Brand dilution as a design patent theory of harm

Apple, Inc. v. Samsung Electronics Co., Ltd., --- F.3d ----, 2012 WL 1662048 (Fed. Cir.)

Apple sued Samsung for infringing three design patents and one utility patent, and the district court denied a preliminary injunction on all four.  The court of appeals reversed and remanded on one design patent.  I omit discussion of the utility patent. 

Apple’s D'087 and D'677 patents are minimalist smartphone designs “consisting of a large rectangular display occupying most of the phone's front face. The corners of the phone are rounded. Aside from a rectangular speaker slot above the display and a circular button below the display claimed in several figures of the patent, the design contains no ornamentation.” The D'087 patent claims a bezel surrounding the perimeter of the phone's front face and extending from the front of the phone partway down the phone's side.

The D'677 patent shows a black, highly polished, reflective surface over the entire front face of the phone, and disclaims the sides and back of the device:

The D'889 patent related to tablet design: “a rectangular tablet with a polished reflective surface extending to the edge of the front side of the device. Within that surface, broken lines delineate a slightly smaller rectangular display area. The front face of the patented design has rounded corners, and a thin bezel surrounds the front surface along its perimeter. The front surface has no ornamentation, buttons, speaker slots, holes, or raised surfaces. The back and sides of the design are also claimed; the figures depict a flat, unadorned back transitioning into the sides through a rounded-over edge.”

For the D'087 and D'889 patents, the district court found that Apple had failed to show likely success on the merits, while for the other patents the court found that Apple had failed to show that it would likely suffer irreparable harm from continuing infringement while the case was pending.  The court of appeals found that the district court hadn’t abused its discretion on the D'087 patent when it found substantial questions about the patent’s validity given anticipation by a Japanese patent showing “similar edges and rounded corners, a bezel, a similarly shaped speaker, and similar proportions of screen and border.” 

As for the D'677 patent, the court concluded that it was not anticipated since it wouldn’t have been obvious to a designer to adopt a “flat, black, translucent front screen.”  The court also found that an ordinary observer would find the overall design of the accused Samsung phones substantially the same as the claimed design, so infringement was likely.  However, the court rejected Apple’s irreparable harm arguments that Samsung's sales eroded Apple's design and brand distinctiveness, resulting in a loss of goodwill, and that Samsung cost Apple market share that would be difficult to quantify.  As to the former, Apple didn’t explain how erosion of design distinctiveness would cause irreparable harm, ruling that “[e]ven assuming that brand dilution could arise from design patent infringement, Apple has not met its burden to provide evidence that such brand dilution is likely to occur in this case.”  (Good luck figuring out what that evidence might be.) 

As to market share, the parties were directly competing for first-time smartphone buyers, so the potential for harm was strong, and initial purchase decisions can have long-term effects on downstream purchases.  Purchasers may be locked in, fearing to switch to a competitor because of the potential loss of previous digital purchases such as digital media and apps.  That could support a finding of irreparable harm.  However, Apple failed to establish a nexus between Apple’s harm and Samsung’s allegedly infringing conduct.  While product design is generally a factor influencing smartphone purchases, novelty and not design may also drive purchases, and smartphone buyers have numerous reasons to buy; the evidence suggested that only a small percentage found design dispositive.  Apple’s case was weakened further because its patents didn’t cover the entire smartphone.  This, coupled with Apple’s delay in seeking an injunction (it alleged that Samsung had been copying for years, but waited to sue until 2011), undercut its claim of irreparable harm.  Given all this, and in light of the presence of other smartphone manufacturers in the market, an injunction would substantially harm Samsung without necessarily benefiting Apple significantly.

The court of appeals rejected Apple’s two challenges to this analysis: that it need not show a nexus between infringement and market harm to establish irreparable injury, and that it had indeed shown such a nexus.  First, the district court was correct to require a showing of “some causal nexus” between the infringement and the alleged harm.  “Sales lost to an infringing product cannot irreparably harm a patentee if consumers buy that product for reasons other than the patented feature.”  (While I expect this conclusion will be much cited, it leaves open the question of ‘as opposed to what?’  Obviously, Samsung’s phone would have had some design no matter what, which implies that the proper comparator is a sort of generic design at least for design patents—but does this have any implications when there’s a utility patent?  Can we also assume that a product that infringes a utility patent would have used a noninfringing substitute, at least if the defendant proves there’s one available?  The court’s later language hints that this might be a special design patent rule, but it’s only a hint and that’s somewhat in conflict with the general idea that the utility and design rules should be similar.)

Anyway, i4i Limited Partnership v. Microsoft Corp., 598 F.3d 831 (Fed.Cir.2010), aff'd, 131 S.Ct. 2238 (2011), was not to the contrary. True, in that case Microsoft Word purchasers weren’t motivated to buy Word because of the inclusion of i4i’s patented software.  But there, the patented product was an add-on to Word, and Microsoft completely eradicated the market for the add-on.  The “narrow injunction” in that case protected the patented product from “obsolescence,” whereas here the district court found that the alleged infringements wouldn’t threaten any such dramatic effects on the market generally or on Apple’s share thereof.

Apple argued that it had shown a nexus between the infringing conduct and the alleged harm, but that was the district court’s call given the conflicting evidence.  Proof of consumer motivation won’t be a prerequisite to finding irreparable harm in every design patent case, but here the district court didn’t abuse its discretion in holding that Apple didn’t produce sufficient evidence of harm.  “A mere showing that Apple might lose some insubstantial market share as a result of Samsung's infringement is not enough.”

While a blanket rule against “design dilution” as a theory of irreparable harm would have been improper, here the district court found that Apple had offered only “conclusory statements and theoretical arguments” in support of its theory. Without “concrete evidence, … Apple has not yet established that this harm to its reputation for innovation is likely to occur.”  Nor did Apple show “brand dilution.”  Thus, the district court didn’t “categorically” reject the design dilution/brand dilution theories.  The court of appeals therefore affirmed.

The district court proceeded similarly on the Samsung Galaxy Tab tablet that allegedly infringed the D'889 patent, but found a likelihood of irreparable harm because the tablet market was dominated by only two manufacturers, Apple and Samsung.  Apple’s market share decreased in accordance with the increase in Samsung’s market share after it introduced the Galaxy Tab.  Also, the court concluded that design mattered more to consumers for tablets than for smartphones, and that Apple hadn’t delayed with respect to tablets.

But the district court denied a preliminary injunction because there were substantial questions about the validity of the D'889 patent given the prior art references.  According to the court, the broad, simple design created basically the same visual impression as a prototype tablet developed in 1994 by Roger Fidler. The Fidler tablet lacked a “flat glass-like surface,” but the court found that didn’t “detract from the fact that the ‘overall visual impression’ created by the D'889 patent is the same as the 1994 Fidler[ ] tablet.” 

And the flat glass screen showed up in the 2002 Hewlett–Packard Compaq Tablet TC1000. 

The district court found Apple’s evidence of industry skepticism and unexpected commercial success inconclusive and not related to the patented design, respectively.

The court of appeals found that the district court erred in its validity analysis.  For design patent obviousness, one must consider whether the design would have been obvious to a designer of ordinary skill who designs articles of the relevant type.  This requires starting with a single reference with a design basically the same as the claimed design.  Other references may be used to modify the primary reference, but only if they’re so related that the appearance of ornamental features in one would suggest the application of those features to the other.  The district court did this, and credited Samsung’s expert on the obviousness of the combination.

As usual, reviewing courts feel free to engage in de novo review of visual evidence.  (I personally think these create almost identical visual impressions, for what that’s worth.)  Here, the court of appeals found that a side-by-side comparison showed “substantial” differences in the overall visual appearance:

The Fidler tablet wasn’t symmetrical, and the frame created a “very different” impression than the “unframed” D'889 design; the Fidler design broke the continuity between the frame and the screen embedded within it, while the transparent glass-like front surface of the D'889 patent covered essentially the entire front face without breaks or interruptions, creating the visual impression of an unbroken slab of glass extending from edge to edge.  Also, the Fidler design didn’t have a thin bezel surrounding the edge on the front side, and the frame contained multiple perforations.  Its sides were neither smooth nor symmetrical, and the back also conveyed a different visual impression.  Fidler wasn’t a proper primary reference.

Even if Fidler had been a proper primary reference, the TC1000 secondary reference couldn’t “bridge the gap” between it and Apple’s design.  Its screen area was surrounded by a gray frame area and encircled by a metallic rim; it also had indicator lights in several places, unlike Apple’s minimalist design.  It wasn’t similar enough to Fidler to qualify as a comparison reference.  The district court looked at the designs “from too high a level of abstraction. Fidler does not qualify as a primary reference simply by disclosing a rectangular tablet with four evenly rounded corners and a flat back. Rather than looking to the ‘general concept’ of a tablet, the district court should have focused on the distinctive ‘visual appearances’ of the reference and the claimed design.”

Samsung offered several other tablet and tablet-like designs as references, but they too all either showed a thick surrounding frame or had extensive ornamentation on the front, creating different visual impressions.  Thus, on this record, there was no substantial question of validity.

The court of appeals remanded for findings on the balance of hardships and the public interest.  The partial dissent argued that, given the district court’s other findings (including that, if the patent was valid, Samsung likely infringed it), a remand was unnecessary, but the majority concluded that the district court should undertake an analysis of the potential harm to Samsung and weigh it against Apple’s irreparable harm.  If the district court’s findings in the smartphone part of the case prove readily transferable to the tablet part, then it can act quickly; if not, “then that is exactly the situation in which we would benefit from findings by the district court and in which the district court's greater familiarity with the record will be an important safeguard against precipitous action.”