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Precedential Patent (and Trade Dress) Case From the ‎Federal Circuit

May 19, 2015


Apple v. Samsung – In 2012 Apple was awarded over $1 billion in damages when a jury found that numerous Samsung smartphones infringed Apple's trade dress and its utility and design patents. A partial retrial on damages reduced the judgment to $930 million. In the present appeal, citing the Disc Golf and Leatherman Ninth Circuit cases, the panel reverses the judgment as to trade dress infringement, finding the trade dress to be functional. This ‎will reduce Apple's recovery by $382 million. The panel affirms both the utility and design patent parts of the case, applying Nautilus and finding sufficiently definite the phrase "substantially centered" when describing a user interface feature.

Apple Inc. v. Samsung Electronics Co., Ltd., Fed. Cir. Case 2014-1335, 2015-1029 (May 18, 2015)

I. Trade Dresses

The Ninth Circuit has explained that trade dress is the totality of elements in which a product or service is packaged or presented. The essential purpose of a trade dress is the same as that of a trademarked word: to identify the source of the product. In this respect, protection for trade dress exists to promote competition. The protection for source identification, however, must be balanced against "a fundamental right to compete through imitation of a competitor's product. " Leatherman Tool Grp., Inc. v. Cooper Indus., Inc., 199 F.3d 1009 (9th Cir. 1999). This right can only be temporarily denied by the patent or copyright laws. In contrast, trademark law allows for a perpetual monopoly and its use in the protection of physical details and design of a product must be limited to those that are nonfunctional. Thus, it is necessary for us to determine first whether Apple's asserted trade dresses are nonfunctional and therefore protectable.

In general terms, a product feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article. "A product feature need only have some utilitarian advantage to be considered functional." Disc Golf Ass'n v. Champion Discs, Inc., 158 F.3d ‎‎1002 (9th Cir.‎ ‎1998). ‎Trade dress, taken as a whole, is functional if it is "in its particular shape because it works better in this shape." Leatherman, 199 F.3d at 1013.

Courts have noted that it is more difficult to claim product configuration trade dress than other forms of trade dress. Accordingly, the Supreme Court and the Ninth Circuit have repeatedly found product configuration trade dresses functional and therefore non-protectable so this high bar for non-functionality frames our review of the two iPhone trade dresses on appeal. The unregistered trade dress and the registered trade dress claim different details and are afforded different evidentiary presumptions under the Lanham Act, so will be discussed separately.

A. Unregistered Trade Dress

Apple claims the following elements from its iPhone products to define the unregistered trade dress:

a rectangular product with four evenly rounded corners;

a flat, clear surface covering the front of the product;

a display screen under the clear surface;

substantial black borders above and below the display screen and narrower black borders on either side of the screen; and

when the device is on, a row of small dots on the display screen, a matrix of colorful square icons with evenly rounded corners within the display screen, and an unchanging bottom dock of colorful square icons with evenly rounded corners set off from the display's other icons.

As this trade dress is not registered on the principal federal trademark register, Apple has the burden of proving that the claimed trade dress, taken as a whole, is not functional. See 15 U.S.C. § 1125(c)(4)(A).

Apple argues that its unregistered trade dress is nonfunctional under each of the factors the Ninth Circuit uses to analyze functionality: "(1) whether the design yields a utilitarian advantage, (2) whether alternative designs are available, (3) whether advertising touts utilitarian advantages of the design, and (4) whether the particular design results from a comparatively simple or inexpensive method of manufacture."

1. Utilitarian Advantage

Apple argues that the iPhone's physical design did not contribute unusually to the usability of the device. Apple further contends that the unregistered trade dress was developed not for "superior performance." Neither "unusual usability" nor "superior performance," however, is the standard used by the Ninth Circuit to determine whether there is any utilitarian advantage. To the contrary, the Ninth Circuit has suggested that in order to establish nonfunctionality, the party with the burden must demonstrate that the product feature serves no purpose other than identification. Disc Golf, 158 F.3d at 1007.

The requirement that the unregistered trade dress "serves no purpose other than identification" cannot be reasonably inferred from the evidence. Apple conceded during oral argument that its trade dress "improved the quality of the iPhone in some respects." It is thus clear that the unregistered trade dress has a utilitarian advantage.

2. Alternative Designs

The next factor requires that purported alternative designs "offer exactly the same features" as the asserted trade dress in order to show non-functionality. Leatherman, 199 F.3d at 1013-14. A manufacturer does not have right under trade dress law to compel its competitors to resort to alternative designs which have a different set of advantages and disadvantages.

Apple, while asserting that there were " numerous alternative designs," fails to show that any of these alternatives offered exactly the same features as the asserted trade dress. The "mere existence" of other designs does not prove that the unregistered trade dress is non-functional.

3. Advertising of Utilitarian Advantages

If a seller advertises the utilitarian advantages of a particular feature, this constitutes strong evidence of functionality. Disc Golf, 158 F.3d at 1009. The substance of the iPhone advertisement relied upon by Apple gave viewers the ability to see how the flicking, scrolling and tapping works. Another advertisement similarly displayed the message, "touching is believing," under a picture showing a user's hand interacting with the graphical user interface. Apple fails to show that these demonstrations of the user interface on iPhone's touch screen were not touting the utilitarian advantage of the unregistered trade dress.

4. Method of Manufacture

The fourth factor considers whether a functional benefit in the asserted trade dress arises from "economies in manufacture or use," such as being "relatively simple or inexpensive to manufacture." Disc Golf, 158 F.3d at 1009.

Apple contends that "[t]he iPhone design did not result from a 'comparatively simple or inexpensive method of manufacture" because Apple experienced manufacturing challenges. Apple's manufacturing challenges, however, resulted from the durability considerations for the iPhone and not from the design of the unregistered trade dress. According to Apple's witnesses, difficulties resulted from its choices of materials in using "hardened steel"; "very high, high grade of steel"; and, "glass that was not breakable enough, scratch resistant enough." These materials were chosen for the iPhone to survive a drop.

The durability advantages that resulted from the manufacturing challenges are outside the scope of what Apple defines as its unregistered trade dress. For the design elements that comprise Apple's unregistered trade dress, Apple points to no evidence in the record to show they were not relatively simple or inexpensive to manufacture.

In sum, Apple has failed to show that there is substantial evidence to support a jury finding in favor of non-functionality for the unregistered trade dress on any of the Disc Golf factors. We therefore reverse the denial of Samsung's JMOL that the unregistered trade dress is functional.

B. The Registered '983 Trade Dress

The '983 trademark registration claims design details in each of the sixteen icons on the iPhone's home screen framed by the iPhone's rounded-rectangular shape with silver edges and a black background:

The first icon depicts the letters "SMS" in green inside a white speech bubble on a green background;

the seventh icon depicts a map with yellow and orange roads, a pin with a red head, and a red and-blue road sign with the numeral "280" in white;

the sixteenth icon depicts the distinctive configuration of applicant's media player device in white over an orange background.

(the court's opinion omits thirteen other icon design details for brevity).

The federal trademark registration provides "prima facie evidence" of non-functionality. This presumption ‎shifts the burden of production to the defendant to provide evidence of functionality. Once this ‎presumption is overcome, the registration loses its legal significance. ‎

It is clear that individual elements claimed by the '983 trade dress are functional. For example, the claimed details such as "the seventh icon depicts a map with yellow and orange roads, a pin with a red head, and a red-and-blue road sign with the numeral '280' in white" are functional. Apple's expert agreed that "the whole point of an icon on a smartphone is to communicate to the consumer using that product, that if they hit that icon, certain functionality will occur on the phone." Apple rebuts none of this evidence.

Apple contends that Samsung improperly disaggregates the '983 trade dress into individual elements to argue functionality. But Apple fails to explain how the total combination of the sixteen icon designs in the context of iPhone's screen-dominated rounded-rectangular shape—all part of the iPhone's "easy to use" design theme—somehow negates the undisputed usability function of the individual elements. The iPhone's usability advantage from the combination of its icons shows that the '983 trade dress is nothing other than the assemblage of functional parts. In the face of undisputed facts demonstrating functionality, this registration loses its evidentiary significance and shifts the burden of proving non-functionality back to Apple. Apple, however, has failed to show that there was substantial evidence in the record to support a jury finding in favor of non-functionality for the '983 trade dress on any of the Disc Golf factors. We therefore reverse the denial of Samsung's motion for JMOL that the '983 trade dress is functional.

II. Design Patents

The D'677 patent focuses on design elements on the front face of the iPhone:

The D'087 patent claims another set of design features that extend to the bezel of the iPhone:

The D'305 patent claims "the ornamental design for a graphical user interface for a display screen or portion thereof' as shown in the following drawing:

Samsung contends that it should not have been found liable for infringement of the asserted design patents because any similarity was limited to the basic or functional elements in the design patents. According to Samsung, there was no evidence of actual deception of consumers and the differences between the accused smartphones and the asserted design patents should have been clear if prior art designs were properly considered. Samsung raises these three issues: functionality, actual deception, and comparison to prior art—in the context of the jury instructions and the sufficiency of evidence to support the infringement verdict. Finally, Samsung argues that the district court legally erred in allowing the jury to award as damages Samsung's entire profits on its infringing smartphones.

A. Infringement

1. Jury Instructions

a. Functional Aspects in the Asserted Design Patents

"Where a design contains both functional and nonfunctional elements, the scope of the claim must be construed in order to identify the non-functional aspects of the design as shown in the patent." OddzOn Prods., Inc. v. Just Toys, Inc., 122 F.3d 1396 (Fed. Cir. 1997). Samsung contends that the district court erred in failing to exclude the functional aspects of the design patents either in the claim construction or elsewhere in the infringement jury instructions. The panel concludes that the jury instructions, as a whole, limited the scope of the asserted design patents to the "ornamental" elements. As such, Samsung has failed to show prejudicial error in the jury instructions as a whole that would warrant a new trial.

b. Actual Deception and Role of Prior Art

Samsung contends that the infringement instruction was erroneous for stating that actual deception was not required, and for providing guidelines in considering prior art. A design patent is infringed if an ordinary observer would have been deceived: if, in the eye of an ordinary observer, giving such attention as a purchaser usually gives, two designs are substantially the same, if the resemblance is such as to deceive such an observer, inducing him to purchase one supposing it to be the other, the first one patented is infringed by the other. Moreover, an infringement analysis must include a comparison of the asserted design against the prior art: "if the accused design has copied a particular feature of the claimed design that departs conspicuously from the prior art, the accused design is naturally more likely to be regarded as deceptively similar to the claimed design, and thus infringing." Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665 (Fed. Cir. 2008) (en banc). Samsung has failed to show that "when, looking to the instructions as a whole, the substance of the applicable law was not fairly and correctly covered."

2. Supporting Evidence

Samsung contends that the infringement verdict was not supported by substantial evidence. Samsung's contentions, however, are premised on the same issues: functionality, actual deception, and comparison to prior art—it raises in the context of the jury instructions. Having rejected the jury instruction challenges, we likewise find Samsung's parallel substantial evidence complaints unpersuasive.

B. Damages

Finally, with regard to the design patents, Samsung argues that the district court legally erred in allowing the jury to award Samsung's entire profits on its infringing smartphones as damages. The damages, according to Samsung, should have been limited to the profit attributable to the infringement because of "basic causation principles . . ." In reciting that an infringer "shall be liable to the owner to the extent of [the infringer's] total profit," 35 U.S.C. § 289 explicitly authorizes the award of total profit from the article of manufacture bearing the patented design. The clear statutory language prevents us from adopting a "causation" rule as Samsung urges, so we affirm the damages awarded for design patent infringements.

III. Utility Patents

Finally, Samsung challenges the validity of claim 50 of the '163 patent and claim 8 of the '915 patent. Samsung also challenges the damages awarded for utility patent infringement.

A. Validity

1. Indefiniteness of Claim 50 of the '163 Patent

Claim 50 of the '163 patent relates to a user interface feature in which a user's double tapping on a portion of an electronic document causes the portion to be enlarged and "substantially centered" on the display. Samsung contends that claim 50 is indefinite because the '163 patent provides no objective standard to measure the scope of the term "substantially centered."

Samsung's complaint about a lack of an objective standard of measure is seeking a level of precision that exceeds the definiteness required of valid patents. "The definiteness requirement mandates clarity, while recognizing that absolute precision is unattainable." Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120 (2014). Given this recognition, "a patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention." Id. at 2124

Samsung, however, points to no evidence showing that skilled artisans would find the element "substantially centered" as lacking reasonable certainty in its scope. In contrast, Apple's expert explained that the "padding" allowed in the '163 patent provides skilled artisans with enough information to understand what "substantially centered" means in the patent. Apple's expert cites a discussion in the specification of an embodiment referring to the figure reproduced below where the enlarged portion of the document is essentially centered except for "a predefined amount of padding along the sides of the display." We therefore agree with the district court that Samsung failed to carry its burden in challenging the validity of claim 50 of the '163 patent for indefiniteness.

2. Anticipation of Claim 8 of the '915 Patent

Claim 8 of the '915 patent describes a computer-based method for distinguishing between scrolling and gesture (such as zooming) operations on a touch screen. The dispute centers on whether a prior art reference, the Nomura patent application, taught the "event object" element in claim 8. Apple's expert explained that "event objects" in claim 8 refers to a particular programming construct and that there were many potential programming alternatives that Nomura could have used to implement the "movement history" it disclosed. We find that a reasonable jury could have credited the testimony of Apple's expert that Nomura did not inherently disclose the claimed event object. Thus, we agree with the district court that there was substantial evidence to support the jury's finding that claim 8 was not anticipated.

B. Damages

Apple advanced at trial both lost profits and reasonable royalty damages theories. The jury determined that for certain Samsung phones found to infringe the '915 patent, no reasonable non-infringing alternative was available, and thus lost profits was an appropriate measure of damages. For the other Samsung phones found to infringe Apple's utility patents-in-suit, the jury determined that an award of lost profits was not supported, and thus awarded Apple a reasonable royalty for Samsung's infringement.

1. Lost Profits for Infringement of the '915 Patent

Samsung contends that two Samsung phones, found to have not infringed the '915 patent, should have been considered as non-infringing substitutes. Samsung further asserts that Apple failed to prove consumer preference of the '915 patent's technology over a comparable feature available in the two non-infringing Samsung phones. However, of these two phones, one had significantly different features, such as a slide-out physical keyboard in combination with a small, low-resolution screen. The other phone was never sold by a U.S. carrier, and to be an acceptable non-infringing substitute, the product must have been on the market at the time of infringement. Samsung's unsupported assertions fail to show a lack of substantial evidence supporting the award of lost profits.

2. Reasonable Royalty

Samsung argues that Apple's experts in the two trials offered only "cursory" or "non-meaningful" testimony applying the Georgia-Pacific factors. But, taken as a whole, we find that they provided sufficient evidence to support the jury's reasonable royalty awards in the original and damages retrial.

Comments: This case shows how important it is to apply for design patents on ornamental features and how it doesn't seem to be all that helpful to register trademarks in product configurations. The opinion also provides another example, along with the recent Federal Circuit case of Eon v. AT&T (May 6, 2015), that perhaps Nautilus v. Biosig didn't change things all that much when it comes to applying the test for indefiniteness.