The Supreme Court’s December 2016 decision in Apple vs. Samsung reversed a dangerous lower court decision that would have allowed patent plaintiffs to claim the total value of a product containing an allegedly infringing design feature, even if that design feature only provides a small amount of the product’s value. While total profits awards may arguably have been more plausible in an age when devices were less complicated and the design of the object constituted a significant portion of its value, the complexity of modern devices renders total profits awards for design patent infringement particularly illogical.
As the below graphic illustrates, devices like the ones over which the smartphone wars were waged contain a dizzying number of components from a variety of different contributors, all of which combine to give the object its value. Consider Bluetooth 3.0—a technology incorporating the contributions of more than 30,000 patent holders, including 200 universities—which enables short range connectivity between the smartphone and other devices. Or the micro SD removable memory storage card, whose more than 800 patent holders make up the SD Card Association. Imagine what would happen if patent trolls could assert a single design patent to claim the total value of these contributions and innovations, regardless of the design patent’s actual impact on the product’s total value.
The dangerous implications of allowing design patent holders to claim total profits damages for infringements are obvious, and the logic of a total profits regime is weak. Unless consumers are buying phones principally because of their patented rounded rectangle corners, total profits awards produce windfall profits for design patent holders well beyond their actual economic value. Perversely, these unjustified damages awards hinder rather than promote innovation, directly undermining the fundamental purpose of patent law and emboldening patent trolls.
For further proof that the total profit damages regime make no sense, check out the below graphic illustrating just how many components go into a smartphone: