Apple v. Samsung Saga
In 2012 and 2013, two Silicon Valley juries awarded Apple a total of $929,860,041 for Samsung's use in its smartphones and tablets of three intellectual property types -- design patents, utility patents, and trade dress (or overall image).
On May 18, 2015, the Federal Circuit affirmed the judgment that ensued as to the first two kinds of IP but held as a matter of law that Apple's trade dress did not meet the "nonfunctional" requirement for protection under the Lanham Act.* Apple Inc. v. Samsung Electronics Co., Ltd., No. 14-1335 (Fed. Cir. May 18, 2015).
Because the trade dress award accounted for $382 million, the outcome slashed Apple's payday by 41 percent, to $547,860,041 (before interest).
A few days before it announced the first iPhone in January 2007, Apple filed patent applications that covered design elements of the smartphone. In 2011, Apple combined resulting design patents with utility patents and trade dress in an epic lawsuit against Samsung.
The case went to trial the first time in 2012. The jury in San Jose found largely for Apple, determining that Samsung infringed multiple design and utility patents and diluted Apple's iPhone trade dress. The trial judge ordered a retrial on a portion of the $1.049 billion damages award, leaving $639,403,248 in place. In 2013, a second jury found $290,456,793 in damages.
Samsung attacked the judgment on many grounds. One succeeded. But by itself it will save Samsung $382 million.
Trade dress can't serve a functional purpose
The Federal Circuit's rejection of the trade dress verdict turned on the rule against protection of "functional" elements of a product's image.
"The essential purpose of a trade dress is the same as that of a trademarked word: to identify the source of the product." Apple, slip op. at 7 (citation omitted). Trade dress consists of the product's or service's total image. But it must have "inherent" distinctiveness.
- Volkswagen's "Beetle" design;
- Decor of Taco Cabana and Hard Rock Cafe;
- Color and shape of drug capsules and tablets;
- Shape of old Coca-Cola bottles
Because "'trademark law allows for a perpetual monopoly and its use in the protection of “physical details and design of a product”, it "must be limited to those that are 'nonfunctional.'” Apple, slip op. at 7 (quoting Leatherman Tool Grp., Inc. v. Cooper Indus., Inc., 199 F.3d 1009, 1011-12 (9th Cir. 1999)). As the court explained:
“In general terms, a product feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.” Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 850 n.10 (1982). “A product feature need only have some utilitarian advantage to be considered functional.” Disc Golf Ass’n v. Champion Discs, Inc., 158 F.3d 1002, 1007 (9th Cir. 1998). A trade dress, taken as a whole, is functional if it is “in its particular shape because it works better in this shape.” Leatherman, 199 F.3d at 1013.
Apple, slip op. at 7-8 (emphasis in original).
Apple's iPhone trade dress consisted essentially of the smartphones' now-familiar look -- a rectanglular body with round edges, a flat screen with colorful, square icons, and black borders around the screen and the distinctive appearances of the colorful icons themselves. Apple, slip op. at 9 & 15.
But the trade dress failed the "nonfunctional" requirement, according to the Federal Circuit.
The court's test for nonfunctionality weighed four factors: “'(1) whether the design yields a utilitarian advantage, (2) whether alternative designs are available, (3) whether advertising touts the utilitarian advantages of the design, and (4) whether the particular design results from a comparatively simple or inexpensive method of manufacture.'” Apple, slip op. at 9-10 (quoting Disc Golf, 158 F.3d at 1006).
The trade dress, the court concluded, may have beauty, but it also "serve[s] the functional purpose of improving usability." Apple, slip op. at 14.
* The Lanham Act also protects trademarks and service marks and provides a cause of action for some kinds of false advertising.