At the Human Rights and Business conference at the University of Connecticut this week.
At the Human Rights and Business conference at the University of Connecticut this week.
As reported by The Wall Street Journal, Apple won its long-anticipated jury trial against Samsung on Thursday and was awarded $1.05 billion in damages by a jury. I think it is highly unlikely that the decision will be overturned on appeal, so the case is likely to establish an important precedent, as I anticipated in an earlier post I wrote in 2011. My prediction then, however, was that Apple would win through a private settlement instead of a jury verdict.
I predicted a private settlement because of the high stakes involved and the risks open to both companies if the issue ultimately was taken to a jury. Apple’s risk was that the jury would invalidate some or all of the patents it had asserted, a defensive maneuver that Samsung adopted during litigation. Samsung’s risk was that it would be found to have infringed Apple’s patents by copying user interfaces and other design aspects of Apple’s products. In the end, and to the surprise of many, both companies rolled the die and Apple came out on top.
The $1.05 billion verdict is a big coup, not just for Apple, but for product designers in general. For a long time, product design was perceived in industry and in legal policy-making circles as an intellectual property and strategic backwater. That has changed, however, due to consumers’ increasing aesthetic sophistication and a crowded global marketplace.
Design is starting to play an essential role in product differentiation and branding. An empirical study I conducted with two marketing scholars in 2009, published in The Journal of Marketing, found a positive association between trademark ownership and financial performance. This link between the two suggests that companies which pay attention to the legal aspects of branding through trademark registration reap greater rewards.
Elsewhere, I have written about the rare capability within firms that generates product shape trademarks. Product shape and packaging trademarks, often referred to as “trade dress,” were among the arrows in Apple’s legal quiver in the Samsung trial. I believe the Apple-Samsung case signals that product design and trademarks will be increasingly applied during new product development and asserted during litigation among companies across industries.
I make a career of teaching legal studies to business students. In my lectures, I invariably cover the subject of intellectual property management and strategy. Had Samsung won at trial against Apple, I would have cynically advocated what I perceived as Samsung’s business and intellectual property strategy. That is, I would have advocated in favor of free-riding from an industry leader to quickly gain a foothold and increase market share. Had Samsung won, this strategy would be effective, since the risks of infringement and damages would have been minimal. Once the fast follower and design imitator establishes their foothold, they can then compete against the innovator based on a cost advantage. From a business perspective, this clearly would have been an effective tactic.
Given Apple’s victory, however, Samsung’s strategy is no longer risk free or optimal. Instead, a better strategy is to be aware of competitor’s intellectual property rights and embrace innovation. This will require investing in design capabilities to distinguish products, which is how Apple secured its leadership position.
A copycat strategy may still be adopted by firms that want to quickly enter a technology market, such as mobile devices. After the Apple-Samsung case, however, that strategy became significantly riskier, much to to the benefit of pioneering innovators everywhere.
Borges would approve. Stack upon stack of used books. A labyrinth tucked inside an alley. You enter and see a Tiffany lamp cast shadows on the dark wooden stacks. An older gentleman peers over his book. Ancient maps, esoteric histories, musty Persian rugs and philosophical tracts. A vintage chair invites you to sit.
Those are the fragments of my recollection of Bookman’s Alley bookstore in Evanston, Illinois.
During my Northwestern days, I would occasionally stroll into to that singular bookstore. One day, I walked in and picked up a copy of “History of the Yale Law School: The Tercentenary Lectures“ Little did I know that this obscure book (as randomly obtained as can be obtained by any stochastic process) would re-shape my entire outlook on the law as a subject rich in realism and experience.
I was sad to learn that Bookman’s Alley, as reported by Chicago Today, is scheduled to close in July.
This past Tuesday, Apple obtained a preliminary injunction preventing Samsung from selling its Galaxy Tab tablet. A preliminary injunction was granted before the trial was concluded since Apple demonstrated that it would suffer probable success on the merits and irreparable harm. Interestingly, the basis for the injunction was a design patent (D504889) that Apple obtained for its iPad tablet.
Design patents only secure ornamental product attributes, so the patent term is somewhat of a misnomer since utility patents, issued for working inventions, are much more prevalent and are typically what comes to mind when the term patent is used.
For some time design patents were seen as offering little protection to their owners. The Cout of Appeals for the Federal Circuit’s decision in the Apple case, however, breathes new life into design patents.
Since design plays a large role in certain consumer product markets, for example, autos, jewelry, fashion, and consumer electronics, it seems like the courts are more willing to extend property rights to aesthetic innovations. In some markets, design is an important if not essential element of the consumer’s purchase criteria, a source of differentiation from competitors, and an important element of branding and goodwill.
Resorting to the legal system to protect designs, however, as anyone within Apple can attest, remains a lengthy, expensive and uncertain process. Apple first requested the injunction on July 2011 and only recently obtained the order to prevent Samsung from free-riding on Apple’s investments in design-based innovations.
Another important design-related intellectual property case that will be decided soon on appeal is the Louboutin red sole trademark case. This case is currently on appeal at a federal appellate court which will review the New York trial court’s decision to revoke Louboutin’s trademark for its famous and distinctive red sole. Trademarks have a dual purpose to protect consumers from confusion and to protect the property attributes of designs that have become sources of differentiation among consumers. If the New York appellate courts follow the logic of the appellate court in the Apple case, they will reverse the trial court judge and affirm Louboutin’s red sole as a validly procured property right.
My most recent article, Administrative Patent Levers was accepted for publication in the Penn State Law Review. This article looks at the U.S. Patent and Trademark Office (PTO) and how they implement rules that are technology-specific and policy-oriented. This is a major departure from the PTO’s prior role since they have historically been limited to procedural rule making by the courts. The PTO’s implementation of administrative patent levers signals a potential new era of greater policy making by the PTO.
Once a year, the legal studies group at the University of Florida’s Warrington College of Business provide an opportunity for legal studies scholars to meet and share their research at the Huber Hurst Legal Studies Research Symposium. A few weeks ago, I had the honor and pleasure of serving as a discussant at the Hurst Seminar. Papers were presented on a variety of topics, including: advertising law, the Foreign Corrupt Practices Act, corporate law, tax law, international civil procedure and the deregulation of the legal profession.
A wonderful thing about being an academic is being able to travel to interesting places, like Gainseville. My wife and I enjoyed the city from the get go, stopping to dine at eclectic, fun places like Boca Fiesta. The outdoor patio at Boca Fiesta is worth visiting and their fusion cuisine tacos are out of this world. Next door, the Palomino Pool Hall offers an opportunity to spot local pool sharks and townies out for a night of leisure.
To top things off, my wife bought me a painting from a local sidewalk artist named Bill Peglar. I immediately fell in love with the painting since, to me, it perfectly represents Florida. The artist even said that he could “feel the humidity” in the painting.
The Wall Street Journal just ran a noteworthy article on Judge Jed Rakoff’s path-breaking judicial opinion. Judge Rakoff, a federal trial court judge who sits in the Southern District of New York, recently refused to approve a settlement between the Securities and Exchange Commission (SEC) and Citibank because the settlement omits any facts that would justify its approval as one that furthers the public interest. Judge Rakoff makes known his views on the public policy implications of the case when he discusses “the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives.”
Refusing to approve the settlement would either compel the defendant to admit wrongdoing, or force the SEC to drop the case, or litigate it. By failing to approve a settlement reached willingly by both parties as a matter of public interest, Judge Rakoff has departed from a customary practice. If the decision is sustained on appeal, it might create an important legal precedent that could curtail the harmful practices that are committed by some professionals in the financial industry.
Strategically, Citibank would likely refrain from appealing the case to avoid creating binding future precedent that would apply to itself and others in the financial industry. One might think that the SEC, as a public institution charged with protecting consumers, would be more inclined to appeal the matter to actually establish the precedent.
As the Wall Street Journal article suggests, however, the SEC often has settled cases with defendants in the financial industry as a practical compromise to avoid risks and expense. It is clear, based on Judge Rakoff’s ruling, that he believes practicality and expedience were not enough to warrant subverting the public interest.