.S. Department of Justice on behalf of the United States in the Samsung v. Apple matter. The Supreme Court’s opinion acknowledged the test proposed in the amicus brief; however, it did not go so far as to endorse or sanction the proposed test.
Although the jury verdict form in the Columbia v. Seirus matter required the jury to specifically reveal its conclusion regarding the relevant article of manufacture, the jury awarded all of the accused profits in damages, suggesting that it concluded the entire product to be the relevant article of manufacture.
At issue in Nordock v. Systems is the alleged infringement of U.S. Patent No. D579,754, which is a design patent pertaining to a lip and hinge plate for a dock leveler. A dock leveler is generally a device that bridges the gap between the floor of a loading dock and the bed of semi-trailer, allowing people and equipment to easily pass between the two.
At the initial trial, the jury found Systems liable for infringing the patent and awarded reasonable royalty damages totaling $46,825. In the verdict form, the jury concluded that there were no damages resulting from lost profits and price erosion, and also indicated that Systems’ profits were zero. The case was ultimately appealed to the Supreme Court, which remanded the matter, citing its opinion in Samsung v. Apple. The CAFC subsequently remanded the case back to the district court for a new trial on damages. In its opinion, the CAFC stated that the trial court would “have the opportunity to consider the parties’ arguments with respect to the relevant ‘article of manufacture.’”
Both parties subsequently filed motions for summary judgment in attempts to have the district court pinpoint the article of manufacture. The district court issued an order on November 21, 2017 that denied both motions but which provided guidance regarding a number of issues related to identifying the article of manufacture.
The first issue related to who should determine the article of manufacture. The district court held that, in general, it was a question for a jury to determine the article of manufacture. It indicated that “summary judgment may be appropriate if there is no genuine dispute of material fact or if there is only one conclusion that a reasonable jury could reach.” The court indicated that in that particular matter, it was unable to identify the article of manufacture and the finder of fact must make that determination.
Second, the court addressed each party’s burden under Section 289. The court generally agreed with the district court in Apple/Samsung, concluding that:
The plaintiff bears the burden of persuasion in proving the relevant article of manufacture and in proving the amount of the defendant’s total profit under Section 289. The plaintiff also bears an initial burden of production on both of these issues. However, once the plaintiff satisfies its initial burden of production, the burden of production shifts to the defendant to come forward with evidence to support any alternative article of manufacture and to prove any deductible expenses.
Finally, the court agreed with the four-factor test proposed in the amicus brief filed by the U.S. Department of Justice on behalf of the United States in the Samsung v. Apple matter and adopted by the district court in Columbia v. Seirus. The court, however, indicated that it did not believe that those four factors would always reflect the only relevant factors in determining the article of manufacture. It specifically concluded that “how a product is manufactured merits explicit consideration as a factor when attempting to determine what is the relevant article of manufacture.”