The question is whether the remedy in these cases -- the award to the plaintiff of the total profits earned by the defendant's product -- makes any sense in the modern world.
A smartphone is a complex integration of thousands of hardware and software technologies, manufacturing processes, aesthetic designs and concepts. These components may each be patented, or licensed, or not at all, by any number of firms. A smartphone, by one estimate, may contain up to 250,000 patents. Does a minor design patent comprising a tiny fraction of a product's overall makeup drive the purchase decision? If company A's product contains one infringing component among many thousands, even if it has no knowledge or intent to infringe, and even if the patent should never have been issued, does it make sense that company B gets all company A's profits?
Advocates of the total-profit penalty say all this is irrelevant. Read the plain text of the 1887 law, they say. The phrase -- "shall be liable to the owner to the extent of his total profit" -- may appear to support their view. But why couldn't "total profit" mean the total profits of the firm? Fortunately, a more natural reading is at hand. Given the realities of highly integrated modern technologies, the phrase "to the extent" can easily be read to limit the award in proportion to the severity of the infringement. This is more in keeping with the law of trademarks and copyrights, which (although imperfect themselves) more closely resemble design "patents" and often provide for more common sense remedies.
Absolutists reply that the total profit penalty is the only effective deterrent against counterfeiting. They say proportional penalties would be like royalties, a simple cost of doing business, and thus would not discourage counterfeiting. This, however, presumes the quality control of the issued design patents. When "designs" are everywhere, no one can hope to completely avoid infringement, and thus no one is safe from the total loss of one's profits.
Intellectual property is a crucial foundation of innovation and economic growth. But too many frivolous patents and lawsuits render it a tool not of invention but of destructive gamesmanship. If the appeals court reins in total-profit penalties, the patent reformation will achieve another important advance.
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