Apple, Inc. v. Samsung Electronics Co., Ltd.
786 F.3d 983 (Fed. Cir. 2015)
Authored by David Bly
Statement of Facts: During the iPhone design development, Apple obtained several patents and trade dress protections. Apple held design patents involving elements of the iPhone’s front face, features extending to the outside frame of the phone, and graphical user interface and utility patents involving the iPhone’s “double-tapping” procedure, where a user can double tap the screen to enlarge and center an image. Apple also had a registered trade dress for the iPhone’s home screen, featuring sixteen distinct items and unregistered trade dress for physical design elements, such as evenly rounded corners, a flat clear surface, and a row of dots on the home screen that allows a user to toggle between a series of icons. Samsung developed and manufactured numerous smartphones that Apple alleged infringed Apple’s intellectual property and subsequently brought suit in the United States District Court, Northern District of California. This case is an appeal from that decision brought by Samsung.
Procedural History: In 2012, a jury in the district court ordered Samsung to pay over $1 billion in damages to Apple for repeated patent infringement and trade dress dilution. After the jury trial, the district court upheld the jury’s findings of patent infringement and trade dress dilution, as well as $639,403,248 in damages, but ordered a partial retrial of the remainder of damages because Samsung lacked notice of some of the patents. The jury in the partial retrial awarded $290,456,703 to Apple and Samsung subsequently appealed to the Federal Circuit. Since the Federal Circuit decided this case, the Supreme Court has granted certiorari to determine whether an award of an infringer’s profits should only be limited to those profits attributable to the component in question.
Questions Presented:
(1) Did the district court properly deny Samsung’s motion for a judgment as a matter of law that Apple’s unregistered trade dress is not protectable because it is functional?
(2) Did the district court properly deny Samsung’s motion for a judgment as a matter of law that Apple’s registered trade dress for iPhone’s icons is not protectable because it is functional?
(3) Did the district court commit prejudicial error warranting a new trial because it failed to exclude the functional aspects of the design patents in the jury instructions regarding infringement?
(4) Did the district court act within its discretion when it precluded Samsung’s testimony rebutting an allegation of copying?
(5) Did the district court properly find that Samsung failed to carry the burden of showing that claim of the “double-tap to zoom” patent is invalid for indefiniteness?
(6) Were the design patent infringement damages proper based on 29 U.S.C. § 289, which states that an infringer “shall be liable to the owner to the extent of his total profit[?]”
(7) Did the district court properly find that Apple’s expert testimony was sufficient evidence to justify reasonable royalty awards to Apple?
Holdings:
(1) No. Apple failed to meet its burden of proving that the unregistered trade dress for was not functional. Therefore, the district court improperly denied Samsung’s motion for judgment as a matter of law and the Federal Circuit reversed the district court’s decision.
(2) No. Apple failed to meet its burden of proving that the trade dress was not functional. Therefore, the district court improperly denied Samsung’s motion for judgment as a matter of law and the Federal Circuit reversed the district court’s decision.
(3) No. The district court’s failure to exclude the functional aspects of the design patents in its jury instructions was not prejudicial error warranting a new trial.
(4) Yes. The district court’s preclusion of Samsung’s testimony to rebut an allegation of copying was within its discretion. The Federal Circuit upheld the district court’s decision.
(5) Yes. The district court properly found that Samsung failed to carry its burden of showing that the claim regarding the “double-tapping” patent was invalid for indefiniteness. The Federal Circuit upheld the district court’s decision.
(6) Yes. The design patent infringement damages were proper based on 29 U.S.C. § 289, which states that an infringer “shall be liable to the owner to the extent of his total profit[.]” The Federal Circuit upheld the district court’s decision.
(7) Yes. The district court properly concluded that Apple’s expert provided sufficient evidence to justify royalty awards to Apple. The Federal Circuit upheld the district court’s decision.
Reasoning:
(1) The district court improperly denied Samsung’s motion for a judgment as a matter of law that Apple’s unregistered trade dress was not protectable because it was functional.
The jury found Samsung liable for dilution of Apple’s iPhone trade dresses under the Lanham Act. Because the action was brought within the Ninth Circuit, the Federal Circuit applied Ninth Circuit law to settle the issue of whether Apple’s unregistered trade dress was functional, and therefore not protected. In the Ninth Circuit, trade dress is defined as “the totality of elements in which a product or service is packaged or presented.” See Apple, Inc. v. Samsung Electronics Co., Ltd., 786 F.3d 983, 990 (Fed. Cir. 2015) (quoting Stephen W. Boney, Inc. v. Boney Servs., Inc., 127 F.3d 821, 828 (9th Cir. 1997)). A trade dress exists to identify the product and is protected, but that protection is limited to the physical details and design considered “nonfunctional.” Id. at 991. In the Ninth Circuit, a product feature is considered “functional” if it has “some utilitarian advantage.” Id. The four factors used to analyze functionality are: “(1) whether the design yields a utilitarian advantage, (2) whether alternative designs are available, (3) whether advertising touts the utilitarian advantages of the design, and (4) whether the particular design results from a comparatively simple or inexpensive method of manufacture.” Id. at 992 (citing Disc Golf Ass’n v. Champion Discs, Inc., 158, F.3d 1002, 1006 (9th Cir. 1998)). The Federal Circuit evaluated Apple’s arguments under each of the Disc Golf factors and found there was insufficient evidence to find non-functionality under any factor.
The court found the first non-functionality factor, whether the design yields a utilitarian advantage, was not established. Apple’s argument that “the iPhone’s physical design did not contribute unusually . . . to the usability of the device” and that the unregistered trade dress was not developed for “superior performance” failed because those arguments do not address the Ninth Circuit’s standard that an unregistered trade dress must not serve any purpose besides identification. Id. Here, Apple’s arguments about unusual usability and superior performance failed to show the unregistered trade dress had no other purpose than identification. Thus, the Federal Circuit found the unregistered trade dress has a utilitarian advantage.
The court found the second non-functionality factor, whether alternative designs are available, was not established. Apple attempted to use alternative designs to the iPhone to show that alternative designs were available, but failed to demonstrate that these alternative designs had the same features of the trade dress at issue. The Federal Circuit found that Apple therefore failed to show non-functionality under the second factor.
The court found the third non-functionality factor, whether advertising touts the utilitarian advantages of the design was not met. Apple’s argument centered on its “product as hero” approach, which features the product itself as the primary focus of its advertisements. Id. at 993–94. The Federal Circuit rejected this argument, however, citing the demonstrations of how the user interface worked through demonstrations in commercials, thus touting the iPhone’s utilitarian advantage.
The court found the fourth non-functionality factor, whether the particular design results from a comparatively simple or inexpensive method of manufacture, was not established. Apple did not meet its burden of proof with its evidence demonstrating the iPhone was not relatively simple to manufacture. The Federal Circuit rejected Apple’s manufacturing challenges argument because the increased durability resulting from the manufacturing challenges were outside the scope of Apple’s claimed unregistered trade dress.
In total, Apple failed to meet all four of the Disc Golf factors and the Federal Circuit held no reasonable jury should have found that Apple’s unregistered trade dress was non-functional. Accordingly, the Federal Circuit reversed the district court’s decision to deny Samsung’s motion for judgment as a matter of law because Apple’s unregistered trade dress is functional, and therefore not protected.
(2) The district court improperly denied Samsung’s motion for a judgment as a matter of law that Apple’s registered trade dress for iPhone’s icons was not protectable because it was functional.
The other trade dress at issue concerned the iPhone home screen icons’ design details. This trade dress is a federally registered trademark, which provides prima facie evidence that the trade dress is not functional. The defendant, in this case, Samsung, has the burden of providing evidence of functionality, which then shifts back to the plaintiff, Apple.
Here, Samsung provided the prima facie evidence of non-functionality by pointing to individual elements that are functional. These elements include icons that signal certain functionalities, such as the icon depicting a map, a pin, and a road sign. Apple’s own user interface expert described these icons as visual shorthand. Because the trade dress is just an assembly of functional parts, Apple’s argument that Samsung’s separation of individual elements somehow negates the usability function of those elements failed.
With the burden shifting back to Apple, Apple failed to argue any of its points under the Disc Golf factors. The only two citations Apple made in regard to the Disc Golf factors include an “alternative design” and “advertising” argument that fall short. The other two factors are not even addressed. Apple failed to show substantial evidence in the record to find non-functionality. The Federal Circuit therefore reversed the district court’s denial of Samsung’s motion for judgment as a matter of law
(3) The district court did not commit prejudicial error in instructing the jury.
Samsung argued that the district court improperly failed to exclude in its jury instructions the functional aspects of the design patents for elements on the front face of the iPhone, design features on the bezel of the iPhone, and user interface. Samsung argues that the functional elements should be completely ignored from the scope of the design patent claim, but the Federal Circuit found that case law did not support Samsung’s position. Case law also did not support Samsung’s argument that any “structural” aspect should be removed from the scope of the claim. Id. Samsung’s alternatively argued that the jury should have been instructed to compare the “overall ornamental appearance” of Samsung phones instead of “the overall appearance.” Id. at 999. The Federal Circuit, however, found the absence of the word “ornamental” was not a prejudicial error warranting a new trial when considering the jury instructions as a whole.
Samsung also argued that the jury instruction stating that there was no need for actual deception as well as the instructions giving guidelines to consider prior art (i.e., Samsung’s older phone models) were erroneous. Samsung argued this because the jury then considered a lack of actual deception irrelevant, which in turn caused the jury to disregard the prior art. The Federal Circuit disagreed with Samsung’s assessment. The court found that the jury instructions merely clarified that proving actual deception was not required and were explicit that the jury must consider the prior art.
(4) The district court acted within its discretion by excluding testimony rebutting an allegation of copying.
Samsung sought to provide testimony about its development of the “F700” phone before the iPhone was released to rebut an allegation of copying. Samsung was previously precluded from introducing F700 evidence under Rule 37 of the Federal Rules of Civil procedure because it did not disclose the evidence during discovery. The witness did not design any of the devices at issue and did not know whether any of the devices in question were based on the F700. Therefore, the Federal Circuit found the district court acted within its discretion by finding the probative value of the testimony was outweighed by the possibility that the jury would consider it for a purpose prohibited under the Rule 37 sanction.
(5) The district court’s award of total profits for design patent infringement was appropriate.
The district court awarded Apple damages for the design patent infringement, ordering Samsung to pay the entire profits from its infringing phones. Samsung argued that rather than awarding the entirety of the profits, the damages should have been limited to the profit that can actually be attributed to the design patent infringement.
Section 289 of Title 35 of the United States Code provides that when a person or entity sells a product that infringes a design patent, the person or entity “shall be liable to the owner to the extent of his total profit[.]” Although the Federal Circuit acknowledges the policy argument that awarding a defendant’s entire profits for design patent infringement does not make sense in today’s world, the Federal Circuit held it is bound to the statute’s language.
Samsung argued that the profits awarded should only have considered those limited to the infringing component, but the Federal Circuit rejected Samsung’s argument citing a Second Circuit decision that “allowed an award of infringer’s profits from the patented design of a piano case but not from the sale of the entire piano.” Id at 1002. The Federal Circuit rejected this argument because that case contained a fact where the purchasers actually regarded the case and piano as distinct articles of manufacture, which was not the case with Samsung’s smartphones. Samsung’s argument ultimately could not overcome the express statutory language of 35 U.S.C. § 289, and therefore the Federal Circuit upheld the damage award for design patent infringement.
(6) The district court correctly found that Samsung failed to carry its burden in challenging the validity of the “double-tapping” patent for indefiniteness.
Users can double-tap iPhone screens, causing an image to be enlarged and “substantially centered.” Id. at 1002. Samsung challenged double-tapping infringement claim because the patent does not provide an “objective standard” for what it means to be “substantially centered.” Id. The Federal Circuit, however, found that the “objective standard” Samsung sought exceeded the definiteness requirements for valid patents. Id. Indefiniteness causes a patent to be invalid when the patent does not provide “skilled artisans” with reasonable certainty about the scope of the patent. Id. at 1003. Samsung was unable to point to evidence that skilled artisans would be reasonably uncertain about the meaning of “substantially centered.” Id. Apple, on the other hand, presented evidence showing that the same skilled artisans would interpret “substantially centered” to provide for small amounts of spacing to allow for other graphical elements. Id. The Federal Circuit therefore held that the district court correctly found Samsung did not carry its burden for challenging the double-tapping patent for indefiniteness.
(7) The district court properly found that Apple’s expert on damages provided sufficient evidence to support reasonable royalty awards.
On the retrial for damages, Apple’s expert testified both about damages for lost profits and damages in the form of reasonable royalties. Samsung argued that because Apple’s expert did not explain her analysis of the demand for reasonable royalties like she did for lost profits, there was insufficient evidence to support an award of reasonable royalties. The Federal Circuit, however, held that a reasonable jury could simply use the expert’s testimony on lost profits to consider a calculation on royalty rates, especially because she expressly testified that the demand factor for lost profits was a relevant consideration to determine a reasonable royalty. Therefore, The Federal Circuit upheld the jury’s reasonable royalty awards from the damages retrial.