Design Patents—taking a Closer Look at These Valuable Assets

• Publication year: 2014
• Author: Sarah S. Brooks

Design Patents—Taking a Closer Look at These Valuable Assets

Sarah S. Brooks

Stradling Yocca Carlson & Rauth

Salil Bali

Stradling Yocca Carlson & Rauth

INTRODUCTION

Today, most companies want to maximize their intellectual property dollars and investment returns. Utility patents are most often thought of as the most valuable IP asset. However, in light of recent jury verdicts for design patent infringement and the relatively low acquisition cost, design patents should be considered valuable assets of a company's portfolio.

Companies may wonder whether they should spend the time and money applying for both utility patents and design patents. In determining the value of applying for a design patent, companies should take into account the actual expense, time-to-issue, and enforceability of design patents versus those same considerations for utility patents. As explored further below, many companies that did not consider applying for design patents as recently as ten years ago have begun to rapidly increase their design patents portfolios over the last several years.

In fact, design patent litigation can, in some instances, be more lucrative than traditional utility patent litigation because the patent owner may be awarded the total profits of the infringer rather than the reasonable royalty or lost profits for a utility patent infringement.¹ Reasonable royalty is simply a percentage of the infringer's profits, not 100% of the profits potentially awardable in design patent cases. Moreover, prior to the Federal Circuit's decision in Uniloc v. Microsoft, a reasonable royalty was presumed to be 25%.² This made proving damages for the patent owner somewhat simple. However, after Uniloc v. Microsoft, this prevailing rule of thumb was abandoned and the analysis to determine a reasonable royalty for infringement of a utility patent became more difficult to establish and case specific.³ Similarly, lost profits is difficult to establish because the patent owner must demonstrate, among other things, "the amount of profit the patent holder would have made if the alleged infringer had not infringed" and "the patent holder had the manufacturing and marketing capacity to make any infringing sales actually made by the infringer."⁴

One recent high profile example of a case that successfully asserted design patent infringement is the first jury award in the Apple v. Samsung case, which awarded $1.049 billion to Apple. Of this $1.049 billion, approximately $600 million was attributed solely to Samsung's profit and therefore to Apple's design patents.⁵ In light of this watershed case, recent trends and the expense of design patents compared to utility patents, perhaps more companies should be considering filing and asserting design patents.

RECENT TRENDS

The number of design patent applications filed with the U.S. Patent and Trademark Office (USPTO) has steadily been increasing over the past several years, as has the number of applications for utility patents.⁶ In line with these trends, the numbers of design and utility patent suits have also been increasing.

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SUMMARY OF DESIGN AND UTILITY PATENT APPLICATIONS AND LITIGATIONS7

Year	Design Applications Filed	Design Patents Granted	Filed Design Patent Suits	Utility Applications Filed	Utility Patents Granted	Filed Utility Patent Suits
2013	35077	22453	252	563853	265979	6082
2012	32258	21953	246	530764	246464	5416
2011	30247	21295	259	504663	221350	3530
2010	28559	23373	250	478649	207915	2714
2009	25575	23415	208	458901	165213	2502
2008	28217	26016	222	466258	154699	2527
2007	26693	22543	219	439578	160306	2745
2006	25853	19072	188	417453	162509	2575

Moreover, certain large companies such as Samsung, Microsoft, Procter & Gamble and Apple have all greatly increased their design patent portfolios since 2005.⁸ Of these companies, Microsoft and Apple saw the greatest growth: a tenfold increase in design patent grants since 2005.

NUMBER OF DESIGN PATENT GRANTS BY COMPANY AND BY YEAR9

Company	2005	2006	2007	2008	2009	2010	2011	2012	2013
Samsung	80	261	622	768	465	383	328	378	515
P&G	56	107	213	187	180	228	270	212	159
Microsoft	40	153	327	286	257	214	182	302	409
Apple	16	24	34	64	103	154	122	147	171

BENEFITS OF DESIGN PATENTS

Several features of design patents make them potentially more lucrative than utility patents. Foremost is the relative ease and speed with which they can be secured. In contrast to applications for utility patents, design patent applications are generally short and straightforward, thus costing significantly less to draft and prosecute. Once the application is drafted and filed, the average time from filing to issuance for a design patent is only 15 months with limited Office actions, if any.¹⁰ In contrast, utility patents usually take an average of 18.2 months to obtain the first Office action and an average of 29.1 months for a utility patent to issue.¹¹ Second, once a utility patent issues, the patent holder must track and timely pay maintenance fees throughout the life of the utility patent. These fees currently are $12,600 over the life of the patent for a large entity.¹² Design patents, however, require no maintenance...