Opinion by Bret Swanson

Will the Apple-Samsung battle help modernize patent law?

Currently, the balance tips in favor of clever lawyering rather than promoting true innovation

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The patent conflict between Apple and Samsung may finally be heading to a resolution, possibly at the Supreme Court. After four years of court battles around the world, Samsung says it will appeal federal circuit rulings that it pay Apple $548 million. The tussle is complicated, technically and legally. In the end, however, the case may have the salutary effect of simplifying and modernizing patent law, sweeping away some of its 19th century shortcomings and making it practical for a 21st century smartphone world.

The smartphone patent wars have touched nearly every technology company in some way. The complexity of smartphones, which contain many thousands of parts and millions of lines of software code, means numerous firms own intellectual property in any device, no matter whose name is on the label. Over the past five years, many firms have found ways to resolve their differences — through, for example, cross licensing — but Apple continues its litigation strategy in the U.S.

For all the real innovation in smartphones, this particular case came down to three rather pedestrian Apple design patents that Samsung was found to have infringed. Design patents govern the appearance of a product, not its functionality. Functionality is the province of utility patents. Here, the design patents covered not earth-shattering technological advances but a shiny black screen and rounded corners.

After a long series of jury trials and hearings, a court ordered Samsung to pay most of the original jury award, in the amount of $548 million. In the meantime, however, something very important happened. The U.S. Patent and Trademark Office had re-examined some of the patents in question and judged that Apple’s patent for the rounded rectangle shape of the phone should never have been issued in the first place. (The PTO also ruled that one of the utility patents involved in this case is invalid).

Samsung questioned why it should have to pay the large judgment immediately. Not only had one of the key patents been invalidated, but Samsung also publicly stated it was appealing to the Supreme Court. It argued that the order of immediate payment could result in irreparable harm, and on Friday a judge issued an emergency temporary stay of the judgment.

This particular case may seem narrow and petty, but larger issues are at stake. The applicable 1887 law giving rise to the majority of the hundreds of millions of dollars in damages, for example, says an infringer is liable “to the extent of his total profits.” But if Apple infringed an unimportant patent of a tiny firm, could that firm be awarded Apple’s “total profits” of tens of billions of dollars? It’s not at all clear in today’s modern economy of highly complex products that “total profit” refers to the entire product, if it ever did. The phrase “to the extent” appears to be an important modifier. So is additional text noting that any award shouldn’t exceed “twice the profit made from the infringement.” Isn’t a plain reading that any award related to the harm of the infringement? Put another way, if the infringement isn’t shown to cause the harm, the remedy doesn’t make sense.

Apple claims that the infringement is not merely of the minor, individual components but of the iconic “look and feel” of the iPhone.

But Apple did not patent the “look and feel” of the iPhone. It patented the appearance of specific components — a shiny black screen, rounded corners and a graphical user interface.

And one of the patents upon which this judgment was based has been found invalid by the PTO. If the protection of any one small component of any complex machine or gadget were always judged to extend to the “look and feel” of the entire device, all of our modern economy could be thrown into chaos.

Apple may be an important innovator. It can take pride in dozens of true advances in hardware, software and manufacturing. But the protection of true innovation via our intellectual property laws requires that we be selective. If everything is patentable, then the battles shift to the courtrooms and the USPTO, not the competitive playing field of laboratories and the marketplace. Intellectual property is not easy to get right. It requires a balancing act between protection of true innovation and the possible exploitation of the system to close off competition.

Over the last several decades, we issued far too many patents in software and for ornamental designs. If the Supreme Court takes this case and rights the interpretation of the special remedies provision, it could help rebalance our IP paradigm away from clever lawyering and in favor of true innovation.

Bret Swanson, a visiting fellow at the American Enterprise Institute’s Center for Internet, Communications, and Technology Policy, is president of Entropy Economics LLC.

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