throbber
No. 15-777
`
`
`
`IN THE
`Supreme Court of the United States
`
`___________
`SAMSUNG ELECTRONICS CO., LTD., SAMSUNG
`ELECTRONICS AMERICA, INC., SAMSUNG
`TELECOMMUNICATIONS AMERICA, LLC
`Petitioners,
`
`v.
`APPLE INC.,
`
`___________
`
`Respondent.
`
`On Writ of Certiorari to the United States Court
`of Appeals For The Federal Circuit
`___________
`
`BRIEF OF ACT | THE APP ASSOCIATION AS
`AMICUS CURIAE IN SUPPORT OF
`RESPONDENT
`___________
`
` BRIAN E. SCARPELLI*
` ACT | THE APP ASSOCIATION
` 1401 K Street NW, Suite 501
` Washington, DC 20005
` (202) 420-7487
` bscarpelli@actonline.org
`
`
`
`
`
`
`Counsel for Amicus Curiae
`August 5, 2016
`
`
` * Counsel of Record
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`

`
`
`
`TABLE OF CONTENTS
`
`Page
`
`TABLE OF AUTHORITIES .............................. ii
`
`INTEREST OF THE AMICUS CURIAE .......... 1
`
`SUMMARY OF THE ARGUMENT .................. 2
`
`ARGUMENT ...................................................... 3
`
`I. DESIGN PATENTS ARE VITAL TO THE
`NASCENT APP ECONOMY……………… 3
`
`II. THE COURT SHOULD NOT
`REINTERPRET THE CLEAR INTENT OF
`CONGRESS IN SECTION 289…………... 9
`
`III. A WEAKENING OF THE SAFEGUARDS
`IN SECTION 289 WOULD CAUSE HARM
`TO SMALL SOFTWARE DEVELOPERS
`AND THE APP ECOSYSTEM, AND THE
`COURT SHOULD REJECT
`SPECULATIVE HARMS RAISED BY
`PETITIONER AND PETITIONER’S
`AMICI………………………………………. 12
`
`A. Reducing Section 289’s Clear
`Protections Against Design Patent
`Infringement Will Impede Small
`Business Innovators’ Ability to Grow
`and Hire………………………………...13
`
`B. Claims That Upholding Section 289’s
`Clear Protections Against Design
`Patent Infringement Will Create
`Abusive Patent Litigation by “Patent
`Trolls” and “Patent Holdup” are
`Baseless……………..…………….……14
`
`CONCLUSION ................................................ 18
`
`
`
`

`
`
`
`ii
`
`TABLE OF AUTHORITIES
`
`CASES
`
`
`
`Page(s)
`
`
`American Fruit Growers v. Brogdex Co.,
`283 U.S. 1 (1931)………………………….………………9
`
`Bates v. United States,
`522 U.S. 23 (1997)…………………………...………11
`
`
`Bergstrom v. Sears, Roebuck & Co.,
`496 F. Supp. 476 (D. Minn. 1980)……….………..11
`
`
`Bonito Boats, Inc. v. Thunder Craft Boats Inc.,
`489 U.S. 141 (1989)………………………….………17
`
`
`Catalina Lighting, Inc. v. Lamps Plus, Inc.,
`295 F.3d 1277 (Fed. Cir. 2002)…………………… 10
`
`
`Commil USA, LLC v. Cisco Systems, Inc.,
` 135 S. Ct. 1920 (2015)………………………………16
`
`
`Dobson v. Dornan, 118 U.S. 10 (1886)…………...…...11
`
`Gorham Co. v. White,
` 81 U.S. (14 Wall.) 511 (1872)…………..….……….8
`
`
`Microsoft Corp. v. i4i Ltd. P’ship,
`564 U.S. 91 (2011)………………………...…………12
`
`
`Nike Inc. v. Wal-Mart Stores, Inc.,
`138 F.3d 1437 (Fed. Cir. 1998)……….…….…10, 11
`
`
`
`
`
`

`
`iii
`
`STATUTES AND RULES
`
`35 U.S.C.
`§ 289……………………………...………..………9,10,
`
`
`Leahy–Smith America Invents Act, PL 112-29, Sept.
`16, 2011, 125 Stat 284…………………….……………11
`
`
`LEGISLATIVE MATERIALS
`
`
`49 Cong. Ch. 105, Feb. 4, 1887, 24 Stat. 387……......11
`
`S. Rep. No. 49-206 (1886)………………………...........10
`
`
`OTHER AUTHORITIES
`
`
`ACT | The App Association, State of the App
`Economy 2016 (Jan. 2016),
`http://actonline.org/state-of-the-app-economy-
`2016/…………………………………………………. 4
`
`
`ACT | The App Association, Six-Figure Tech
`Salaries: Creating the Next Developer Workforce,
`(Jan. 2016),
`http://www.arcgis.com/apps/MapJournal/index.ht
`ml?appid=b1c59eaadfd945a68a59724a59dbf7b1..4
`
`
`American Intellectual Property Law Association,
`Report Of The Economic Survey (2015) (ebook)..14
`
`
`Bessen, James & Michael J. Meurer, The Direct Costs
`from NPE Disputes,
`99 Cornell L. Rev. 387 (2014)……………………16
`
`
`
`
`

`
`iv
`
`OTHER AUTHORITIES—Continued
`
`
`
`
`
`
` Page(s)
`
`
`Breitzman, Anthony & Thomas, Patrick, Analysis of
`Small Business Innovation in Green Technology,
`SBA Office of Advocacy (Oct 2011)
`http://www.sba.gov/sites/default/files/rs389tot.pdf
`…………………………………………………………...5
`
`
`Case, Jennifer L., How the America Invents Act Hurts
`American Inventors and Weakens Incentives to
`Innovate, 82 UMKC L. Rev. 29 (2013)…...……7, 9
`
`
`Chien, Colleen V., Patent Assertion and Startup
`Innovation, New America Foundation, Open
`Technology Institute White Paper (2013),
`http://papers.ssrn.com/sol3/papers.cfm?abstract_id
`=2321340…………………………………………7, 14
`
`
`Dictionary.com,
`http://www.dictionary.com/browse/article (last
`visited August 4, 2016)……………………………….9
`
`
`Graham, Stuart J.H. et. al., High Technology
`Entrepreneurs and the Patent System: Results of
`the 2008 Berkeley Patent Survey,
`24 Berkeley Tech. L.J. 1255 (2009)……………6, 7
`
`
`Grid Thoma, Patent Management and Valuation: The
`Strategic and Geographical Dimension (2016)
`(ebook)……………………………………………….6, 7
`
`
`
`
`
`

`
`v
`
`OTHER AUTHORITIES—Continued
`
`
`
`
`
`
` Page(s)
`
`
`Heinecke, Grace, Pay the Troll Toll: The Patent Troll
`Model Is Fundamentally at Odds with the Patent
`System's Goals of Innovation and Competition,
`84 Fordham L. Rev. 1153 (2015)……………….15
`
`
`Kesan, Jay P., & Gwendolyn Ball, How Are Patent
`Cases Resolved? An Empirical Examination of the
`Adjudication and Settlement of Patent Disputes,
`84 Wash. Univ. L. Rev. 237, 259 (2006)………14
`
`
`Mandel, Michael, App Economy Jobs in the United
`States (Part 1),
`Progressive Policy Institute (Jan. 1, 2016),
`http://www.progressivepolicy.org/slider/app-
`economy-jobs-part-1/………………………………….5
`
`
`Mann, Ronald J. & Thomas W. Sager, Patents,
`Venture Capital, and Software Start-Ups,
`36 Res. Pol’y 193 (2007)…………………………….6
`
`
`Menell, Peter S., Promoting Patent Claim Clarity (UC
`Berkeley Pub. Law Research Paper No. 2171287,
`2012),
`available at http://ssrn.com/abstract=2171287...7
`
`
`Queale, Abby J., Transcript of Presentation - the
`Design Patent: A Sleeping Giant?,
`16 Fla. Coastal L. Rev. 139 (2014)………………….8
`
`
`
`
`

`
`vi
`
`OTHER AUTHORITIES—Continued
`
`
`
`
`
`
` Page(s)
`
`
`Reed, Morgan, Comments of ACT | The App
`Association to the National Telecommunications
`and Information Administration regarding The
`Benefits, Challenges, and Potential Roles for the
`Government in Fostering the Advancement of the
`Internet of Things, ACT | The App Association
`(June 2, 2016), http://actonline.org/wp-
`content/uploads/NTIA-Comments-on-IoT-
`Regulations.pdf………………………………………..5
`
`
`Risch, Michael, Functionality and Graphical User
`Interface Design Patents,
`17 Stan. Tech. L. Rev. 53 (2013)…………………8, 9
`
`
`Small Serial Innovators: The Small Firm
`Contribution to Technical Change, SBA Office of
`Advocacy (Feb 27 2003) …………………………..5, 6
`
`
`Takahashi, Dean, The App Economy Could Double to
`$101 Billion by 2020, Venture Beat (Feb. 10,
`2016), http://venturebeat.com/2016/02/10/the-app-
`economy-could-double-to-101b-by-2020-research-
`firm-says/……………………………………………….4
`
`
`Zhou, Habio et al., Patents, Trademarks, andTtheir
`Complementarity in Venture Capital Funding,
`Technovation, Jan. 2016………………………….6, 7
`
`
`
`

`
`
`
`INTEREST OF THE AMICUS CURIAE1
`
`ACT | The App Association is an international
`grassroots advocacy and education organization
`representing more
`than 5,000 small software
`application developers and information technology
`firms, and is the only organization focused on the
`needs of small business innovators from around the
`world. The App Association advocates
`for an
`environment that inspires and rewards innovation
`while providing resources to help its members leverage
`their intellectual assets to raise capital, create jobs,
`and continue to grow.
`
`In light of the critical role that design patents and
`technological advancement play
`in enhancing
`competition and improving the welfare of consumers,
`the App Association has a keen interest in the proper
`functioning of the US patent system. In particular,
`while the dispute underlying the Question before this
`Court is between large companies, we submit this brief
`to ensure that the Court fully considers the impact
`that sweeping changes to design patent law will have
`on small business innovators that power the American
`economy. These innovators rely on legal clarity and
`certainty regarding their design patents in order to to
`thrive and succeed in one of the most competitive
`sectors of the economy.
`
`
`1 Pursuant to Rule 37.6, amicus affirms that no counsel for a
`party authored this brief in whole or in part and that no person
`other than amicus and its counsel made a monetary contribution
`to its preparation or submission. Petitioner filed a blanket
`consent in this appeal on May 18, 2016, and respondent
`provided its consent to the filing of this brief via letter dated
`July 26, 2016. The latter has been filed with the Clerk’s office.
`
`
`
`

`
`
`
`2
`
`SUMMARY OF ARGUMENT
`
`In less than a decade, the revolutionary rise of the
`software application (“app”) industry, along with the
`unprecedented uptake of smartphones, tablets and
`other Internet-enabled mobile devices, has unleashed
`countless
`society-altering
`improvements
`and
`efficiencies to the benefit of hundreds of millions of
`Americans. This hyper-competitive and innovative
`“app economy” is powered by thousands of small
`businesses from across the United States that rely on
`the legal framework protecting their intellectual
`property to attain funding, grow, and create jobs. Of
`the different types of important intellectual property
`rights these innovators depend on – from trademarks
`to copyrights to patents – design patents play an
`essential and unique role by offering distinct
`protections of particular design elements of software
`that are crucial to a product’s success in the
`marketplace.
`
`The recovery mechanisms that Congress provided to
`design patent owners in 35 U.S.C. § 289 are
`foundational to these protections. Since the creation of
`design patents, courts have long upheld the clear
`intent of Congress in Section 289 to permit (but not
`require) the trier of fact to award the owner of an
`infringed design patent the infringer’s entire profits
`from the article of manufacture to which the design
`was applied. Small businesses in the app economy, in
`order to commit resources to continued innovation,
`must be able to count on these safeguards.
`
`The intent and statutory language of Congress in
`creating design patents and the “total profit” approach
`
`
`
`
`
`

`
`3
`
`
`the
`are unmistakable and unambiguous. As
`established approach of this Court is to take statutory
`meaning at its face value, and neither Petitioner nor
`any of its supporters offer adequate justification for a
`re-reading of Section 289, this Court should reject calls
`to reinterpret the law.
`
`Further, no segment of the high technology industry
`is more concerned – or susceptible – to litigation
`abuses than the thousands of small software
`development
`firms
`that
`the App Association
`represents. The Petitioner aims for this Court to
`weaken Section 289’s protections by introducing an
`apportionment approach into the determination of
`design patent infringement damages based on a litany
`of extreme hypotheticals. These alleged harms that
`would befall the patent system, ranging from “patent
`trolls” to undue double recovery and beyond, are
`entirely speculative. In addition, despite design
`patents and the precedent the Petitioner seeks to
`discard being in existence for over 130 years, none of
`these harms have materialized to date over this long
`period of time.
`
`We therefore strongly urge this Court to reject the
`Petitioner’s argument and to uphold the judgement.
`
`ARGUMENT
`
`I. DESIGN PATENTS ARE VITAL TO THE
`NASCENT APP ECONOMY
`
`The app industry has been in existence less than a
`decade, and has experienced explosive growth
`alongside the rise of smartphones, tablets, and other
`Internet-connected devices, and has revolutionized the
`
`
`
`
`
`

`
`4
`
`
`software industry, touching every sector. ACT | The
`App Association, State of the App Economy 2016 (Jan.
`2016), http://actonline.org/state-of-the-app-economy-
`2016/. Today, the app economy is a $120 billion
`ecosystem that is led by United States companies. Id.
`Over eighty percent of app economy companies are
`startups or small businesses. Id. As decreasing
`operational costs through the use of global computing
`resources, such as cloud-based services, have enabled
`a diversity of novel and inventive business models,
`hundreds of millions of Americans – and billions of
`people around the world – today use apps in every
`facet of their lives, from education to finance to leisure
`activities and beyond. And this use will only increase:
`downloads in the app store in 2016 are targeted to
`grow to 147.3 billion and by 2020 to reach 284.3 billion.
`Dean Takahashi, The App Economy Could Double to
`$101 Billion by 2020, Venture Beat (Feb. 10, 2016),
`http://venturebeat.com/2016/02/10/the-app-economy-
`could-double-to-101b-by-2020-research-firm-says/.
`
`The app economy is also responsible for creating a
`significant number of jobs in the United States, with
`salaries paid to software developers bringing in more
`than $114 billion to the economy. ACT | The App
`Association, Six-Figure Tech Salaries: Creating the
`Next
`Developer Workforce,
`(Jan.
`2016),
`http://www.arcgis.com/apps/MapJournal/index.html?
`appid=b1c59eaadfd945a68a59724a59dbf7b1. While
`eighty-nine percent of these software developers are
`employed outside Silicon Valley, there are more than
`223,000 unfilled job openings for software developers
`in the United States today. Id. And while in 2013 there
`were about 750,000 app economy jobs in the United
`States, in 2016 there are 1.66 million app economy
`
`
`
`
`
`

`
`5
`
`
`jobs. Michael Mandel, App Economy Jobs in the United
`States (Part 1), Progressive Policy Institute (Jan. 1,
`2016),
`http://www.progressivepolicy.org/slider/app-
`economy-jobs-part-1/.
`
`As more and more devices throughout the consumer
`and enterprise spheres become connected to the
`Internet – a phenomena commonly referred to as the
`“Internet of Things” – the interface for communicating
`with these devices is likely to remain an app. Morgan
`Reed, Comments of ACT | The App Association to the
`National Telecommunications and
`Information
`Administration regarding The Benefits, Challenges,
`and Potential Roles for the Government in Fostering
`the Advancement of the Internet of Things, ACT | The
`App
`Association
`(June
`2,
`2016),
`http://actonline.org/wp-content/uploads/NTIA-
`Comments-on-IoT-Regulations.pdf. This app-powered
`ecosystem’s success, reliant on continued innovation
`and investment in connected devices and interfaces,
`will hinge on the sufficiency of the legal frameworks
`that underlie them.
`
`Among these frameworks, strong patent protections
`are heavily relied upon by small software companies to
`protect their inventions, grow their businesses, and
`create jobs. Small businesses hold 41 percent of
`patents in the United States and, on average, patents
`owned by small firms are more highly-cited than those
`of large firms. See Small Serial Innovators: The Small
`Firm Contribution to Technical Change, SBA Office of
`Advocacy (Feb. 27 2003); see also Anthony Breitzman
`& Patrick Thomas, Analysis of Small Business
`Innovation in Green Technology, SBA Office of
`Advocacy
`(Oct.
`2011)
`http://www.sba.gov/sites/default/files/rs389tot.pdf.
`
`
`
`
`
`

`
`6
`
`
`Smaller firms have 16 times more patents per
`employee than large firms. See id. On average, small
`innovative businesses with fewer than 500 employees
`have 27 patents per 100 employees, while large
`business have 1.6 patents per 100 employees. See id.
`
`Patenting also plays a substantial role for high-
`technology small business startups in securing a
`competitive advantage from their innovations. See
`Ronald J. Mann & Thomas W. Sager, Patents, Venture
`Capital, and Software Start-Ups, 36 Res. Pol’y 193,
`194 (2007). Start-ups that file at least one patent prior
`to applying for venture capital funding on average
`obtain 51.7% more funding from venture capitalists
`than start-ups who do not file. Habio Zhou et al.,
`Patents, Trademarks, and Their Complementarity in
`Venture Capital Funding, Technovation, Jan. 2016, at
`14-22 [hereinafter Zhou, Patents]. With patents, small
`businesses can also use that protection to attract
`investment. Investors, understanding how patents are
`used to secure businesses, often consider how firms
`have protected their IP before deciding to invest.
`Patents can serve as “quality signals for startup
`investors,” allowing small businesses to demonstrate
`their innovations and their commitment to protecting
`that investment. Stuart J.H. Graham et. al., High
`Technology Entrepreneurs and the Patent System:
`Results of the 2008 Berkeley Patent Survey, 24
`Berkeley Tech. L.J. 1255, 1303 (2009) [hereinafter
`Graham, High Technology].
`
`Further, as financial markets have, over time,
`gained the ability to attain and use relevant
`information about a business’ assets and future cash
`flow, patent-related
`information has grown
`in
`importance. See Thoma Grid, Patent Management and
`
`
`
`
`
`

`
`7
`
`
`Valuation: The Strategic and Geographical Dimension
`(2016) (ebook) [hereinafter Grid, Patent Management].
`The valuation of a small business holding a design
`patent is therefore highly dependent on the validity
`and enforceability of that patent. Further, small
`business software developers must seek capital
`injections from a variety of sources to hire needed
`employees and to grow, and when seeking these
`injections, a valuation of the business’ assets are a
`threshold issue. See Zhou, Patents at 14-22; see also
`Peter S. Menell, Promoting Patent Claim Clarity (UC
`Berkeley Pub. Law Research Paper No. 2171287,
`2012), available at http://ssrn.com/abstract=2171287.
`
`
`Although there can be different approaches to
`product development, most, if not all start with an
`idea,
`are
`researched,
`transition
`into
`a
`conceptualization, progress into the prototype phase,
`and
`finally are produced and brought to the
`marketplace. See Jennifer L. Case, How the America
`Invents Act Hurts American Inventors and Weakens
`Incentives to Innovate, 82 UMKC L. Rev. 29, 32 (2013)
`[hereinafter Case, The America Invents Act]. In this
`process, not only are functions developed, but so are
`innovative and novel appearance characteristics
`associated with brand recognition. See Colleen V.
`Chien, Patent Assertion and Startup Innovation, New
`America Foundation, Open Technology Institute
`White
`Paper
`(2013),
`http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2
`321340 [hereinafter Chien, Patent Assertion]; see also
`Graham, High Technology; see also Grid, Patent
`Management. And in the hyper-competitive app
`economy,
`ease
`of use and
`other aesthetic
`
`
`
`
`
`

`
`8
`
`
`characteristics can easily represent the success or
`death of a product. In this way, design patents on
`recognizable features provide vital protections to
`“aspect[s] given to [an] article of manufacture” that
`“give[] a peculiar or distinctive appearance to the
`manufacture.” Gorham Co. v. White, 81 U.S. (14 Wall.)
`511, 524-25 (1872). Design patent holders are further
`allowed to update their innovations through filing for
`additional design patents to hone the representation
`to further differentiate themselves from competitors.
`In this way, design patents are an incentive to create
`articles of manufacture in new and efficient ways. See
`Abby J. Queale, Transcript of Presentation - the Design
`Patent: A Sleeping Giant?, 16 Fla. Coastal L. Rev. 139,
`143 (2014).
`
`Design patents are distinct, but complementary, to
`other intellectual property protections (utility patents,
`trademarks and copyrights). For example, design
`patents offer app developers the ability to compete
`through the patenting of graphic user interfaces
`(GUI). These GUIs permit app developers to patent
`static or animated graphics which act as the logos and
`branding of these small business, which in turn are
`intrinsic to the performance of an app, shaping the end
`user’s acceptance of and experience with it. See
`Michael Risch, Functionality and Graphical User
`Interface Design Patents, 17 Stan. Tech. L. Rev. 53, 59-
`63 (2013). Therefore, strong intellectual property
`protection of designs patents over such aspects as
`GUIs are necessary to protect businesses and
`consumers alike. See id.
`
`Design patents, protecting the appearance given to
`an article of manufacture, predate the app economy by
`
`
`
`
`
`

`
`9
`
`
`over 100 years, yet they play an absolutely integral
`role in the competition and innovation that drives the
`app economy today, particularly for small business
`software development firms. However, “[w]ithout
`some ability to recuperate their investment of time
`and money, startups and individual inventors will stop
`turning their bright ideas into products that benefit
`society.” See Case, The America Invents Act at 41.
`
`
`
`II. THE COURT SHOULD NOT REINTERPRET
`THE CLEAR INTENT OF CONGRESS IN
`SECTION
`289
`
`Section 289 states that a person who applies a
`patented design to an “article of manufacture for the
`purpose of sale” or who sells “any article of
`manufacture to which” the patented design has been
`applied, “shall be liable to the [patent] owner to the
`extent of his total profit.” 35 U.S.C. 289. Further the
`“article of manufacture” will not always be the finished
`product that is sold in commerce. An “article” is
`something that could be a part of other things or an
`object
`by
`itself.
`Dictionary.com,
`http://www.dictionary.com/browse/article (last visited
`August 4, 2016). To be considered manufactured,
`“[t]here must be transformation; a new and different
`article must emerge ‘having a distinctive name,
`character, or use.” American Fruit Growers v. Brogdex
`Co., 283 U.S. 1, 13 (1931).
`
`Section 289 remedies exist in addition to the other
`remedies available under 35 U.S.C. § 284, which
`allows for an award of “damages sufficient to
`
`
`
`
`
`

`
`10
`
`
`compensate for the infringement, but in no event less
`than a reasonable royalty...” 35 U.S.C. § 289. As
`discussed on the record, neither Section 289 nor
`precedent from this Court prohibits concurrent
`recovery under Sections 284 and 289. The Ass’n of The
`Bar Of The City Of NY Br. 4-6. Despite the petitioner’s
`argument that Section 289 allows for double recovery,
`the statute explicitly rejects this idea. 35 U.S.C. § 289
`(“[n]othing in this section shall prevent, lessen, or
`impeach any other remedy which an owner of an
`infringed patent has under the provisions of this title,
`but he shall not twice recover the profit made from the
`infringement.”); see also Catalina Lighting, Inc. v.
`Lamps Plus, Inc., 295 F.3d 1277, 1291 (Fed. Cir. 2002).
`
`
`
`the remedy now
`When Congress designed
`enshrined in Section 289, it was responding to the
`specific problem of apportioning the value of a product
`derived from a protected design. See S. Rep. No. 49-
`206, at 1 (1886). Congress recognized that requiring
`design patent holders to attribute damages precisely
`and specifically to the patented design would leave
`them “without a remedy” in the vast majority of cases
`of infringement. Id. at 1; see also, e.g., Nike Inc. v. Wal-
`Mart Stores, Inc., 138 F.3d 1437, 1442–43 (Fed. Cir.
`1998) (discussing the history of the Patent Act).
`Congress therefore enacted the “total profit” remedy to
`avoid the inefficiencies and unintended outcomes
`associated with requiring design patent owners to
`apportion their damages. See, e.g., Dobson v. Dornan,
`118 U.S. 10, 17 (1886).
`
`
`
`
`
`

`
`
`
`11
`
`By creating the “total profit” remedy in 1887 and
`by retaining that remedy through the past century
`despite numerous revisions to the Patent Act,
`Congress deliberately
`sought
`to
`retain
`this
`disgorgement remedy for design patents. See Leahy–
`Smith America Invents Act, PL 112-29, Sept. 16, 2011,
`125 Stat 284 (overhauling patent
`law without
`amending the total profit rule for design patent
`damages); see also Bergstrom v. Sears, Roebuck & Co.,
`496 F. Supp. 476 (D. Minn. 1980) (“In 1946, and again
`in 1952, Congress left the ‘total profit’ remedy for
`design patent infringement untouched, even while
`eliminating
`infringer profits as a remedy
`for
`infringement of utility patents and removing the
`requirement of knowing infringement.”); See generally
`United States Statutes at Large, 49 Cong. Ch. 105,
`February 4, 1887, 24 Stat. 387. Further, the
`application of apportionment principles in design
`patent cases has been specifically rejected by courts on
`a number of occasions. See, e.g., Nike, 138 F.3d at
`1442–43; Bergstrom, 496 F. Supp. At 476.
`
`This Court “ordinarily resist[s] reading words or
`elements into a statute that do not appear on its face.”
`Bates v. United States, 522 U.S. 23, 29 (1997). It is
`clear from the legislative history and from statutory
`text that Congress did not intend to require design
`patent damages to use apportionment
`in the
`calculation of damages. Neither Petitioner, nor any of
`its supporters, offer sufficient grounds for courts to
`take a different reading of Section 289, whether based
`on the history of Section 289 or on the text of the
`statute. “Any re-calibration” of that remedy “remains
`
`
`
`
`
`

`
`12
`
`
`in [Congress’s] hands.” Microsoft Corp. v. i4i Ltd.
`P’ship, 564 U.S. 91, 114 (2011).
`
`III. A WEAKENING OF THE SAFEGUARDS IN
`SECTION 289 WOULD CAUSE HARM TO
`SMALL SOFTWARE DEVELOPERS AND
`THE APP ECOSYSTEM, AND THE COURT
`SHOULD REJECT SPECULATIVE HARMS
`RAISED BY THE PETITIONER AND
`PETITIONER’S
`AMICI
`
`Design patent protections in Section 289 were
`carefully shaped by Congress over 100 years ago and
`are, today, essential to small business technology
`developers. Infra at 9-10. However, the record contains
`claims from Petitioners and their amici urging this
`Court to undercut Section 289, making arguments
`alleging
`that upholding
`the Federal Circuit’s
`interpretation of Section 289 will damage the startup
`ecosystem, chill innovation, and facilitate “patent
`holdup” and “patent trolls,” among other harms.
`Representing the global community of app developers,
`The App Association disagrees with these speculative
`claims, and urges this Court to disregard them. First,
`we believe that introducing apportionment into
`Section 289 remedies would unreasonably devalue
`design patents, threatening the viability of small
`business app innovators. Further, upholding the
`established protections of Section 289 have no linkage
`to abusive litigation tactics such as those employed by
`“patent trolls.”
`
`
`
`
`
`

`
`
`
`13
`
`A. Reducing Section 289’s Clear Protections
`Against Design Patent Infringement Will
`Impede Small Business
`Innovators’
`Ability
`to
`Grow
`and
`Hire
`
`Small business app makers, almost universally,
`are operating on borrowed time. They face financial,
`time, and other resource constraints yet must work to
`grow. The valid design patents they hold are their
`lifeblood, and provide an avenue to seek new
`financing, hire new talent, grow into new markets,
`differentiate themselves, and prevent theft of their
`intellectual property.
`
`By weakening the established remedies in Section
`289 and introducing an undefined apportionment
`approach to such damages, the valuation of design
`patents will unquestionably decrease, as the recourse
`for infringement of these patents will be uncertain.
`Even supporters of the Petitioner discuss the
`uncertainties and complexities that would arise in
`such an event. Public Knowledge et al. Br. 16-20.
`Further, the development of such a new and sweeping
`precedent would directly conflict with Congressional
`intent and text of Section 289, which was intended to
`avoid the uncertainty of an apportionment approach
`for this class of patents. See infra at 9-12.
`
`For larger businesses, this may be overcome
`through shifting of internal investments and cost (or
`other means). However, for small business software
`developers that face razor-thin margins and high
`competition, the implications of such a change can
`represent the difference between growth and winding
`
`
`
`
`
`

`
`14
`
`
`down. Simply put, these smaller entities would find
`tightened funding mechanisms available to them due
`to the lessening of the value of their design patents.
`We therefore urge this Court to consider the impact of
`reducing Section 289’s clear guarantees to design
`patent owners when making its ruling in this case.
`
`
`
`B. Claims That Upholding Section 289’s
`Clear Protections Against Design Patent
`Infringement Will Create Abusive
`Patent Litigation by “Patent Trolls” and
`“Patent Holdup” are Baseless
`
`No segment of the technology industry better
`understands the dangers of abusive litigation than
`small software developers that hold patents. It is
`estimated that legal costs can range from $500,000 to
`$3 million per suit, or $500,000 per claim at issue,
`for each party involved in patent litigation. See
`American Intellectual Property Law Association,
`Report Of The Economic Survey (2015) (ebook).
`Further, the rates of settlement of patent cases are
`approximately 80 percent, rather than the commonly
`assumed rate of 95 percent litigation settlement. See
`Jay P. Kesan & Gwendolyn Ball, How Are Patent Cases
`Resolved? An Empirical Examination of
`the
`Adjudication and Settlement of Patent Disputes, 84
`Wash. Univ. L. Rev. 237, 259 (2006). Naturally, small
`businesses are more vulnerable to the high costs of
`litigation, and in addition to costs can face related
`delays in hiring, and difficulty in making timely
`business line pivots. See Chien, Patent Assertion.
`
`
`
`
`
`

`
`
`
`15
`
`As discussed above, the app economy relies upon
`the consistent and clear application of patent law
`generally, and particularly
`for design patents.
`Policymakers have long attempted to remedy the
`implicit stress between reducing the exploitations of
`“patent trolls” while ensuring that genuine patent
`owners can safeguard their intellectual property
`rights. Grace Heinecke, Pay the Troll Toll: The Patent
`Troll Model Is Fundamentally at Odds with the Patent
`System's Goals of Innovation and Competition, 84
`Fordham L. Rev. 1153, 1156 (2015). Regardless of how
`one defines a “patent troll,”2 this Court should foster
`innovation and competition by ensuring that it does
`not punish legitimate intellectual property owners
`who have relied on and strive to comply with the letter
`and spirit of the Patent Act. See, e.g., James Bessen &
`Michael J. Meurer, The Direct Costs from NPE
`Disputes, 99 Cornell L. Rev 387, 396 (2014). We urge
`this Court to accomplish this goal by providing
`reinforcement
`to – not an unsubstantiated
`reinterpretation of – Congress’ intent in Section 289.
`Without this clarity, small business design patent
`owners on whose survival the viability of their design
`patent hinges very well may face an “end of life”
`scenario when its design patents’ value is diminished
`through negative impacts on the ability to attain new
`capital and create jobs, as well as in recovering just
`damages for infringements on its design patents.
`
`Petitioner and several of its supporters allege that
`the Federal Circuit’s application of Section 289 would
`
`
`2 To date, there is no definitive or widely-held view on what constitutes a
`“patent troll.”
`
`
`
`
`
`

`
`16
`
`
`damage the startup ecosystem by encouraging a
`“cottage industry of opportunistic litigation” in the
`design patent space. See, e.g. Public Knowledge Br. 16-
`21. Supporters of the Petitioner also claim that “patent
`trolls” would cause this storm of litigation to be
`enabled through the upholding of the Federal Circuit’s
`application of Section 62. See, e.g. Engine Advocacy Br
`7-10. These claims are unsubstantiated and wildly
`speculative, and should be disregarded by this Court.
`In reality, the certainty provided by Section 289 is
`foundational to design patent owners, particularly to
`small businesses, and will help to curb the same
`“patent trolls” that this Court has stated “impose a
`harmful tax on innovation.” Commil USA, LLC v.
`Cisco Systems, Inc., 135 S. Ct. 1920, 1930 (2015).
`
`Further, we find the connection by Petitioner and
`several of its supporters of “patent trolls” to design
`patents to be totally unsupported, as well as unaligned
`with the real-world experiences of innovative startups
`and small businesses. In the experience of the app
`developer community, the assertion of patents by
`“patent trolls” is one specific to utility patents, not
`design patents. Rather, in the context of design
`patents, app developers are primarily concerned with
`the potential that protection afforded by design
`patents will be eroded, enabling copycats to steal their
`innovations and undermine their businesses. The
`curtailing and obs

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