Patent Trawls and the Total Profit Rule

Patents should be made more difficult to obtain, say by raising the obviousness standard or more speculatively by requiring patent terms to vary with investment. Aside from these types of changes, however, damages for infringement can also be made more reasonable. The issue is especially pronounced for design patents.

In the recent Apple v. Samsung case, the infringement of a handful of “look and feel” design patents resulted in Apple being awarded Samsung’s total profits on the infringing devices. A friend of the court brief from industry heavyweights, Dell, eBay, Facebook, Google, Hewlett-Packard, Limelight Networks, Newegg, and SAS Institute explains:

In this closely watched case, the panel upheld a jury’s award of the entirety of Samsung’s profits on smartphones that were found to have infringed three Apple design patents relating to a portion of the iPhone’s outer shell and one graphical-user-interface screen. Although the design patents covered only minor features of those complex electronic devices, the panel rejected Samsung’s argument that damages must be limited to the profits made from those infringing features. See slip op. 25-28. It instead concluded that the relevant statute, 35 U.S.C. § 289, “explicitly authorizes the award of total profit from the article of manufacture bearing the patented design.” Id. at 26-27. Viewing the smartphone as a single “article of manufacture,” the panel held that the statute required it to award the total profit where the “innards of Samsung’s smartphones were not sold separately from their shells as distinct articles of manufacture to ordinary purchasers.” Id. at 27-28.

A typical device might involve many design elements and what the total profit rule means is that a finding of infringement on any of these elements can get you all of the profits. The total profits rule is an invitation to rent seek. For a complex product, trawling the patent databases will almost always find some handful of patents that some court might rule were infringed. Defendants are put in the unenviable position of having to be right one hundred percent of the time while trawls need only be right once.

Do we really want to turn serifs into billion-dollar weapons of commercial war?

Hat tip: Mark Thorson.

Addendum: Keep in mind the general point: Patents are supposed to protect innovators but when weak claims of imitation are easily made and well-rewarded then patent law can harm innovators and reduce innovation, as the Tabarrok Curve illustrates.