Banking On Design

// Design patents are not usually at the root of aggressive patent enforcement campaigns. At best, they have been relegated to supporting roles in big-ticket patent litigation, perhaps most prominently in the Apple-Samsung case that I spoke about to my eldest son’s fourth-grade class way back when. (If you needed another reminder that time flies, he starts college in less than a month.) As some readers may recall, it was Apple’s design patents that led to a big chunk of the damages tentatively awarded before the worldwide patent dispute between Apple and Samsung settled. If anything, that long-running saga proved that design patents could be quite useful in certain types of patent litigation battles, particularly because of the broad, if uncertain, reach of 35 USC § 289, which requires an adjudged infringer to compensate the design patent holder “to the extent of his total profit” of the sale of an “article of manufacture” embodying a patented design.

Considering the general malaise of many a patent holder looking for litigation riches in this age of IPR and Alice, it is not surprising that at least some attempt to weaponize design patents would be undertaken by an ambitious patent owner. One entity in particular, WePay Global Payments LLC, has been quite active in terms of asserting a single design patent, US Pat. No. D930702, against a variety of large targets, including leading banks and smartphone manufacturers. Ten of the cases remain pending, including two IPRs that were filed this spring. In the most recent set of developments, two recent decisions on motions to dismiss were entered, one by Judge Albright in the WDTX, and the other by Judge Horan in the WDPA.

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Both results are discussed in a recent IP Watchdog article, which notes that WePay was successful in fending off one of the motions to dismiss, while losing on the other one. As pointed out by former interviewee and leading design patent expert, Sarah Burstein, the two decisions may have come down in different directions — but for good reason. In the WDTX case, the basis of the motion to dismiss was based on invalidity grounds, which are “less amenable to disposition on the pleadings.” Indeed, Albright himself found that a motion to dismiss on invalidity grounds was “not the proper vehicle to assess the Defendant’s arguments against the complaint.” The lesson for other design patent defendants is clear. Look for another path of attack, especially if you are trying to get the case dismissed with as much dispatch as possible.

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And a more promising line of attack is available, particularly for defendants facing weaker claims of infringement, as demonstrated by Horan’s decision in the WePay case against PNC Bank. To start, it is established that in contrast to Albright’s comments on motions to dismiss based on invalidity, “courts may dismiss claims of design infringement on a Rule 12(b)(6) motion where, as a matter of law, no reasonable factfinder could find infringement.” In terms of evaluating infringement, courts are charged to apply the famous Egyptian Goddess “ordinary observer” test, which comprises a two-step comparison of the asserted (or patented) design and the accused design. In the WePay case, however, the court first took note of the fact that it was apparently a question of first impression presented, in that “the consumer has not voluntarily chosen the design at issue” when downloading and then using the allegedly infringing mobile app. As a result, Horan raised the prospect that a design patent infringement claim could not stand where “the Complaint does not allege a purchase or transaction by a consumer with regard to the Accused Design over the Asserted Design.” As Sarah Burstein, Professor of Law at the University of Oklahoma College of Law, notes in a recap of the decision on Patently-O, there is no requirement that a sale take place for design patent infringement to lie. Thankfully for the defendant, Horan also found other grounds for granting the motion to dismiss.

On top of noting the infirmity of the design patent infringement claim in the absence of a customer’s selection of the accused design, Horan also applied the Egyptian Goddess test in finding that the accused design differed from the asserted design, such that “[a]ny similarity between the two designs is limited to basic geometric shapes, but with notable differences in shape size and spacing such that no ordinary observer would mistake the Accused Design with the Asserted Design or vice versa.” And because the side-by-side comparison was so definitively not in the patentee’s favor, there was no reason to continue the case, leading to dismissal. Unsurprisingly, the patentee lodged an appeal to the Federal Circuit, which should be an interesting case to track for design patent aficionados.

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Ultimately, the WePay cases illustrate the importance of picking the right infringement highway off-ramp when attempting to get a case dismissed quickly. Just as an Alice motion can be much more promising than a noninfringement or prior-art based motion to dismiss in the utility patent context, so too noninfringement-based motions to dismiss in the design patent context may be preferable in certain scenarios over motions brought on other grounds. In fact, irrespective of how the WePay appeal goes, it likely makes sense for design patent defendants to ask their assigned judge to conduct an ordinary observer test at the motion to dismiss stage. If successful, the case is derailed before it can generate too much cost or disruption. And if unsuccessful, it is better to know sooner rather than later in a case whether you have an uphill battle on infringement. At this point, there is little to indicate that there is a raft of other patent holders looking to follow WePay’s lead into the volume patent assertion business. Still, it is important for defendants to consider whether a noninfringement motion to dismiss is their ticket out of a design patent mess. Because even without volume plaintiffs, there will surely be other patent holders in the future looking to make bank on the strength of their design patents.

Please feel free to send comments or questions to me at [email protected] or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

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Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at [email protected] or follow him on Twitter: @gkroub.

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Biglaw, Gaston Kroub, Intellectual Property, Patents