Patent Law Tamed Yet Again

The United States Supreme Court made another major shift in patent law on Tuesday, overruling Federal Circuit precedents that had held that any design patent violation entitles the prevailing party to 100% of the profits from the product utilizing the patent, in the case of Samsung Electronics Co. v. Apple, Inc. According to the official syllabus of the decision (in the link above) the holding is that:

In the case of a multicomponent product, the relevant “article of manufacture” for arriving at a [35 U.S.C.] §289 damages award need not be the end product sold to the consumer but may be only a component of that product.

In the case, Samsung was ordered to pay $399 million to Apple for breaching design patent aspects of the iPhone that were a small component of the total product. The U.S. Supreme Court held in a unanimous opinion that damages for breach of a design patent should instead be proportionate to the contribution that the patented element makes to the total product - in this case, probably a small fraction of the total $399 million of profits that Samsung made from selling the infringing phones.

The decision resolves what had been a serious fundamental flaw in patent law that produced damages that were grossly disproportionate to the true value of the harm from an infringement. Under the old rule of law, it could easily be the case that the damages award for multiple breaches of different patents that all contribute to the same product could result in total damages far in excess of the total profits from the sales of the goods.

This is a particular barrier to technological innovations, because it is often not at all clear until a court finally resolves the issue, whether a product infringes a patent, and because there is no fool proof way to review the existing catalog of patents when designing a new product. Yet, a patent holder can recover for patent infringement even if the product is designed and/or invented completely independently of the patent holder's invention.

Also, a the patent holder can take a wait and see approach and only sue in cases where an allegedly infringing product becomes profitable, without bearing any of the downside risk, when potentially infringing products turn out to generate little or no profits.

This is one of an ongoing string of U.S. Supreme Court decisions that have generally narrowed the scope of what can be protected by patent law and the consequences for infringing a patent. Previous cases have, in particular, narrowed the scope of patentable business processes and software, made it easier to sanction weak patent infringement claims with attorneys' fee awards, narrowed the general presumption that injunctions are available for every patent infringement, and now, narrowed the scope of damages which can be awarded for an infringement that is a minor part of a product.

For a long time, the U.S. Supreme Court stayed away from patent law, which is a quite insular and technical speciality in the law, since circuit splits of authority never arose because all patent law cases are handled on appeal by the U.S. Court of Appeals for the Federal Circuit, a bench full of judges with private practice backgrounds in firms that enforced patents, resulting in a degree of institutional capture. But, the U.S. Supreme Court eventually got wise to this problem and has embarked on a slow but steady roll back of the Federal Circuit's patent law excesses.

Patent holders are now about 3 pro to 17 against to 4 neutral in U.S. Supreme Court litigation implicating patent law since 2005, a period which also included the America Invents Act in 2011 which was a major reform. There has also been related nationalization of trade secret law this year.

An important piece of patent legislation of venue for infringement actions has some change of passage either in the lame duck session or in the next Congress.

Other Relatively Recent Posts on Patent Law at this blog include:

* 15% of U.S. Tech Patent Litigation Due To Patent Troll Enforcement Of Three Dubious Patents

* Patents Are Much Harder To Get Than They Were A Dozen Years Ago

* Almost Half Of Fully Litigated Patents Are Invalid

* Fed Circuit Wrong Again On Patent Law

* The Law Against Using Your Own Ideas

* Tax Strategy Patents Are No More