Category Archives: Intellectual Property

Should companies pay damages for invalid patents?

Screen Shot 2016-03-04 at 11.13.21 AMThat’s one of the questions in the recurring litigation between Apple and Samsung. Next month, the two firms will begin a fourth trial in their multiyear battle over intellectual property for smartphones. Two weeks ago Apple, according to Law360, “asked a judge…to bar Samsung from telling the jury about reexaminations that have tentatively found some of Apple’s patents invalid.”

Then on Friday, in a separate case, another court did in fact invalidate two of the many patents in question, tossing out a May 2014 verdict that had awarded Apple $120 million.

The U.S. Federal Circuit Court of Appeals dismantled a San Jose jury’s findings in the second trial between the two rivals, essentially concluding that the technology at the heart of Apple’s lawsuit was so obvious that Samsung could not be punished for incorporating it into its smartphones. The appeals court added salt to Apple’s wound by upholding a $158,000 judgment against the Cupertino company for infringing a Samsung tech patent involving camera features.

To most casual observers, paying damages for patents that no longer exist and should never have been granted might seem wrong. Denying jurors the knowledge that the patents no longer exist may also seem odd and unfair. But this is patent law, and over the last few decades common sense hasn’t always applied. We thus got an explosion of patents issued for questionable “inventions,” especially for obvious software code, business practices, and even graphic designs. We also suffered a corresponding explosion of patent litigation.

Fortunately, common sense has in the past few years been making something of a comeback. The Supreme Court has reined in some of the worst abuses of trolls and the over-issuance of software patents. The Apple-Samsung cases highlight some of the remaining relics of patent law left over from a pre-digital world. Such as how to handle products that contain tens of thousands of pieces of intellectual property. Or, as in this case, how to clean up after several decades of over-issuance of questionable IP.

If you were a juror, would you want to know if the IP at the heart of the case was highly suspect or nonexistent? The law in this realm may be complicated. But as a matter of right and wrong, it seems pretty straight forward.

Could Apple be awarded all of Ford’s or Lexus’s profits?

Screen Shot 2015-03-04 at 10.42.26 AMThe fanfare surrounding Apple exploded to new levels two weeks ago as we learned that the iPhone maker may enter the automobile business. The Wall Street Journal reported that CEO Tim Cook has hired away top auto executives from Mercedes and Ford and is running a secret car team that may number up to 1,000 employees. Apple, apparently, doesn’t want to let Google, with its driverless car program, or Tesla, the auto darling of the moment, have all the fun. Or, another rumor goes, maybe Apple plans to buy Tesla — for $75 billion. Who knows. Odds are Apple will never build cars. Perhaps Apple is mostly targeting electronics, software, and content in the new and very large “connected car” world.

Whatever the case, its not difficult to imagine Apple’s iOS, its apps, its icons, and its designs seeping into more and more devices, from smart-watches to smart-homes to connected cars.

Which gets us to the point of this post . . .

There’s a big oral argument today. No, not the health care hearing at the Supreme Court. Today is the latest round of the four-years patent war between Apple and Samsung. The two smartphone titans have been suing each other all over the world, but the cases have reduced to a couple remaining skirmishes in American courts.

While not the focus of today’s argument, the highest profile issue remains unresolved. Last year a jury found Samsung infringed three fairly minor Apple design patents and awarded Apple $930 million — a huge number considering the nature and consequence of the patents in question. Among other legal arguments at issue is a quirk of patent law, dating to 1887, which says an infringer is liable for its “total profit.” But as we’ve previously explained, in today’s market of hypercomplex products, this rule is perverting rationality.

The question is whether the remedy in these cases — the award to the plaintiff of the total profits earned by the defendant’s product — makes any sense in the modern world.

A smartphone is a complex integration of thousands of hardware and software technologies, manufacturing processes, aesthetic designs and concepts. These components may each be patented, or licensed, or not at all, by any number of firms. A smartphone, by one estimate, may contain up to 250,000 patents. Does a minor design patent comprising a tiny fraction of a product’s overall makeup drive the purchase decision? If company A’s product contains one infringing component among many thousands, even if it has no knowledge or intent to infringe, and even if the patent should never have been issued, does it make sense that company B gets all company A’s profits?

There are good reasons to think a fair reading gives a much saner result:

To see why the phrase should be interpreted in a common sense way, consider an alternative plain reading. Why couldn’t “total profit,” for example, mean the entire profit of the firm, including profits derived from unrelated products?

Does anyone think this is the meaning of the law? No. Among other common sense readings, the phrase “to the extent” is a modifier that can easily be read to limit the award in proportion to the severity of the infringement. An additional consideration is that many design patents better resemble trademarks and copyrights, and in fact trademark and copyright law (although imperfect themselves) often provide for more common sense remedies.

Imagine, however, if the reading of the 1887 law that yielded the $930-million award is upheld. Several years from now, Apple’s iOS is installed in Chevrolets and BMWs. But Ford and Lexus are using distinct software that in some way resembles Apple’s. Apple sues Ford and Lexus for a tiny graphical icon containing a bevel that could only have originated in the mind of Sir Johnny Ive. Could Apple be awarded all of Ford’s or Lexus’s profits?

Absurd? Yes. But that is the logical extension of the overly-expansive “total profits” reading.

In the last few years, the Supreme Court has reined in software patents in a hugely constructive way. A common sense ruling here would be one more step forward on the path to patent sanity.

Congress Asking Questions on IP Pools

A couple weeks ago I singled out one case (among many) that showed how important it is to improve our intellectual property institutions. Here’s that Forbes article.

I see Congress is now asking questions, too.

Congressional to Asst AG Baer 04.18.13 by Bret Swanson

Lawyerpalooza

Larry Downes, author of the excellent Laws of Disruption and a new colleague at the Tech Liberation Front, notes the proliferation of patent lawsuits in the mobile phone world and points toward this good graphic in the New York Times to help make his point, that “It’s both much worse and not as bad as it seems”:

“Information is not free”

Longtime news and media executive Gordon Crovitz has for the last half-year been writing a terrific column on the “Information Age” — this week on the new copyright agreement between Google and book publishers.