FEDERAL CIRCUIT DODGES DESIGN PATENT DAMAGES ISSUE AND GOES LOCO OVER INFRINGER’S LOGO

In Columbia Sportswear v. Seirus Innovative Accessories (No. 2018-1329, 2018-1331 and 2018-1728) (November 13, 2019), the U.S. Court of Appeals for the Federal Circuit declined to decide the single most important and unresolved issue in design patent law: determining the “article of manufacture” upon which the infringer’s total profit is calculated under 35 U.S.C. Sec. 289.

BACKGROUND: The Supreme Court’s 2016 decision in Samsung v. Apple held that the article of manufacture upon which the infringer’s total profit is to be calculated can be either the end product sold by the infringer, or a component of the end product. It did not, however, provide any guidance to the lower courts as to how the article of manufacture is to be determined in any given case. Three years have passed since the Supreme Court’s pronouncement. This is the first case to reach the Federal Circuit on this admittedly difficult issue.

Columbia’s design patent, D657,093, claimed a heat reflective material, and included drawings that showed this material applied to several end products, such as socks and gloves (the end products – socks & gloves - were shown in broken lines, i.e., disclaimed):

Columbia, of course, wanted the end products, e.g., socks and gloves, to be the articles of manufacture, simply because the total profit on those end products would be far larger than the total profit on the material alone. Naturally, the infringer Seirus wanted the material alone to be the article of manufacture, which would minimize the total profit. The jury awarded Columbia $3 million in total profit damages and the infringer Seirus appealed.

The urgent issue before the Federal Circuit was to determine the relevant article of manufacture, and in the process fashion an appropriate set of factors that a court should consider. The Columbia case was supposed to be the case where the Federal Circuit would finally give the lower courts – and litigants – guidance on this critical issue.

The Federal Circuit punted, kicked the can down the road - again! (see earlier post re: Campbell Soup case).

LOCO: Instead of wrestling with the article of manufacture gorilla, the court strained to reverse the district court’s grant of summary judgment of infringement and remanded the case.

In so doing, the court – rather remarkably, and unfortunately – said that the infringer’s logo on its products is a factor that must be considered in determining infringement. This is a startling ruling that will ultimately weaken design patents. It handed infringers a new, powerful weapon: simply include their logo/name on their infringing products.

Following are enlargements showing the infringer’s logo on two of its products:

In discussing this issue, the court tried to distinguish the venerable (and precedential) L.A. Gear case, (L.A. Gear, Inc. v. Thom McAn Shoe Co., 988 F.2d 1117 (Fed. Cir. 1993)). The court, citing L.A. Gear, said: “A would-be infringer should not escape liability for design patent infringement if a design is copied but labeled with its name.” But a few sentences later, it inexplicably said that the trier of fact cannot “ignore elements of the accused design entirely, simply because those elements included the name of the defendant”. How does one reconcile these two statements?

Those of us in the real world know that infringers are clever. Many copy exactly (or very closely) a design patented product, and put their own logo on it. Take footwear as an example: Nike shoes have their famous swoosh on every sneaker. Of course, Nike’s design patents do not claim the swoosh, because it would significantly narrow their scope.

After the Federal Circuit’s ruling in Columbia, an infringer is now incentivized to copy a patented design and try to avoid infringement by using, e.g., the word “balloons” on the side of its shoes, as did the infringer in L.A. Gear:

In fact, it is a rather common practice. The infringers generally avoid putting the patentee’s name/logo on their product, because to do so would amount to counterfeiting which carries severe criminal penalties.

The presence of a logo/name significantly weakens the patentee’s case for infringement, because obviously the logo – any logo or name – is not going to be part of the patentee’s claimed design. Requiring courts to consider the overall appearance of the design including the logo by definition will make it more difficult for a design patentee to get an infringement ruling, for the logo will provide another visual element that the infringer can use to argue that its design is not substantially the same in overall appearance as the patented design.

OTHER FALLOUT: The court further chastised the district court for its “piecemeal approach” in that it spoke of individual design elements during its comparison of the patented design and accused products. The Federal Circuit said that: “the fact-finder must analyze the design as a whole”. But, as a practical matter, how does one analyze the design as a whole except by comparing individual elements of the design?

The Federal Circuit also criticized the district court for violating Rule 56 (Summary Judgment) in that it did fact-finding in the course of granting summary judgment. But district courts on summary judgment make findings of fact all the time, otherwise such motions would never be granted. The real question is whether the non-movant (infringer) introduced sufficient evidence - not simply a list of facts in dispute - such that a reasonable jury could find in its favor. The whole idea of summary judgment is to avoid potentially wasteful jury trials where there’s no triable issue of fact. The Federal Circuit glossed over this nicety.

UPSHOT: The Federal Circuit’s entire opinion regarding the design patent practically mandates another jury trial – hoping perhaps that the parties will now settle and postpone the necessity of the court to wrestle with the admittedly difficult – but extremely important – article of manufacture issue.